Total cost of ownership of electric vehicles compared to conventional vehicles: A probabilistic analysis and projection across market segments

Abstract

While electric vehicles (EV) can perform better than conventional vehicles from an environmental standpoint, consumers perceive them to be more expensive due to their higher capital cost. Recent studies calculated the total cost of ownership (TCO) to evaluate the complete cost for the consumer, focusing on individual vehicle classes, powertrain technologies, or use cases. To provide a comprehensive overview, we built a probabilistic simulation model broad enough to capture most of a national market. Our findings indicate that the comparative cost efficiency of EV increases with the consumer's driving distance and is higher for small than for large vehicles. However, our sensitivity analysis shows that the exact TCO is subject to the development of vehicle and operating costs and thus uncertain. Although the TCO of electric vehicles may become close to or even lower than that of conventional vehicles by 2025, our findings add evidence to past studies showing that the TCO does not reflect how consumers make their purchase decision today. Based on these findings, we discuss policy measures that educate consumers about the TCO of different vehicle types based on their individual preferences. In addition, measures improving the charging infrastructure and further decreasing battery cost are discussed.