Question: When does an internal-combustion-engined car become valueless?
Answer: When the cost of buying or leasing an electric vehicle along with paying for maintenance and miles becomes less expensive than using a free gas car.
That’s already been the case for years for high mileage drivers but with higher gas prices, we’ve now reached the point where the cost comparison is becoming more acute. It is now noticeable even to consumers that don’t drive a higher range of miles.
In a story this week, Bloomberg highlighted the plight of an Uber driver who had the option of keeping her extremely common ICE vehicle, the Toyota Camry, or renting a Tesla Model 3:
Barnes opted to rent a standard Tesla Model 3 for a month through Hertz, which has a deal with Uber Technologies Inc. offering drivers a weekly rate of $344 that includes insurance, basic maintenance, and unlimited miles. Even after accounting for the cost to charge the car, Barnes was paying roughly $450 a week for “the car of her dreams,” less than the nearly $600 required to fuel her Camry.
Obviously Uber drivers operate on the high end of the miles-driven spectrum. But there is a lot more to consider here. First of all, renting a vehicle from Hertz isn’t typically on most economists’ list of cost-effective vehicle management. There’s at least one additional middleman involved, even if Uber is helping to subsidize that cost. $450 per week extrapolates out to close to $2,000/month.
But also, let’s acknowledge that the Uber vehicle in question, a Tesla Model 3, even in standard range configuration at $47,000 is not a cheap EV. A 2023 Chevy Bolt EV ($26,500) or Nissan Leaf (under $20k, after full federal EV incentive) with similar range costs almost half as much. That changes the math dramatically since the purchase price of an EV is the outsized cost in an ROI equation vs. a gas car. ICE vehicles usually cost about double per mile to drive and maintain, and that was before gas prices spiked dramatically.
With the gas prices at $5 and not budging at least for the summer, more and more people are flocking to EVs. But, after many years of automaker excuses claiming there was no demand for EVs, now no automaker can make enough EVs to meet demand.
We can’t make enough EVs, and prices will reflect that
In Electrek‘s Electric Vehicle Best Price Guide we used to highlight the best deals we could find at dealerships around the country. We’d often save our readers thousands, and sometimes ten thousand, dollars. Since the supply chain shortage combined with the gas price hikes, we now cover cars that you can actually find on lots and are sold at or near sticker price.
Tesla, which doesn’t use a dealership model, has been raising prices for most of the last year, moving the Model 3, which was once at $35,000 starting price, up to $47,000. Model Ys have increased even further. It doesn’t seem to matter – there a wait of many months for Teslas, even with two new factories being spun up.
But I have to imagine once the supply chain comes back online and more competition emerges, Tesla might again lower its vehicle prices. Even if it doesn’t, there are cheaper EVs coming.
Real, inexpensive EVs coming soon
Chevy just dropped the price of its 2023 Bolts by $6,000 and has a $30,000 Equinox coming. Ford CEO Jim Farley has espoused the need for ~$25,000 inexpensive EVs while setting the base price on the Ford F-150 Lightning to $40,000. Hyundai and Kia both sell $34,000-ish vehicles before the $7,500 tax credit. Volkswagen has been teasing its ID.Life vehicle for as little as $24,000, and every inexpensive Chinese maker is salivating at the idea of entering the US market.
Sure, dealers are marking up prices due to scarcity, but that won’t last forever. At some point, EV production will start to meet demand. Or will it?
Who would buy a $26,000 gas Chevy Equinox when a slightly more expensive electric one was available and cost less than half as much per mile to own? If the refined Build Back Better Bill passes, EVs will be even cheaper. The economics will keep EVs more expensive than gas vehicles, perhaps until there are no more gas vehicles?
What is keeping internal combustion engines going?
The biggest hurdle yet to overcome for EVs is infrastructure, whether it is explicitly or implicitly needed. City and apartment/condo dwellers don’t always have access to overnight full charges, so the five-minute gas fill is still warranted. But if running a few hundred feet of 240V electric lines is all there is between saving a few hundred bucks a month in gas, I feel like HOAs will do it (and some states have implemented “right to charge” laws to help renters with charging options). It’s the same with street parking. Citizens will demand it.
But even us suburban folks need assurances that we can do the trip to grandma’s house 500 miles away or go on the quintessential American cross country road trip. Tesla owners can do that right now with little or no effort.
For other EV makers, it can still be done, but it sometimes takes a little bit more effort finding charging locations and hoping they are online and charging at optimal speeds. This is getting better, and the US government is even dropping $5B on a nationwide charging network, putting chargers every 50 miles on the nation’s interstates.
Back to basics
Let’s also not forget that EVs are just a better experience all around. Smoother, quieter, no pollution vehicles make happier drivers and in the case of the Uber driver we mentioned earlier, happier customers:
Her new ride is also a hit with passengers. “They’re a lot more generous,” Barnes said. “Usually I’m lucky to get $1 to $3 tips but it’s now $10 or $15, sometimes consecutively.” In total, she netted over $2,600 during her 25-day rental, more than double the $800 to $1,000 she typically made from driving the “Beast,” according to screenshots of earnings she provided to Bloomberg.
That EV happiness can be seen directly financially. Double to triple the tips is another huge benefit to the bottom line.
And while this article has mostly focused on the direct consumer costs of gas vs. electric, there are also the enormous social costs of pollution. Fossil fuels are more expensive than you think, and even oil companies have started (pretending to?) support carbon pricing to bring the costs of fossil fuels more in line with reality. Society has to change to electrified transport sooner than most of the industry is ready for. But that will take a decade even if we move every single battery we can into EVs, and this will affect stock of electric vehicles for many years to come. The fix for that is for manufacturers to ramp EV production, and stop gas car production, even sooner than they think is possible.
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