Does it make sense to buy EVs when oil prices are low?

 In EV Industry

Conventional wisdom suggests that lower oil prices should drive customers away from electric vehicles. But although the rate of growth of plug-in electrics sales slowed for many countries in 2015, Canada was up 32% on the year, and worldwide sales of plug-in [battery electrics (BEV) and plug-in hybrids (PHEV)] came in at over 550,000 deliveries — a 72% growth over 2014.

New York City mayor Bill de Blasio has announced that NYC will have a “vast” municipal fleet of electric vehicles by 2025. A UK electric-taxi fleet claims it saves so much cash that “EVs are like getting a license to print money.

What’s happening here? For some answers, let’s look at BEVs.

By the way, later this month we’ll be hosting a webinar on the topic of maximizing the ROI of fleet electrification. This will cover integrating EVs into your motor pool, how to determine which EVs should go where, how to utilize them to receive the greatest return on your investment, and optimizing your fleet charging.

UPDATE: you can now download the recording here.

Things to consider as the price of oil drops

The price of oil directly affects two areas of importance: the cost of fossil fuel and the variability in the cost of that fuel.

Fuel cost savings

Global Oil Prices.com pegs the average world price of gasoline at $0.95 USD per litre (or $3.77 a gallon). It’s around 22 cents a litre in Kuwait, $1.77 a litre in Hong Kong, and 53 cents a litre in the US ($1.99 a gallon).

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According to Brian Millar of Plug’n Drive, the cost of fuelling a BEV is one-quarter that of a gas vehicle.

Worldwide the equivalent price for electricity would be 23.8 cents per litre, and 13.25 cents per litre or 49.8 cents per gallon in the US.

When was gas that low? We can’t remember. Here’s the U. S. price per gallon since 1919:

Annual gas prices 1919-2011

Annual U.S. gas prices 1919-2011. Graph courtesy of Sam Avro, Energy Trends Insider

According to Millar, with the current prices and a fleet average of 20,000 km traveled per year for each vehicle, you can save about $2,000 on fuel annually.

Volatile oil prices

There’s no guarantee that the oil price will stay low. Oil is a commodity and it’s the nature of commodity prices to go up and down. The graph below shows oil’s “rollercoaster ride” over 70 years. Yes, electrical rate changes are increasing, but the changes are much more gradual so you can predict future costs more easily.

Crude oil prices

Crude Oil Price Jan. 1946-Feb. 2016. Source: Macro Trends, WTI — The industry uses West Texas Intermediate (WTI) crude oil as a benchmark in oil pricing.

Other issues to consider

Not all considerations depend on fuel costs.

Lower maintenance costs

Battery electric vehicles cost much less to maintain. You don’t have to service what isn’t there; there’s no oil or oil filter, no exhaust system, no water pump or fuel pump, no alternator, and no transmission. The electric motor has one moving part while the gasoline engine has hundreds of moving parts. Your servicing schedule would be much easier with considerably less downtime for regular maintenance and repair. Millar added that you could significantly reduce brake wear in a BEV by using battery regeneration instead of braking.

The BEV batteries are sealed so they don’t need any maintenance, though may need periodic replacement. Most BEV batteries are covered by an eight-year warranty. Batteries are 90 percent recyclable, according to Millar, or can be reused in groups for emergency power in buildings such as your company facilities.

If battery life is a concern, you could schedule your fleet replacement to rollover before the battery warranty was due to expire. If leasing is an option for your company, you could avoid battery degeneration and replacement altogether.

Environmental considerations

Millar states that no other vehicle, throughout its lifetime, is going to produce less greenhouse gas emissions and other air pollutants than an EV (though this may depend on the source of your electricity). This represents a chance for your organization to demonstrate its social responsibility in addressing climate change and to ensure that it will achieve compliance with any emissions regulation.

Low Emissions Zones (LEZ) are particularly popular in Europe and China. These are designated areas (usually in cities) that place a restriction on vehicles with high emissions. The restrictions can range from an outright ban, restrictions for certain times of the day, or a financial penalty for the emissions. Your choice of a BEV could eliminate the costly inconvenience of your fleet being restricted from an LEZ.

The World Bank is also pushing for a worldwide price on carbon. More than 40 countries and some cities, states and provinces already have a plan to price carbon. If you reduce the carbon emissions of your fleet now, you can avoid those costs in the future.

Government incentives

Many governments provide incentives to encourage the increased sales of electric vehicles. The ultimate purpose is to meet their greenhouse gas emissions target to put more EVs on the roads. These incentives can include subsidies for the purchase price, assistance with charging stations, preferential traffic lanes and other inducements. For example, Norway and the Netherlands offer an incentive of about 55 and 75 percent respectively of the vehicle’s purchase price.

Purchase price and life cycle cost

While the retail prices of BEVs are still considerably higher than their fossil-fueled counterparts, the savings on fuel and maintenance over the BEV’s lifetime plus government incentives can produce a price that is competitive with gasoline. The payback period can also largely depend on how the vehicle is utilized.

How do I know if EVs are right for my fleet?

Remember that the price of gas is not the only factor in your decision. Here’s a general guideline that you can follow:

  • Examine the vehicle requirements of your fleet. Do you need light-, medium-or heavy-duty vehicles? Are there suitable electric vehicles meet those requirements?
  • Determine the required driving ranges. This will help you determine if you need BEVs (typically with a range of less than 200 km) or PHEVs (short battery range extended by gas powered generator)
  • Match your vehicle requirements with the plug-in electrics that are available.
  • Compare the life cycle costs for electric vehicles.
  • Determine the suitability of electric vehicles for your fleet.

Fortunately, commercial software exists that can automate this assessment process for you.

Maximizing the ROI of Your EVs

By the way, later this month we’ll be hosting a webinar on the topic of maximizing the ROI of fleet electrification. This will cover integrating EVs into your motor pool, how to determine which EVs should go where, how to utilize them to receive the greatest return on your investment, and optimizing your fleet charging.

UPDATE: you can now download the recording here or by clicking on the image below.

Maximizing the ROI of Fleet Electrification Webinar

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  • Eva Trice

    How do I get a logger for my Tesla? Did you stop selling these?