Electric Car Pricing

I recently started shopping for a new car. One of the big questions was whether to go for an electric, hybrid, or traditional internal combustion engineer (ICE) car. Originally I thought I would definitely go for an electric car in 2024. Obviously it’s better for the environment and my wallet. Charging at home seemed obviously cheaper than buying gas at the pump.

As I started picking out my shiny new electric car, I noticed that the ones I was looking at were about $10k more expensive than an ICE version of the same car. I had never considered that the price difference would be upwards of 30%. That put the “savings at the pump” into a different light. I already have a 2014 Prius C hybrid that actually gets around 50 mpg… and it only has ~50k miles on it. At current $3/gallon gas prices, that means I’ve only spent ~$3,000 on gasoline over 10 years. Even if I got 25mpg like a typical luxury sedan, that would only be ~$6,000 in gas compared to $10,000 up front.

When you take into account the electric price, the economics get even fuzzier. Electric cars have their efficiency rated in MPGe - which is how many miles the car could drive if you converted all the chemical energy in a gallon of gasoline to electricity perfectly. This metric is interesting from an environmental standpoint - since it is sort of how many gallons of gas you are replacing. The far more interesting metric however, is kWh/100 miles. This combined with the price of electricity (measured in kWh) can give you a $/mile number to compare.

As an example, let’s compare the Hyundai Ionic 6 and the Hyundai Sonata. Both are sedans. The Ionic is full electric, the Sonata is available in a traditional Hybrid or full ICE version.

Ionic 6 - $37,500 - 33 kWh / 100 miles - “100 MPGe”
Sonata Hybrid - $31,000 - 50 mpg
Sonata ICE - $28,000 - 35 mpg

At $3.00 per gallon of gas and $0.15 per kWh, that means the price of fuel per mile is as follows:

Ionic 6 - $0.05 / mile
Sonata Hybrid - $0.06 / mile
Sonata ICE - $0.09 / mile

If you only look at the MPGe, you might think the Ionic 6 costs 3x less in fuel than the basic ICE Sonata. However, in reality it’s closer to 2x because in my area electricity is actually slightly more expensive per kWh than the chemical energy stored in gasoline. Yes, an electric car is far more efficient with the energy it’s given (reflected in the MPGe), but gasoline can actually be an incredibly inexpensive way to get a lot of energy to your car compared to electricity. With gasoline, you waste most of your energy in the motor itself, leading to a lower MPG. With electricity you’ve already lost a lot of the raw chemical energy at the power plant, meaning your price for fueling the car is higher.

So, how many miles would we need to drive to make up the up-front price difference between each type of vehicle? For the upgrade from ICE to Hybrid ($3,000) to pay off in fuel savings, you’ll need to drive 100,000 miles. For the upgrade from ICE to full Electric ($9,500) you’ll need to drive 240,000 miles. The full electric doesn’t hypothetically beat the hybrid in value until ~600,000 miles.

However, that doesn’t even take into account inflation or the opportunity lost for that additional money. There is value lost putting down $9,500 up front on the electric vehicle rather than investing it elsewhere. With a modest investment return, $9,500 from 10 years ago would now actually be $15,000.

Obviously no car will be on the road for 600,000 miles. However, if the ratio of gasoline prices to electricity prices in your area are dramatically different this math could be quite a bit different as well. At that point it might make a lot of sense to use an electric vehicle for daily commutes and charge it at night. If the miles add up quickly, the fuel savings could add up too. If anyone tells you electric cars are cheaper because you don’t pay for gas - keep in mind that is not true everywhere or for everyone.

So, what advantages does an electric car have if not saving money? Does it still make sense for me even if the fuel costs don’t pay for the upgrade?

One of the big ones is the driving profile - electric engines can produce a lot more torque, and so you can accelerate much faster. A normal ICE needs to gear down the motor a lot to get the same type of torque. That ultimately means an equivalent electric motor can feel much more sporty. This is actually one of the reasons many hybrid vehicles can get away with much smaller ICE motors - they leverage their electric motor’s torque when accelerating. To get a comparable driving feeling, you might need to upgrade to a “sport” trim in the ICE model - adding significant costs.

Another is that you can “refuel” it at home. That’s a big advantage if you have a very regular commute since you simply don’t have to worry about getting gas anymore. It’s not just a matter of saving money at the pump, but also the convenience.

One other subtle advantage is that an electric car hedges against gas prices going up. You’re no longer affected by gas prices, but rather only electric prices - which have a much broader supply chain. Presumably gas prices will go up over time, but that may not even be a sure thing if a huge portion of the demand is phased out by electric vehicles.

Of course, there is also one big disadvantage: taking longer to charge at charging stations for larger road trips. The classic “range anxiety” that is the bane of every electric car proponent.

Looking at what I really want this car for - comfortable and fun road trip driving - I likely won’t be able to justify the price point of an electric car over a more traditional ICE.