How Electric Cars Will Save You Money
If you are someone who watches your dollars and cents, you probably don’t own a plug-in hybrid. Sure, they deliver good gas mileage but it’s not good enough to offset the higher sticker price needed to cover the costs of the battery. (That’s why I own a Honda Fit.) Cars like the Toyota Prius and Honda Insight are expensive ways to say, "I’m green."
Electric cars are another story, and that’s why the arrival of the Nissan Leaf (left) and the Chevy Volt (below) in just a few months could become a watershed moment for the auto industry, as well as for the environmental movement. Unlike the Prius, the Leaf and Volt are not aimed at the early-adopter, eco-conscious, well-to-do niche buyers on the coasts and in places like Amherst, Mass., and Ann Arbor, Mich. They are being built for the mass market.
The economics make all the difference.
That, at least, is my takeaway from a discussion about electric cars held at a Washington Post Live event called Energy Now. (Video will be posted on the site, the newspaper says.) The panel was stacked with electric-car enthusiasts — Tony Posawatz from Chevy, Carlos Tavares of Nissan, David Crane of NRG Energy, David Vieau of battery-maker A123 Systems and a lone skeptic, Alan Crane of the National Research Council. But with the exception of Alan Crane, they all argued that electric cars will be not only fun to drive, not only convenient (because you don’t need to drive to a gas station to refuel) and not only good for the climate and for U.S. energy security, but also cheaper to own over the life of the car.
That’s essentially because (1) electric car engines are more efficient than internal-combustion engines and (2) generating electricity from a big coal, natural gas or nuclear plant is more efficient than burning gasoline in millions of cars.
This isn’t a new argument. I’ve heard it from people like David Sokol of Berkshire Hathaway and BYD, and from Shai Agassi (See "Electric cars: all systems go") but David Crane’s explanation today laid out the math in clear terms.
Describing NRG’s plans in Houston (see "Even Houston, the 'Petro Metro,' Loves Electric Cars"), Crane said the NRG-owned utility company, Reliant Energy, is working with Nissan and plans to offer Leaf owners an all-you-can-eat model for buying electricity to power the car. Here’s the selling proposition:
First, NRG would buy and install a Level 2 car charger for the home. Those are worth $1,500 to $2,000, Crane said, and they can fully charge a Leaf, which has a range of about 100 miles, in four to eight hours. “You come home from work, you plug it in, and in the morning it’s ready to go again,” he said. Second, NRG will build a network of charging stations around the city of Houston. “At no point will you be more than five miles away from a fast charge,” he said.) The business model for sustaining the stations remains uncertain.) Third, NRG will offer unlimited mileage for three years at a price still to be determined, but estimated at $70 to $80 a month, added to the utility bill. After the three years, the price would drop because by then NRG will have recouped the cost of the charging station and would only need to pay for the electricity.
So how does the math look? At $80 a month, fuel costs for the Leaf would be $960 a year. By comparison, assume that you drive a conventional car 15,000 miles a year and get 20 mpg. You’ll buy 750 gallons of gas. At $2.58 per gallon, the current average price on the Gulf Coast, you’ll pay just under $2,000 a year.
You can challenge my assumptions, but that $1,000 a year in fuel savings will over time offset the upfront cost of the Leaf, which is roughly $25,000 after a federal rebate in most places and $20,000 in California which offers a state rebate as well. If gas prices rise, the deal looks sweeter. It looks better yet if, as seems likely, the costs of batteries (and the sticker price) falls.
Then there are the psychic benefits. A123′s Vieau said the company has already hired 300 people at the battery-making plant it just opened in Livonia, Mich., and expects to hire many more. “We’re shifting dollars spent on oil overseas to create jobs at home,” Vieau said.
People who care about the environment, meanwhile, can take pride in the fact that they are driving cleaner cars.
“American’s want to make a difference if they can,” NRG’s Crane said. “Look at the organic food business.”
Now, a couple of caveats: Today’s electric car business is heavily subsidized, it must be noted. Buyers get tax breaks. Battery maker A123 got a $249-million stimulus grant, a federal loan guarantee and state subsidies and Nissan was given a $1.4 billion energy department loan guarantee to retool a plant in Smyrna, Tenn. GM, of course, got bailed out.
The second caveat is that it will take years for electric cars to have a major impact. The Chevy Volt will be available in only seven states at first, Posawatz told me that Chevy will make only “thousands” of the cars in the first model year, and “tens of thousands” after that. “If the demand is there, we’ll keep building more,” he said.
Nissan will make about 60,000 Leafs in Japan during 2011 for the world market. Nissan had been taking pre-orders for the Leaf on its U.S. website, but stopped today because 20,000 have been ordered. The company will be able to build more starting late in 2012 when it opens the Smyrna plant, which has a capacity of 150,000 units a year.
To put that in context, there are more than 250 million cars on the road today in the U.S.
Still, I received an interesting 62-page report earlier today from HSBC Research called Sizing the Climate Economy [PDF]. Its best guess is that the market for low-carbon vehicles — essentially, electric cars — will grow to $473 billion worldwide by 2020, making low-carbon transport business a bigger investment opportunity than low-carbon energy.
Electric cars, in other words, are going to be a very big deal.
GreenBiz.com Senior Writer Marc Gunther is a longtime journalist and speaker whose focus is business and sustainability. Marc maintains a blog at MarcGunther.com. You can follow him on Twitter @marcGunther.