We’re on the cusp of yet another revolution - the electrification of vast segments - perhaps virtually all our transportation systems.
They point out that there are merely 6 million electric vehicles on the road, compared to over a billion vehicles on the road, worldwide.
Nevertheless, electrification of vehicles by the global automotive industry is well underway. It will be one of the many technologies ranked as transformational on par with the wheel and the internal combustion engine by changing the definition of “how business is done” in the transportation industry.
Throughout history, technology and innovations have continually brought us new, more powerful, eco-friendly and cost-effective ways to do business. They’re typically built to co-exist with current technologies before supplanting them. A few examples which the transportation industry has seen throughout history are ships and their evolution from sails, to steam, and now modern engines and horse and coach transportation being replaced by internal combustion engine vehicles.
The question is, how fast and how soon are electric vehicles (EVs) going to be widely incorporated into fleets? And what factors are consumers and fleet managers considering when evaluating EVs. As time goes forward, and the product line from OEMs continues to grow, how viable are EVs, and what are the considerations needed to make a full through analysis?
Electric vehicles are built and engineered differently from the ground up. As a result, to compare them one needs to do a deep dive into all facets and differences offered between ICE and EVs.
The goal of this article is to provide some perspective on how EVs are different, how to measure cost, considerations around safety and upcoming changes both in the U.S. and the world.
With cost, infrastructure, and product offering rapidly changing, what are the benefits and negatives tied to EVs when compared to ICE vehicles?
These are factors that will determine the pace of adoption for EVs entering the fleet market:
- Vehicle Price/TCO
- Maintenance Cost
- Cost of EV’s - Batteries
- Fuel vs. Electricity Cost
- Vehicle Range – Charge Capacity
- Emissions Regulation & Government
Analyzing Electric Vehicle Total Cost of Ownership vs. ICE Vehicle
While many factors listed have a significant impact on the future of EVs and EV adoption, vehicle prices are always a key consideration. With federal and state incentives often not available as a pass-thru by fleet management companies due to the tax ramifications, the upfront cost of EVs remains quite expensive.
Instead of looking strictly at the upfront cost of an EV versus an ICE vehicle, it’s more important to look at the total cost of ownership (TCO) and the differences offered by EVs.
The major items used when formulating a TCO comparison/calculation between EVs and ICE vehicles are depreciation, fuel, and maintenance costs.
The Average ICE vehicle has around 1,500 moving parts in the vehicle drivetrain alone. Each moving part (i.e. belts, pulleys, pumps, injectors, valves and transmission) extracts energy and presents an opportunity for ongoing maintenance, wear & tear.
An ICE vehicle’s conversion of fuel energy to propulsion is at 15%. The remaining 85% of the fuel energy utilized by ICE engines is converted into heat or is lost in the driveline or while idling.
EV conversion of energy is more than five times more efficient when compared to an ICE vehicle, according to data from the U.S. Environmental Protection Agency (EPA).
An alternating current (AC) Induction motor no longer requires brushes or a transmission. Most EVs are built with direct drive, single speed gear box unit requiring no shifting. As few as 20 moving parts may be found in the drivetrain. Fewer moving parts equates to greater efficiency, both in energy use and maintenance.
EVs do not require regular oil, oil filter, transmission fluid, transmission filter, gas filter, radiator fluid, air filter or spark plug for scheduled maintenance to maintain the vehicle’s reliability.
There’s no requirement for state emission checks on EVs as emissions are non-existent. Less scheduled maintenance, few visits to the garage lowers a vehicle’s TCO, equates to more time and productivity from employees.
Additionally, all EVs are engineered to generate a charge back to the battery when the driver lets off the accelerator, recapturing inertia energy. By harnessing this energy EVs provide an added maintenance benefit, increases brake pad longevity and reduced brake rotor wear approximately doubling the mileage needed before brake work is required on EV’s when compared to ICE vehicles.
Along with greater energy efficiency, fewer moving parts, less scheduled maintenance, perhaps the greatest benefit fleet managers have when comparing EVs to ICE vehicles is ability to opt to higher replacement cycles.
- Current ICE Replacement cycle 36 mo. / 75,000 miles.
- Proposed EV replacement cycle 60 mo. / 150,000 miles.
With an EV drivetrain, fleet managers have limited exposure to vehicle long-term reliability. In many cases, OEM drivetrain warranty coverage for EVs is longer when compared to ICE vehicle warranties.
EV drivetrain warranties are inclusive of the most expensive item, (battery and AC induction motor) thus eliminating the costliest repair items of a vehicle.
Each organization will need to review their replacement policy, however, with the help of fleet management companies’ data, a TCO calculation based on using longer replacement cycles compared to current replacement cycles, comparison can work favorably to EVs without exposure to higher maintenance expense.
The State of Electric Vehicle Batteries
The costliest part of any EV is its battery. Cost for EV batteries have historically been exorbitant. The good news, battery production is growing, and technology continues to improve.
Improvements in material sciences as well as alterations to the battery’s chemical composition, coupled with price erosion due to production cost optimization and mass-manufacturing are factors that will dramatically allow increased production and availability, thus lowering the cost of batteries.
Currently there are two primary battery types: a lithium nickel manganese cobalt oxide (NMC) battery as well as a silicon-based lithium-ion battery.
Many varieties of silicon-based lithium-ion batteries are available, however the batteries in which silicon is used as an alloy, are the most promising and hope to provide the increased energy density.
Lower battery prices, improved range and performance will have a significant impact on the overall price of an EV. Battery efficiencies and price competitiveness will strongly contribute to the mass adoption of electric vehicles.
Consider recent history, over the past six years, OEMs built EVs with smaller batteries with limited range. Most would have a maximum range of 150 miles. Purchasers would often avoid acquiring such vehicles due to “range anxiety.” For the exact same reason, OEMs found EVs with short range to have poor residual values. High upfront cost, high depreciation, limited range have all affected short range EV sales, reducing them to a fraction of the total U.S. vehicles sold.
As the cost of batteries declines it now allows OEMs the ability to build and install larger batteries into EVs at a more cost-efficient rate.
Additionally, these vehicles obtain greater performance and achieve higher mileage ratings. Today, a range over 225 miles is becoming a minimum standard for commercial success. New models brought to market continue to improve, bringing higher mileage ratings and longer range.
The result has been EV market share and residual values growing.
Most economist predict the $100 dollar/kWh barrier will be reached respectively between 2020-2025 for silicon- based lithium-ion batteries and 2025–2030 for NMC batteries. With lower battery prices the research group at Morgan Stanley now concludes that EVs will reach price parity with ICE products by 2025.
This will make EV drivetrain costs competitive with ICE vehicles. As ongoing battery technology continues to improve and cost for manufacturing is reduced, the TCO for EVs will, within the next 10 years, likely favor EVs over ICE vehicles.
Fuel Price: Fossil vs. Electric
The United States has officially become a net energy exporter of fossil fuels in 2017. The US Energy Information Administration (EIA) projects an extended period of high production a result of large increases in crude oil, natural gas, and natural gas plant liquids (NGPL) production coupled with slow growth in U.S. energy consumption.
Gasoline prices are projected to increase at an average rate of $2.00 per barrel or 4% increase year over year. However, if history is any indicator of the future, predicting future fuel prices with reasonable accuracy is difficult. Fuel prices are a commodity and pricing is largely determined by the global market. Geo-political conflict, local shutdowns at a refinery, workers strikes or even natural disasters in key oil producing regions all add volatility into the cost per barrel and price at the pump.
Fleet Managers wishing to project future fuel cost should calculate cost increases using a median average of today’s fuel prices with anticipated increase into their TCO calculations.
An example of this is listed below.
- 3 year replacement cycle – 6% over todays fuel cost
- 4 year replacement cycle – 8% over todays fuel cost
Average electricity prices vary considerably across the US, and may change dependent upon the energy source and ongoing conversions for generating electricity. Generation costs account for the largest share of the price of electricity and are projected to decrease 15% from 2019 to 2050. Generation costs are regulated in 70% of the United States markets and are reflection of the recovery of investment costs for both fuel and operating costs. Investment costs decline over time as older processing methods for generating energy are retired and new, lower cost methods are brought online.
Using historic data from the US Energy Information Administration (EIA) average consumer cost per kWh for electricity the US market has experienced a steady increase year over year. Continued projections for Electric kWh cost are anticipated to remain neutral with a high potential for reduction.
When comparing fossil versus electricity cost, electric costs have not been as volatile due to industry regulation. New renewable energy and continued decline in capital cost of renewable energy, combined with low natural gas prices and increased use of natural gas to generate electricity are the primary reasons the future cost of electricity is projected to remain flat in the immediate future. With more efficient generators of electricity, increased use, and conversion to natural gas and renewables, the long-term view is that electrical prices will decrease.
Electric Vehicle Safety
ICE vehicles have had a 130 plus years of history, technology and design to perfect the vehicle safety systems for drivers and passengers. In every passing year, OEMs continue to improve on vehicle design and are now producing the safest products ever built.
EVs are redefining safety, as equipment required on ICE vehicle is no longer needed. EVs no longer must consider the placement of an engine, transmission or radiator when building/designing a vehicle.
In fact, one of the most significant advancements for EVs is the ability to place the large and dense battery in the middle at the floor of the vehicle. This enables OEMs to construct their chassis and frame rails around the cabin to protect both the occupant and the vehicle battery.
OEM engineers can now focus on controlled deformation in their design without consideration to engines, transmissions, etc. Energy absorbing areas are built around the front and rear, where most high impact collisions occur. These crumple zones minimize impact energy and help preserve the integrity of the vehicles cabin.
By engineering the vehicle frame rails underneath the doors around the outside of the battery and vehicle cabin, side impacts are met by reinforced steel rails. This not only reduces impact intrusion but improves overall stability and body stiffness. In the event of an impact/accident the high voltage power source in an EV automatically disconnects. When involved in a side impact, the battery pack on the EVs is very dense and will absorb impact energy helping to minimize intrusion into the vehicle cabin.
By constructing the frame on the outer portions of the vehicle, OEM’s gain two safety advantages, protecting the battery pack while also preventing intrusion into the vehicle cabin and injury to occupants. The result is greater safety for its occupants.
As EVs are now being equipped with large battery pack, such as 75 kWh or higher, the combined weight of the electric motor, differential and the battery can easily make up 50% the overall vehicle’s weight.
With half of the vehicles weight located below the wheel spindles, EVs enjoy the unique characteristic of a lower center of gravity unavailable with ICE vehicles.
This improves handling and minimizes rollover risk. OEMs can shift the battery location forward or aft underneath the vehicle to provide a 50/50 front to rear weight ratio, ideal for handling. Although not a part of collision results, cars which handle better are more likely to maintain control when requiring emergency evasive maneuvers, thus avoiding accidents. Additionally, with a low center of gravity, EVs achieve better rollover ratings.
Should an accident occur, batteries are much less flammable than the gasoline in cars. One manufacturer, Tesla, claims its products are 11 times less likely to catch fire when compared to their gasoline counterparts. Statistics from the National Fire Protection Association show a total of 40 recorded Tesla fires over 7.5 billion miles driven compared to 55 fires per one billion miles on average with gasoline vehicles.
The Issue of Range Anxiety
With ICE vehicles we’ve become accustomed to having the ability to drive 400 plus miles, stop off at a local station, fill up the tank, and within eight to 10 minutes be back on the road. EVs are compared against this standard.
It’s no wonder consumers have long demanded products that would provide greater range as a means of alleviating range anxiety. The average consumer drives 13,476 miles per year according to the U.S. Department of Transportation. Fleet operators often drive their vehicles over 20,000 miles annually. As a result, it is a fleet manager’s decision based on the use case for each driver on whether providing an EV becomes a prudent choice for the driver.
Most adopters of EVs will tell you to charge up overnight and leave each morning with a full charge. Effectively, if an EV has a 225-mile range, a driver driving 60 mph, the EV could be driven for over 3.5 hours at high speed without recharging. While these are generic terms, in many cases high mileage EVs should be able to cover the daily requirements for most commutes and occasions. But what happens when the vehicle needs a charge?
Tesla has recently started its V3 Supercharging. With peak charging rates of up to 250kW per car, with on-route battery warmup and proper conditions, a Model 3 can recover up to 75 miles of charge in five minutes. There’s also Tesla’s nationwide supercharging network with the capacity to charge vehicles at a rate which allows vehicles to travel more than 100 miles with a 15-minute charge.
For other products, Level-III charging stations are now being deployed by Volkswagen. High-capacity charging stations ranging from 320 kWh to 150 kWh are in the process of being deployed. This project was part of the settlement agreement between Volkswagen and the California Air Resource board as atonement for its part in the Diesel Emission Scandal.
As a result, Volkswagen has created a new company called Electrify America, which will invest $2 billion for a national build-out of primarily Level-III charging stations, with $800 million of this being spent in California.
A plethora of high-speed charging stations, coupled with the efforts by many employers with workplace charging are making it easier every day to maintain an EV’s charge quickly, easily and efficiently to create higher acceptance of EVs.
Emission Regulation and Government
The list of countries which are moving to ban the sales of ICE vehicles is growing. Numerous governments throughout the world have already adopted laws banning the sale of ICE engine vehicles in the coming years, coupled with additional regulation in consideration.
● 2030 - Ban on gasoline and diesel vehicle sales are already on the books in India, Ireland, Netherlands, Denmark and Norway. Israel will ban the importation of all gasoline and diesel cars in 2030.
● 2040 - United Kingdom and France are committed to a ban on all internal combustion engine sales with Germany considering joining the ban. In the U.S., California has proposed to end manufacturing and registration of new gasoline cars in California by 2040.
● Austria, Japan, Portugal, Korea, and Spain have established official targets for electric car sales.
● China is on record for being the largest producer of EVs accounted for more than 40% of all EVs sold worldwide in 2016. China is currently developing a long-term plan to phase out combustion engines as part of its effort to curb carbon emissions.
Each of these state/governments mandates has signaled to the world OEMs a need to move to zero emission vehicles in order to meet their climate and air quality goals.
Projected EV Production
The number of electric car models available in Europe will triple by 2021 according to the European Federation for Transportation and Environmental experts. OEMs will offer more than 210 models in 2021 with 92 fully electric and 118 plug-in hybrid models. With 16 large scale lithium-ion based battery plants scheduled to begin operations by 2023 throughout various Europe countries, the investment European OEM’s are making is real.
Within the U.S., California has signed into law its zero-emission vehicle regulation, which nine additional states have adopted. This includes requirements for a minimum percentage of vehicle sales of EVs and plug-in electric hybrid (PHEV). These policies included California’s requirement for 100% clean energy generation by 2045 and New Jersey’s and Massachusetts’s increased renewable portfolio standard (RPS) requirements that renewables contribute 50% and 35% of generation, respectively.
In the U.S. by 2025, the year the regulations and new US federal fuel economy standards go into full effect, projected sales of EVs and PHEVs is expected to reach 1.3 million, or roughly 8% of all new car sales. With the global movement to EVs the product line-up by OEMs will increase. More products and more choices, greater variety, greater acceptance.