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The late 90’s saw the birth of the world’s first mass-produced hybrid electric car in the form of the Toyota Prius. A little over a decade later Tesla was successful in securing a loan of $465 million from the Department of Energy, to establish their electric car manufacturing plant in California.
Inspired by the success of Tesla, other large automotive manufacturers followed suit, and began designing their own hybrid and all-electric vehicles for mass production.
Reducing Emissions Through Electric Cars
With a global pressure to reduce emissions incentivizing governments to subsidize consumers for owning vehicles running from clean energy, there are few obstacles presenting adoption of electric cars. However, the cars are not popular with all demographics. Research shows that the annual household income of the majority of electric car owners is greater than $100,000.
Given that the median US household income was just $60,000 in 2018, it would seem that ownership of an electric car is only feasible for the rich. Certainly, when the cars were first introduced on the market they were more expensive than the standard petrol or diesel-powered car, but with the development of technology over the past two decades, is this still true?
Cost of Electric Cars
Recent research is uncovering that the electric car may not be as costly as first assumed. A 2018 study found that the price of electric batteries dropped a huge 50% between 2015-2018. This decrease is predicted to continue further over the coming years, helping to continue to cut the cost of producing electric and repairing this type of car.
The reduction in battery cost has helped the overall upfront cost of the electric car to fall. Take the Chevy Bolt, for example, GM’s first all-electric car, the starting price for which is $37,000. This is the same as the average price for new cars and trucks in the US. As the cost of building these vehicles drops, so does the cost to the consumer.
But it’s not just the cost of purchasing an electric car that decides on whether it is affordable or not, what about running it? Recent figures state that the cost of charging electric cars may be up to 50% cheaper than putting gas in a conventional car. Current rates estimate that a 100-mile trip could cost less than $5, where putting gas in your car may set you back around $10 for the same journey.
Governments Incentives for Electric Cars
In addition, with mounting pressure on governments to cut emissions, they are offering tax cuts, subsidies, and abolishing certain fees for electric car drivers in order to make them more appealing. For example, the UK has announced that it will ban the sale of new petrol and diesel cars from 2040, and other countries have similar plans. To help smooth the transition, these countries are offering government grants, and other financial crutches to help people buy electric cars. The US offers $7,500 in federal tax credit, making electric cars more affordable.
All of these factors have resulted in a reduction to the crossover point. This is the point where purchasing and running an electric car becomes cheaper than owning and running a petrol or diesel car. In 2017, you would have to own an electric car for 9 years before it becomes cheaper than its conventional counterpart.
The latest figure shows a dramatic drop, claiming that in just 4 years owning an electric car proves to be cheaper than a diesel- or petrol-powered car. In some countries, such as Norway, the savings are more prominent. But what is happening on a global scale is that the costs of producing electric cars are rapidly decreasing, and therefore the upfront costs of purchasing one are dropping.
In addition, the cost to run is decreasing, and government initiatives are further helping keep costs as minimal as possible. This means that while initial costs may still be slightly elevated in comparison to purchasing a car that runs on fossil fuels, the long-term costs are cheaper, earning electric cars the status of an increasingly affordable option.
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