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Price comparison: do electric cars have to be more expensive than combustion engines?

These are seemingly simple questions to which there is no simple answer, neither for manufacturers nor for car buyers. But technical progress and development are progressing rapidly. Yesterday’s alleged bargain price may already be very expensive tomorrow – and vice versa.

Car life cycle costs are crucial

Also, if you just keep an eye on the purchase price, you can fall into the cost trap. Because an average “life in the car” in Germany lasts about ten years. It also covers maintenance costs, value stability at the time of resale, taxes and insurance, as well as the trend in fuel prices. Furthermore, the current war-related upheavals in commodity markets make it virtually impossible for industry, commerce and buyers to make serious long-term calculations.

So far, realistic comparative calculations over a vehicle’s entire lifecycle have helped cost-conscious car buyers. But at the moment they are also very uncertain.

The total costs of electric cars and combustion engines are currently being reversed

ADAC made the current calculations to determine the total costs for purely electric vehicles per kilometer driven. Electricity and fuel prices, depreciation and maintenance costs, holding period and annual mileage were considered.

In the purchase price, subsidies for electric mobility and dealer discounts for conventional vehicles were taken into account. The first imponderability arises here, because dealer discounts for combustion engines are currently in short supply. The reason for this is tighter supply due to problems in the supply chain, according to the current report from automotive expert Ferdinand Dudenhöffer.

The new comparison with petrol and diesel vehicles still shows that the smaller a car, the greater the purchase price difference between electric motors and combustion engines.

“With few exceptions, manufacturers still charge a high price for electric mobility. The smaller an electric vehicle, the greater the price difference to a comparable conventional vehicle. The premium offsets the high comparative prices. That’s why the data from registrations for electric vehicles have increased significantly in the past year. ” Peter Sobotta, ADAC expert

However, from the consumer’s point of view, the overall cost balance has reversed compared to gasoline engines. In the past, it was almost in balance because the state stepped in with purchase premiums and tax breaks for electric cars.

However, following their recent significant increase due to the crisis, fuel prices in particular have become a turning point. Electric cars also appear to be cheaper than gasoline-powered vehicles for the first time when the overall costs are considered. They have already been able to compete with diesel cars in the past, at least in the overall cost analysis.

Two examples: with the BMW 118i petrol engine with a 100 kW engine, it costs 60.9 cents per kilometer, which is about 14 cents more than a year ago. A comparable electric BMW i3 in terms of equipment and performance currently costs only 50.6 cents, although the purchase price is 2,500 euros higher. Even if the 15 percent discount that was once customary applied to the combustion engine, the gasoline engine no longer helps balance costs.

The example of the VW Golf: the 1.5 TSI LifeDSG petrol model has a discount of 49.9 cents, the successor to the VW ID3 electric Golf costs 47.2 cents per kilometer, although its list price is 4,500 euros in more.

Electric car buyers benefit from subsidies

The state is currently paying up to € 9,000 in subsidies for pure electric cars – and the subsidies will run until 2025. Rising sales figures show that such purchase incentives work. According to the Federal Motor Transport Authority, the number of purely electric cars in 2021 doubled to over 600,000. But what electric car buyers receive as a bonus is paid for by the taxpayer community. Therefore, the economic sense of such subsidies must always be to abolish themselves again. At the moment, the opposite can be observed. There are additional privileges for electric car owners, such as permission to exchange emission certificates for individuals through the law on further developing the greenhouse gas reduction quota.

But what does the calculation look like without state subsidies for electric vehicles and without dealer discounts for combustion engines?

Here, too, the ADAC determined the total costs per kilometer with current prices (as of April 27, 2022). Consequently, the petrol-powered BMW 118 i costs 61 cents, while the comparable BMWi3 costs 60 cents. Draw for the VW Golf 1.5 TSI and the VW ID.3 with a total cost of around 57 cents per kilometer.

A year ago, combustion engines clearly had an advantage in this comparison. This relationship has now been offset by high fuel prices.

Norway: Cheap electricity and tax advantages make electric cars attractive

Even a glance at Norway is revealing. More than half of the cars are already purely electric or hybrid. Because electricity from hydroelectricity is relatively cheap and electric cars are almost completely tax free. The example shows that if you want to serve the mass market with micro and small cars, you cannot avoid low energy costs and subsidies for electric mobility.

Car manufacturers between regulation and the market

The state is intervening massively in the German car market at European and national level: CO2 limits in constant decline and billions of fines for non-compliance on the one hand, billions of investment aid for the development of electric mobility on the other. With all this, car manufacturers are forced to assert themselves against international competition. This means that they must continue to be profitable. A complex task.

“The cat is biting its tail when it comes to the heavier weight of electric cell phones. The use of light metals such as magnesium is therefore essential. This in turn entails very high additional costs.” Jörg Wellnitz, bodywork expert, Ingolstadt Technical University

In a study, management consulting firm Deloitte identified more than 25 levers that manufacturers need to reconcile in cost accounting. Battery technology in particular will be decisive for the price. Batteries account for up to 40 percent of the total price of an electric car. The price trend of necessary raw materials such as cobalt or nickel is a big unknown. This is particularly evident these days.

Sanctions against Russia also mean a shortage of metals needed for batteries. Take nickel, for example, whose price increased by more than 100 percent in March 2022 alone. An average electric vehicle needs 40 kilograms, while a combustion engine needs zero kilograms.

Although recycling concepts are in the works, electric car manufacturers have to recalculate and are looking for replacement solutions such as lithium iron phosphate cells. But that also means billions of investments that consumers pay as customers in the purchase price or as contributors to research subsidies.

Luxury cars: good for manufacturers, but not the solution

It is very likely that the big Stromers will manage not to be more expensive at the purchase price. In the case of large and heavy SUVs costing more than 50,000 euros, the price difference between petrol, diesel or electric vehicles is shrinking and the profit margin for manufacturers is getting wider.

This explains why Audi CEO Markus Duesmann, according to “Wirtschaftswoche”, wants to compete with Tesla in the premium segment from 2024: with the successor of the TT sports car “e-tron GT” – while at the same time the small A1 car it will be removed from the model range in the future.

To what extent heavy, high-margin electric cars still have a better overall ecological balance than comparable combustion engines is another question. Experts such as Marcel Weil of the Karlsruhe Institute for Technology Assessment speak of “absolute nonsense from the point of view of sustainability” and thus advocate the smallest cars possible.

Political guidelines as a “game changer”

But one thing is certain: political decision-makers in Germany, but also the entire European Union, have mapped out the path for the transformation towards types of alternative drives. They do this on the assumption that less carbon dioxide from the exhaust will help counteract ongoing global warming. Regardless of how you feel about it, change in the automobile is becoming inevitable. But even if the purchase price of electric cars does not drop for a variety of reasons, politics still has a “winning card”.

If electric cars cannot get cheaper, costs should increase for competitors with the same performance as combustion engines. This strategy is also supported by current ADAC comparative data for diesel and electric vehicles. Both the BMW 118d and the Golf 2.0 TDI perform significantly worse than their electric siblings. In the case of diesel, the increase in taxes has led to an increase in operating and fixed costs and therefore a greater loss of value. Decreasing the competitiveness of electric vehicles is the politically desired result.

But gasoline engines may also become less attractive in the future due to political demands. The EU is currently considering the introduction of the new Euro 7 emissions standard. Euro 7 requires that every vehicle be largely emission-free in every driving situation. Whether Euro-7 will actually arrive from 2025 is currently the subject of intense debate among experts. In any case, the German auto industry has spoken openly of a “declaration of war”, considers further tightening technically impossible, and refers to 600,000 endangered industrial jobs that, according to the ifo study, depend on engines a combustion in Germany.

On the other hand, subsidies and privileges for electric cars are unlikely to be maintained over the long term. This would not only be wrong in terms of regulatory policy, but would also pose a problem for the fiscal state. In any case, as a precaution, car buyers should not rely on permanent subsidies when planning, because the state still needs revenue somewhere, such as for road construction.

Conclusion from the buyer’s point of view

For consumers, this will most likely mean that electric mobility will continue to be promoted for a while, the range of electric vehicles will increase, the automotive industry will have to make an effort, for better or for worse, to use research and development. to improve all-round electric mobility.

But the risk of comparing apples to oranges when buying a car remains high. Because even if combustion engines and pure e-mobiles in the same segment are to have roughly the same prices in the future – a closer look at the design, equipment and follow-up costs of the specific vehicles under consideration will be even more important. This is especially true of the mass market of micro and small cars.

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