Realist, not conformist analysis of the latest financial, business and political news

Electric Cars Aren’t Going To Be Cheap For All That Long

How fast can you build the factory?

Not that they’re cheap to buy right now, but once bought they are currently cheap to operate. Which isn’t going to continue. Nope, not a chance:

It’s not my Enyaq: it has been loaned to me by Škoda. This one costs £34,495 to buy, including a £2,500 government grant. Still a fair old whack, but EVs are expensive: even a little Renault Zoe costs £27,500. The cheapest Tesla is more than 40 grand.

EVs are much cheaper to run than other cars, though. Research by the price comparison website Uswitch found that, if you charge at home, you can squeeze 2,380 miles (3,830km) out of a Nissan Leaf E+ for £50. Compare that with only 443 miles for a similar-sized VW Golf. Edmund King, the president of the AA, says that service costs should be lower, too, because EVs are simpler. “The main things are tyres and brakes – there’s very little else in the vehicle. Initially, insurance was expensive, but that seems to be coming down. You don’t pay Vehicle Excise Duty, London congestion charge is free [until December 2025], some authorities give you incentives to park.”

Duty, free parking, no congestion charge – those will go as soon as they are making any significant dent in revenues. But rather more important:

Although electric cars do not have anything like the adverse environmental consequences that petrol and diesel cars do, they still contribute to congestion and congestion wastes time. At the personal level, it brings frustration, stress and anger. For businesses, it drives up costs. And the uncertainty about how long a journey is going to take brings added losses.

By contrast, if motorists faced a charge per mile, varied according to the level of congestion, time of day and other factors, then drivers could be incentivised to change their journey times and/or routes or even, at the margin, to decide not to make a journey at all or to share it with others. The result would be less congestion, shorter and more predictable journey times and a much more efficient use of our road network.

A comprehensive system of charging for road usage could also potentially be a major money spinner for the Government, as it either collected the pay-as-you-go revenues from road usage or banked a large lump sum gleaned from selling off the right to collect such revenues.

As others have also pointed out. Government currently gains some £30 to £40 billion from fuel duty. It is not possible that they’ll just shrug and stop spending so much. They will insist on replacing that revenue.

At which point some sort of per mile charge to replace fuel duty becomes inevitable.

The biggest effect of which is going to be to entirely wipe out whatever price advantage electric cars might have. They are, currently at least, an inherently more expensive technology than ICE. How much of that is just timescales, how long significant attention has been paid to technological development is currently unknown. But there are plenty out there who insist there’s no great breakthrough in battery tech a’comin’.

At which point electric plus tax will be much more expensive than ICE plus tax – because both are going to be taxed the same amount. Some will welcome this – the idea that the proles should be mobile and thus free grates – but the populace might well not take it nicely…..

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BlokeInTejasInNormandy
BlokeInTejasInNormandy
4 months ago

The simplest taxation solution is just put 800% (or whatever) VAT on tyres…

They’re consumable. Plus they directly add to pollution with tiny nanoparticles of capitalist-created carbon products being injected into the air. Plus, there’s some power law associated with how much gets shredded vs speed, so the bloated evil bastard Tory plutocrats will get cruelly dinged.

Snarkus
Snarkus
4 months ago

Optimist. More likely, just initially costs the local hoons who will simply start stealing wheels from other vehicles again

BiTiN
BiTiN
4 months ago
Reply to  Snarkus

Well, there is that!
So it’ll have to be swinging vat on automotive grade batteries.
What a pity 🤪

BiTiN
BiTiN
4 months ago
Reply to  BiTiN

Gah.
Swingeing
Idiot mutter mutter iphone

MrVeryAngry
MrVeryAngry
4 months ago
Reply to  BiTiN

I like the idea of swinging batteries…

Nila24
Nila24
4 months ago

Well, it is one sided view I would say. If they continue to subsidize fossils then you might as well make ICE cars cheaper to run than EVs today.

I agree that all these initiatives are going away, eventually. The real question is what will happen on the “other” (ICE) side of the argument. Are they really getting banned? If so then running EV might become more expensive, but cost of running ICE might become infinity. Will carbon taxes be a thing somewhere at the same time EVs (and tax revenues from them) become significant?

Boganboy
Boganboy
4 months ago
Reply to  Nila24

Haven’t noticed the subsidy on fossil fuels, only the tax. But perhaps you can enlighten me?

TD
TD
4 months ago
Reply to  Boganboy

In the US the most pronounced may be the low income homeowner subsidies for heating oil in the NE and other cold parts of country. Some people argue that accelerated depreciation is a subsidy, though I’d disagree. There are plenty of arguments that exploration leases on government lands are too cheap – I’m not sure, but it wouldn’t surprise me. And there are the famed depletion allowances that I’ve never understood but which are cited over and over as a subsidy. Some also argue that the maintenance of a strategic oil reserve amounts to a subsidy. Then there is the… Read more »

TD
TD
4 months ago
Reply to  TD

principle.

Barks
Barks
4 months ago
Reply to  TD

Depletion allowance is long gone in the US. An interesting concept, though. You have, say, a copper mine. Dig around and then sell the copper ore. At tax time take a deduction from taxes for some percentage (smallish) of the value of the copper ore no longer in your mine. Nothing like the “green “ subsidies in scope but still interesting.

Snarkus
Snarkus
4 months ago
Reply to  Nila24

what are these “subsides” petrol and diesel vehicles supposedly get ? Their owners pay taxes and fees electrics are immune too, plus subsidising the charging astations for these toys of the rich. As usual, the poor and middle class remnants are subsidising the wealthy, again.

Quentin Vole
Quentin Vole
4 months ago
Reply to  Snarkus

In Green clownworld, ‘subsidised’ means ‘not as heavily taxed as we think they ought to be’. The 5% VAT on (domestic) gas consumption is counted as a subsidy, because it’s less than the standard rate.

Mark
Mark
4 months ago

Cheap!? Most people in the real world don’t buy new cars. I never have. Most people can’t and will never be able to afford a new car. £25k+ is not cheap for most real wage earners. What are milk floats – or hybrids for that matter – like after 10 years. There are a lot of 10-20 year old cars on the road, and I’ve had perfectly good motoring out of cars even older. The drive trains may have fewer moving parts than an ICE, but they require very complex thermal and electronic management, and if, say, an ECU, were… Read more »

MrVeryAngry
MrVeryAngry
4 months ago
Reply to  Mark

It’s not a ‘clusterf**k. It’s a creed. It’s policy the destroy liberty of the proles.

Snarkus
Snarkus
4 months ago
Reply to  Mark

for what value of “real progress” ? Liquid hydrocarbons are stored and transferred economically, easily and safely. No other readily available substance has these attributes. The damage from lithium and rare earths mining may be manageable in wealthy countries, but not the massive energy used processing them. I await the real world results of Twiggy Forrests investment in solar powered ammonia plant in NW Australia. If an affordable fuel cell that can efficiently utilise ammonia and has a long (20 year) life is created, NH3 might then become an alterantive fuel, assuming it also does not create toxic trace pollutants… Read more »

Bloke on M4
Bloke on M4
4 months ago
Reply to  Mark

“What are milk floats – or hybrids for that matter – like after 10 years. There are a lot of 10-20 year old cars on the road, and I’ve had perfectly good motoring out of cars even older.” This is why I’m mostly avoiding them. I’m always wary of not being an early adopter. You have to make a compelling case for the new thing for me. A few hundred quid saving on energy, especially at the loss of utility of fast recharging with petrol, just ain’t worth it. Someone else can find all the downsides. “There are very high… Read more »

Quentin Vole
Quentin Vole
4 months ago
Reply to  Bloke on M4

Chatting to my windscreen repairer last week about my (plug-in hybrid) electric, he tells me that the AA (other roadside services are available) now have two van fleets, the main one for ICE vehicles, but with a growing number for EVs that have just run out of juice. They carry a fast charger (petrol powered generator) that can get them to the nearest services.

Mark
Mark
4 months ago
Reply to  Bloke on M4

I’ve driven a hybrid (I’ve had them as hire cars a few times), and as cars – put petrol in, drive – they’re fine. I just have doubts about long term reliability, or perhaps it would be better to say utility on the second hand market when 10+years old. I don’t particularly want one, but this milk float insanity (and I’m not at all convinced by hydrogen or any of the other alternatives mooted) is going to have to crash and burn. It’s going to be messy and I’m not sure how long it will be to get to the… Read more »

swannypol
swannypol
4 months ago

It seems like the environmental and societal damage from ICE cars is around £6bn a year (ox.ac worked it out). Which means your car tax pays the pollution cost – compensates off the externality.
Fuel duty and VAT on such at 20% are on top of that and used largely to fund road infrastructure. So revenue collected by say, cost per mile, over all cars needs to come back to same sort of number. At which point ICE cars are cheaper to run AND more convenient that electric ones.

TD
TD
4 months ago

One bet I will make. There will still be gas/diesel vehicles for a long time to come, even if new ones are banned. So there will still be fuel sales and fuel taxes. Any mileage charges will be imposed on all vehicles and fuel taxes won’t be lifted.

Charles
Charles
4 months ago

Congestion would be greatly reduced if people switched from cars to motorbikes when they don’t need to transport much more than themselves – which is a huge proportion of commuting.

Snarkus
Snarkus
4 months ago
Reply to  Charles

as a lifetime biker, I assume you live in a benign climate and dont wear much in way of PPE ? Try stashing a helmet, good PPE in the tiny cubbyholes of a modern office sometime ? Either that, or make lack of situational awareness an enforced capital punishment offense.

Charles
Charles
4 months ago
Reply to  Snarkus

I wear full PPE (helmet, jacket, trousers, gloves, boots) but have found no difficulty with space for it at work. If you bring in a hangar, the clothing doesn’t take up much space, and there’s usually a spare desk somewhere for the rest.

And, of course, lack of situational awareness can be a capital offence – but unfortunately one carried out on the victim rather than the offender.

Addolff
Addolff
4 months ago
Reply to  Charles

Congestion would be greatly reduced if people got out of their cars and walked / cycled / motorbiked. How much of the ‘obesity epidemic’ in our children would reduced if the little bastards walked to school?

Michael van der Riet
Michael van der Riet
4 months ago
Reply to  Addolff

All kinds of wonderful things could be achieved if the state prevented people from doing what they want and spending money on what they want. Zil lanes were a bloody good idea.

MrVeryAngry
MrVeryAngry
4 months ago

“Although electric cars do not have anything like the adverse environmental consequences that petrol and diesel cars do,” That’s not true. An ADAC report from 2018 tested this claim and found that up to about 113,000 kms the total CO2 etc produced by making and using Battery v ICE cars was broadly the same. But from that point battery electric cars started to pull away in the CO2 front, but very slowly. But (2) the life of the batteries was about 85,000 kms at which point they need replacing at vast cost both in cash and CO2 terms.Meaning that over… Read more »

bloke in spain
bloke in spain
4 months ago

I’m starting to think if you want to future proof yourself for road transport in the UK past 2030 you’d best tuck a diesel away. You can run one of them on cooking oil with a few mods. OK. No doubt illegal by then but the police will have a lot more on their hands to worry about. If they dare be on the streets at all except in armored vehicles. If they can find charge points for them

rhoda klapp
rhoda klapp
4 months ago

And the trucks? That’s why BiS is right. Buy a diesel because trucks will be using that for a loooong time. After 2030 the PTB might just make petrol disappear.

Michael van der Riet
Michael van der Riet
4 months ago
Reply to  rhoda klapp

The only problem being that when petroleum is refined, petrol is an inevitable fraction of the output. What would you suggest be done with it?

Addolff
Addolff
4 months ago

We could burn it…….

Fun factoid – I didn’t know until quite recently why the septics called it gasoline. It turns out ‘Petroleum’ is crude oil and gasoline the refined product (although that is from Wkik, so is potentially a load of cobblers)

Rhoda Klapp
Rhoda Klapp
4 months ago

You are of course correct, and the thought had not occurred to me. Soon we will find out whether it occurred to the climate alarmists. Probably they will suggest putting it back in the ground.

john77
john77
4 months ago

On days that wind-power generated is less than 1% of nameplate capacity the government will have the choice of letting industry run, or powering the domestic lights, fridges and heat pumps, or charging the electric trains, buses and cars.

What makes you think that electric cars (other than those of the Nomenklatura) will be top priority?

I can walk, but you may want to buy a bicycle.

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