The word on the street is that electric vehicles are the future of automotive transportation. There have been numerous studies done that seemingly proved that electric vehicles are better for the environment and can save money for consumers.
However, these popular studies left out significant factors in their calculations that swayed the results in favor of electric vehicles. The new study done by The Texas Policy reveals that electric vehicles are a lot more expensive than the number printed on the price tag.
The Price Tag Paradox
One of the most significant benefits of electric vehicles is that they are supposedly less expensive than a traditional internal combustion engine vehicle (ICEV.) Previous studies have done the math that shows that this sentiment is true, but this study called “Overcharged Expectations: Unmasking The True Costs of Electric Vehicles” reveals that this may not be true.
The Argonne National Laboratory Study
A recent study by the Argonne National Laboratory suggested that over 15 years. The average electric car would only cost $8047 more than an ICEV car in total ownership car costs. Unfortunately, this analysis did not consider the broader economic implications that contribute to the total cost of electric vehicles.
Subsidies and Hidden Costs
The Texas Policy study revealed that electric vehicle ownership heavily depends on governmental, direct subsidies, regulatory credits, and subsidized infrastructure that we don’t think about. These financial incentives provided by the government make electric cars affordable. However, it still costs Americans, though it may be indirect costs that are masked into other fees and taxes.
Massive Government Favors
In case you think I’m blowing smoke, let me lay out the numbers. Government subsidies and financial incentives play a huge role in making electric cars more accessible to consumers, but at what cost?
It is estimated by The Texas Policy that $22 billion worth of governmental subsidies for electric vehicle manufacturers and owners significantly impact the overall cost of EV ownership.
In fact, their report shows that in 2021, electric cars were discounted by an estimated $50,000 per car, thanks to these governmental incentives.
But who is paying that extra $50k per vehicle? Americans are, just in other, hidden ways.
So, what exactly are these hidden subsidies? Well, electric vehicles benefit from a web of indirect subsidies. They include avoiding state and federal fuel taxes and the extra cost posed on the electric grid. These subsidies often go unnoticed. And they don’t make it into the calculations when factoring the true cost of electric vehicles.
Another one of the main selling points for electric cars is their low operating cost. Advocates of EVs claim that the cost of electricity for EV owners is equivalent to $1.21 per gallon of gasoline. But, you have to factor in charging equipment and energy losses, and the true cost per gallon equivalent increases to $1.38. However, this is still not the end of the story.
Fuel Tax Gap
The way that the nation currently pays for the roads is by imposing a fuel tax on the gasoline that is purchased for ICEV cars. Portions of this tax are used to fund roads and other driving infrastructure. Since electric vehicles are obviously not buying gasoline. They are seemingly exempt from paying into these funds. Some states have imposed extra fees on vehicle registration to help make up these fees, but others are still cutting the loss.
Electric Grid Costs
Electric vehicles also impose additional costs on the electric grid, which are not fully shouldered by EV owners. These expenses include generation transmission distribution overhead costs, which impact the grid. Each electric vehicle costs the energy grid $11,833 over the lifetime of the car in repairs and expenses.
Unmasking the True Cost
When you do all the math and include all of these hidden subsidies, they add up to a staggering $48,698 to the cost of the average electric vehicle. This is a substantial difference from the simplified analysis done in previous studies.
Remember how I said that EV owners pay the equivalent of $1.38 for a gallon of gas? Well, once you calculate everything in this study, including contribution to the grid infrastructure expenses and subsidies, EV owners are actually paying the equivalent of $17.33 per gallon of gasoline. This makes the dream of all-electric transportation look more like a nightmare.
Reevaluating Economic Landscapes
If nothing else, this study shows that it is possible to rearrange the numbers to depict whatever story it is that you want to tell. It also calls for a deeper understanding of the economic realities associated with EV ownership.
Maybe the price tag of an electric car is affordable, but that doesn’t tell the whole story. EV owners have to think about the full economic impact of their purchase and factor that into the price tag that they see on the dealership lot.
Research journalist, Freelance writer, Managing Editor
- Expertise: automotive content, trending topics.
- Education: LeTourneau University, Bachelors of Science in Business Administration.
- Over 400 articles and short news pieces published across the web.
Experience: Madison Cates is a journalist located in the great state of Texas. She began writing over eight years ago. Her first major research piece was published by the Journal of Business and Economics in 2018. After growing up in a household of eight brothers and a dad who was always restoring old Camaros, she naturally pivoted her freelance career into the automotive industry. There, she found her passion.
Her experience paved the way for her to work with multiple large corporations in automotive news and trending topics. Now, she now finds her home at Wealth of Geeks where she proudly serves as Managing Editor of Autos. Madison is always down to geek out over the latest beautiful cars on the market, and she enjoys providing her readers with tips to make car ownership easier and more enjoyable.