Ownership Cost Parity Between EVs and Gas-Powered Cars Possible by 2025

Ownership Cost Parity Between EVs and Gas-Powered Cars Possible by 2025

This piece was originally published in the May/June 2020 issue of electroindustry.

by Fred Ashton, Economist, NEMA

Over the past decade, electric vehicles (EVs) have made substantial progress toward mass adoption. Charging stations have become faster and more readily available, and range-anxiety has slowly dissipated, with some EVs being able to travel nearly 400 miles on a single charge. One obstacle, however, remains at the forefront: cost.

The ownership cost of a vehicle goes well beyond the sticker price in a showroom. Fuel, maintenance costs, and depreciation are key determinants of the total cost of ownership. So how do electric vehicles stack up against gas-powered vehicles? And when will price parity occur?

A study conducted by the University of Michigan found that the average annual cost to “fuel”an electric vehicle in the United States is $485, compared to $1,117 for a gas-powered vehicle.1 However, the costs for electricity and gas vary dramatically from state to state. To help consumers gauge fuel costs in their state, the Department of Energy has put together an eGallon calculator. eGallon “calculates how much electricity the most popular electric vehicles would require to travel  the same distance as similar models of gasoline- fueled vehicles would travel on a gallon of gasoline. That amount of electricity is then multiplied by the average cost of electricity for the state.”2 According to the eGallon calculator, in no state is it cheaper  to fuel up on gasoline.

Additionally, the prices of lithium-ion batteries have fallen dramatically since 2010 from $1,183/kWh to $156/kWh in 2019, according to Bloomberg.3 They also expect the average price will be close to $100/kWh by 2023.

Maintenance also contributes to the lifetime cost  to operate a vehicle. An article written in Forbes notes that maintenance for EVs is likely lower because they have “fewer moving parts, no exhaust system, less need for cooling … and no need to change oil, fan belts, air filters … and spark plugs.”4

Forbes notes that when fuel savings are accounted for, EVs are already at cost parity in some markets. An executive at Volkswagen predicts electric vehicles will cost less in three to five years.5 Although calculators are helpful, none of them incorporates the effect of depreciation. EVs depreciate significantly faster in value than gasoline-powered vehicles. In some cases, EV tax incentives may offset the depreciation handicap

While the lack of EV infrastructure is likely to remain a headwind to the mass adoption of EVs, ownership costs are heading toward parity by mid-decade. ei


1   “Costs and benefits of electric cars vs. conventional vehicles,” EnergySage

2   “eGallon: What It Is and Why It’s Important,” Department of Energy, June 10, 2013

3   “Powering The EV Revolution — Battery Packs Now At $156/kWh, 13% Lower Than 2018, Finds BNEF,” CleanTechnica, December 4, 2019

4   Jeff McMahon, “Electric Vehicles Cost Less Than Half As Much To Drive,” Forbes, January 14, 2018

5   Steve Hanley, “EV Price Parity Coming Soon, Claims VW Executive,” CleanTechnica, August 9, 2019

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