Electric Cars – Saving Real Money or Arbitrage Opportunity?

Electrek has reported an amazing set of numbers on a Tesla S:

A Tesla Model S hits 300,000 miles in just 2 years – saving an estimated $60,000 on fuel and maintenance

The vehicle is owned by Tesloop, a company that offers rides in Tesla vehicles.

A large part of this difference is due to the fact that the car is being used within an area that has extensive Tesla SuperChargers. So all the electricity is “free” (paid for as part of the purchase price of the vehicle). Also parts of the repairs and maintenance were largely paid for under the warranty. The powertrain warranty is for 8 years and includes unlimited mileage. This means that at the same annual usage rate the warranty would cover 1.2 million miles or 1.93 million kilometres.

The key question here is whether Tesla is losing money on this arrangement. If so, the savings are artificially inflated. The answer to part of that question is in the pricing models that Tesla introduced early in 2017. Before that date all Tesla S vehicles received free power on the Tesla Supercharger Network. After that date only the first 400 kWh per year are free. After that you get charged a fee for your power when charging . The fee varies between locations.

So there is no doubt that Tesla has been heavily subsiding the Tesloop operating costs. A smart business move to spot an arbitrage opportunity.

The 400 kWh is estimated to provide power for 1000 miles of driving (1609 kilometres). In Australia the current (sic) charge on the Tesla Supercharger is A$0.35/kWh.(https://www.tesla.com/en_AU/support/supercharging). so the energy cost per kilometre of driving is approximately 8.7 cents. This compares to my petrol Toyota Corolla Hatch at 8.1 cents per kilometre (combined urban/extra urban mileage claim of 6.7L/100km and fuel at  121 cents per litre). Fuel efficiency is worse in urban driving but the Tesla Superchargers are mainly for highway travel so that this is a fair comparison.

Two other comparisons bear looking at. In Illinois the charging rate is US$0.15 per kWh. This equals A$0.188 (RBA quoted exchange rate August 30th 2017) and changes the per kilometre cost to 4.7 cents.  Secondly, our current at home shoulder and off peak rates are A$0.1257, which reduces the per kilometre cost to 3.12 cents. Of course we would have to pay for a charging unit as well. If we amortise that cost then the total cost might be 4 cents per km. That is half my current fuel costs, or a saving of about $600 a year on 15,000 km.

If we use 4 cents as a reasonable figure then the cost difference for an electric vehicle travelling 100,000 km a year as a car ride service/taxi is $4,000. That is a significant advantage for an electric share vehicle over a fossil fuel vehicle. That number starts to really add up if you own 20,000 of them in a fleet ($80 million a year).

If we go to the non- fuel car costs. RACQ estimates that the private ownership costs of running a medium sized car in Australia are around 65-72 cents per kilometre. More than 50% of these costs are interest costs (about 8.2 cents) and depreciation costs (about 29.5 cents). Registration and insurance and other on road costs are at about 14.9 cents. This leaves about 7.5 cents for repairs and maintenance plus tyres after accounting for fuel costs. The vast majority of that being repairs and maintenance (median is about 7 cents). In the Tesloop case the scheduled repairs and maintenance costs were US$6,900 for 300,000 miles (482,802 km). This equates to A1.79 cents per kilometre. If we go back to my Toyota which has a fixed price service of A$480 a year then that costs is A3.2 cents per kilometre at 15,000 km per year. The reality is that I drive a little less so the cost is 3.7 cents.

If we go back to the RACQ numbers the Tesla Model S 75 version has fuel costs of 4.73 cents per kilometre. It also has maintenance costs of A8.91 cents. This seems high given the Tesla Loop experience but may just be a function of  the much higher mileage.

The Tesla S is a luxury vehicle and so its costs are likely to be higher than a standard vehicle. Lets look at the Chevy Bolt. In this analysis I have been helped by an excellent article by Steven Sinofsky at Learning by Shipping and Insideevs : Chevrolet Bolt Requires Almost No Maintenance For First 150,000 Miles.

The maintenance schedule (H/T Steven Sinofsky) for the Bolt is:

Chevy Bolt maintenance schedule Sinofsky

Insideevs estimates that if you do the very scant maintenance yourself the cost for maintenance for the first 150,000 miles (241,000 km) is US$150 (yes you read that right) while Steven says:

“Yep you read that correctly, during my entire three year lease there’s nothing for me to do. I never have to go to the dealer” – Steven Sinofsky

So one way or another routine maintenance is very low.

In terms of fuel efficiency the Bolt is rated at 238 miles (383 km) on a 60 kWh battery although city driving has a better range due to regenerative braking, and highway driving is poorer due to a poor drag coefficient.  This results in 6.38 km per kWh and if we use the off peak rate I pay then that is A1.97 cents per kilometre (note Steven was more conservative in his mileage calculations which work out to about A2.39 cents per km using my electricity costs).

This is a lot of figures so as a summary I have made up a small table:

Fuel Costs Maintenance Costs Total
Tesloop Tesla S 0 1.79 1.79
Toyota Corolla Hatch (Mine) 8.1 3.7 11.8
Tesla S (RACQ) 4.7 8.91 13.61
Luxury Vehicle (Ave RACQ) 7.06 10.2 17.26
Chevy Bolt (first 60,000km – but generally representative) 1.97 0 1.97

Now I know that I have not made a fair comparison between the Bolt and the Tesla S. In part because they are completely different vehicles, and because I have only included routine maintenance servicing for the Bolt.  There will be non -routine costs in the maintenance costs. The actual costs of those the owner will be in part determined by warranty systems. The RACQ figures appear to include a capped servicing arrangement with Telstra.

What we can say is that there are significant operating costs for the new electric vehicles, as compared to standard ICE vehicles. Even if we add in the Tesloop Tesla S maintenance costs as an estimate for the Bolt’s costs, the Chevy Bolt’s operating cost for fuel and maintenance is still only 3.76 cents per kilometre, compared to my Toyota costs of 11.8 cents. Even though I have only included my fixed costs servicing which is well below the costs shown in the RACQ figures.
 
That comparison is also unfair as the costs associated with the Tesla S are high due to its luxury model status. You can see the details of the repairs and maintenance receipts by going to : Tesla Model S Hits 300,000 Miles with less than $11,000 maintenance costs  and registering for their Google Docs page. These include warranty repairs done at no cost. I was unable to reconcile the costs to the article description as some costs appear to be missing but what is in there is in the following table:
Date Item Cost
18/08/2016 Replace 12V battery 171.33
24/10/2016 replace brake pads and rotors 1759.42
4/11/2016 Right Rear Door handle 961.96
21/11/2016 left front door handle 962.18
20/02/2017 wheel liner, rear diffuser, front aero shield, water ingress on headlights 2176.2
7/03/2017 Air conditioner , other pages to receipt are missing 2800.12
15/03/2017 Air conditioner, passenger door handle 656.64
Total 9487.85

As you can see the majority of the maintenance costs excluding the issue with the headlights and brake replacements related to the air conditioner and door handles. Some of these are likely to be costs associated with the luxury/technology parts of the doors, and early model issues. I would expect that costs for a standard production model would be much lower.

The point of all this analysis is work for our book to look at adoption timelines and business models for electric and autonomous vehicles.

In this case it is the headline number of how much it takes to run your car. That is because people get this in their face every week whereas the main costs of finance and depreciation are more removed from their experience. Once we move to the full question of costs we have to look at those more closely. we will do that in the next few days. Then we have to look at fleet options versus personal ownership.

We will do some more sophisticated modelling as we firm up the assessment for the book.

I am writing a book on autonomous vehicles with Dr Chris Rice of the University of Texas Austin. It is called Rise of the Autobots: How Driverless Vehicles will Transform our Economies and our Communities. Stay tuned for more excerpts as we finalise the book.

 

 

 

 

 

 

 

Advertisements

One thought on “Electric Cars – Saving Real Money or Arbitrage Opportunity?

Please tell me what you think

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s