STUDY: Electric Vehicle ownership equates to paying $17 a gallon for gasoline

“Adding the costs of the subsidies to the true cost of fueling an EV would equate to an EV owner paying $17.33 per gallon of gasoline…It’s time for federal and state governments to stop driving the American auto industry off an economic cliff and allow markets to drive further improvements in cost and efficiency.” — Brent Bennett and Jason Isaac, OVERCHARGED EXPECTATIONS: Unmaking The True Costs of Electric Vehicles

The Texas Public Policy Foundation in an October 2023 report titled OVERCHARGED EXPECTATIONS: Unmaking The True Costs of Electric Vehicles by Brent Bennett and Jason Isaac looked at the real costs of ownership of all electric vehicles (EVs).

Bennett and Isaac in the Executive Summary wrote,

An in-depth analysis of the comprehensive costs associated with electric vehicle (EV) ownership is crucial for a holistic understanding of the economic landscape surrounding the attempted mass transition from internal combustion engine vehicles (ICEVs) to EVs. Major selling points promoted by EV advocates are lower maintenance and fueling costs over the life of the vehicle and the common claim that reductions in battery prices will eventually make EVs less expensive to own than ICEVs. For example, a study conducted by a group at the Argonne National Laboratory estimated that while an average EV is about $22,000 more expensive to purchase than a comparable ICEV, they cost about $14,000 less to fuel, insure and maintain over a 15-year period, making their lifetime cost only $8,047 more than an ICEV (Burnham et al., 2021, p. 144, Table B.1).

Setting aside some of the questionable assumptions used in deriving such favorable economics for EVs, no one has attempted to calculate the full financial benefit of the wide array of direct subsidies, regulatory credits, and subsidized infrastructure that contribute to the economic viability of EVs. In this paper, we show that the average model year (MY) 2021 EV would cost $48,698 more to own over a 10-year period without $22 billion in government favors given to EV manufacturers and owners.

EV advocates claim that the cost of electricity for EV owners is equal to $1.21 per gallon of gasoline (Edison Electric Institute, 2021), but the cost of charging equipment and charging losses, averaged out over 10 years and 120,000 miles, is $1.38 per gallon equivalent on top of that. Adding the costs of the subsidies to the true cost of fueling an EV would equate to an EV owner paying $17.33 per gallon of gasoline. And these estimates do not include the hundreds of billions more in subsidies in the Inflation Reduction Act (2022) for various aspects of the EV supply chain, particularly for battery manufacturing. It is not an overstatement to say that the federal government is subsidizing EVs to a greater degree than even wind and solar electricity generation and embarking on an unprecedented endeavor to remake the entire American auto industry.

Despite massive incentives, EVs are receiving a tepid response from the majority of Americans who cannot shoulder their higher cost. Car lots are swelling with unsold EVs (Muller, 2023), and the Ford Motor Company is losing over $70,000 on each EV it currently sells (Bryce, 2023). EV enthusiasts are holding out for breakthroughs in battery technology—batteries being the main factor in the high cost of EVs—to reduce prices and make EVs more widespread. But advances in battery technology are measured not in months but in decades, and the downward trend of lithium-ion battery costs over the past decade has largely ended (IEA, 2023a). It’s time for federal and state governments to stop driving the American auto industry off an economic cliff and allow markets to drive further improvements in cost and efficiency.

In a post on X former Representative Jason Isaac stated that, “Energy Poverty = Poverty. #decarbonization is dangerous and deadly.”

Today, I’m thankful to live a high-carbon lifestyle and wish the rest of the world could too. Energy poverty = poverty. #decarbonization is dangerous and deadly.

— Fmr. Rep. Jason Isaac (@ISAACforEnergy) November 25, 2022

The study found that,

Recent data suggest that the EV scrappage rate is substantially higher than that of gasoline vehicles. S&P determined that despite EVs having an average age of 3.6 years and gasoline vehicles having an average age of 12.5 years, during “the 10-year period from 2013-2022, 6.6% of BEVs in operation were pulled out of commission. During the same period, just 5.2% of combustion vehicles left the fleet” (Leinert, 2023, para. 7). Therefore, the EV scrappage rate is already higher than that of gasoline vehicles and is likely going to increase in future years as the average age of the EV fleet increases.

Of course, a higher EV scrappage rate and, in turn, fewer miles traveled compared to gasoline vehicles should also be accounted for in any cost-benefit analysis. Other issues excluded from this analysis include:

• Billions of dollars in taxpayer-funded subsidies for electric buses, trucks, and truck stops, plus the addition of charging infrastructure at public facilities such as ports and airports.
• Billions in state and city taxpayer-funded subsidies other than state buyer credits.
• Credits from California’s low-carbon fuel standard, which is a cross-subsidy from gasoline buyers to subsidize EVs in California.
• The unaccounted cost of EVs in terms of additional emissions from power plants, and the embedded environmental costs of the EV supply chain.
• The cost of allowing EVs to use managed lanes, such as high-occupancy vehicle lanes, and the cost of parking spaces given to EVs and EV charging stations.
  • The cost to consumers of additional time spent charging EVs relative to fueling gasoline/diesel vehicles.
• Disproportionately high road damage from heavier EVs compared to gasoline/diesel vehicles.
• Disproportionately high EV recall costs compared to gasoline/diesel vehicles, which are socialized to buyers of gasoline and diesel vehicles from the company initiating the recall. 9 See footnote 4 for more information on how the cost per equivalent gallon of gasoline is calculated.
• Building construction costs as some municipalities are beginning to require “EV-ready” construction in new homes and buildings.

The study concluded,

The stark reality for proponents of EVs and for the dreamers in the federal government, who are using fuel economy regulations to force manufacturers to produce ever more EVs, is that the true cost of an EV is in no way close to a comparable ICEV. Our conservative estimate is that the average EV accrues $48,698 in subsidies and $4,569 in extra charging and electricity costs over a 10-year period, for a total cost of $53,267, or $16.12 per equivalent gallon of gasoline9. Without increased and sustained government favors, EVs will remain more expensive than ICEVs for many years to come. Hence why, even with these subsidies, EVs have been challenging for dealers to sell and why basic economic realities indicate that the Biden administration’s dream of achieving 100% EVs by 2040 will never become a reality.

EV apologists continue to claim that technology breakthroughs and economies of scale will rapidly bring down these costs, but there is no Moore’s law for batteries, which are a fundamentally different technology than semiconductors. The benefits of economies of scale have largely been reached by most lithium-ion battery manufacturers, costs for those batteries have largely ended their downward trend of the past decade (IEA, 2023a), and additional cost improvements will be hard won. Lithium prices are nearly quadruple what they were in 2019 (Trading Economics, n.d.), and fluctuations in raw materials costs will play a significant role in the cost of EV batteries going forward.

The lesson to be learned from this study is that markets, not government, drive innovation and efficiency. Despite the massive financial and regulatory advantages being offered to EVs, there are more than four times more hybrid and plug-in hybrid vehicles than full EVs registered in the U.S. (EERE, n.d.-b). Toyota estimated that the amount of materials to make one EV battery can be used to make 90 hybrid batteries and that those 90 hybrids will result in 37 times more emissions reductions over their lifetime than one EV (McParland, 2023).

Perhaps if D.C. politicians and bureaucrats stop trying to force Americans to build and buy their preferred types of vehicles, the cleaner and brighter future that they imagine will actually materialize. [Emphasis added.]

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