Payback on EVs Could Be Never, Study Reveals

DETROIT – What would it take for electric vehicles to become volume players worldwide?

A lot, say consultants from The Boston Consulting Group, which releases a study on the state of battery technology for full and extended-range EVs in 2020 at a gathering of the Automotive Press Assn. here.

The problem is payback. Without government help or a technology breakthrough, BCG sees it taking from nine to 29 years, depending on region, for consumers to recover the extra cost of electric powertrain technology from lower fuel expenses. The payback on an EREV is even worse: 11 to 40 years.

As a result, BCG says EVs and EREVs will comprise only about 6% of the world’s new-vehicle market, or about 3 million units annually.

Here in the U.S., BCG says the payback on an EV will be 15 years and an EREV owner won’t recover costs until the vehicle is 19 years-old, well past the typical lifespan of a car and about nine years beyond the expected life of advanced lithium-ion batteries that will be used to supply power.

Europe has the fastest payback at nine and 11 years for EVs and EREVs, respectively, while Japan has the worst at 29 and 40 years. It will take 11 years to break even on an EV and 14 years on an EREV in China, the group says.

“Consumers want a payback in three years,” says Xavier Mosquet, who leads BCG’s global automotive practice and co-authored the study. “Four years maybe, and two years would be better. But as you get above three years, it’s a limited market.”

Government incentives could put EVs in a better light. With current incentives of about $7,500 available in Western Europe, the breakeven point on both EVs and EREVs comes down to just one year. Similar incentives now available in the U.S. put the payback at three years on EVs and five years on EREVs, such as the Chevrolet Volt.

But there’s no guarantee those consumer tax breaks – which in the U.S. are available only on the first 200,000 vehicles sold by each manufacturer – will be extended into the next decade.

BCG bases its calculations on batteries with energy densities of 150 Wh/kg and costs of $400/kWh, not the $200-$250 targeted by the industry but a vast improvement from today’s $1,000-$,1200. It also is factoring in oil at $100 per barrel, estimates on electricity costs in each region and no change in fuel taxes from today’s level.

In North America, it would take one of the following to make EVs volume players: government tax incentives of $7,7,00 per unit; a doubling of battery power to 290 Wh/kg; a halving of battery costs to less than $215/kWh; a near-quadrupling in oil prices to $375 per barrel; or a 210% increase in fuel taxes.

It would also solve the problem if Americans began driving more than 40,000 miles (64,000 km) per year, rather than the 14,000-mile (22,000-km) average. “But the trend is probably in the other direction,” Mosquet notes.

The study does not factor in the cost recovered when spent EV batteries are recycled into other uses, because BCG doesn’t believe such a market will exist to any great extent.

“We’re still looking for clients that would pay $100-$200 for a used battery,” Mosquet says. “If you (find one), give us a call.”

If EVs and EREVs remain low volume, auto makers will have to “move in another direction” on fuel efficiency, says Massimo Russo, a BCG partner. “EVs won’t be the perfect solution.”

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