Cost of Plug-In Electric Vehicle Ownership: The Cost of Transitioning to Five Million Plug-In Vehicles in California

Chakraborty, Debapriya; Buch, Koral; Tal, Gil · 2021 · ROSA P / University of California, Davis. Institute of Transportation Studies

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Summary

This study addresses the economic feasibility of transitioning California’s light-duty vehicle (LDV) fleet to five million plug-in electric vehicles (PEVs) by 2030, a target aligned with the state’s goal of net-zero carbon emissions by 2045. Motivated by concerns regarding the cost-efficiency of zero-emission vehicles (ZEVs) without government subsidies, the research investigates when and under what conditions PEVs achieve cost parity with internal combustion engine vehicles (ICEVs). The authors aim to provide policymakers with evidence on the trade-offs between high upfront purchase costs and long-term operational savings, accounting for technological uncertainties and consumer heterogeneity. The methodology comprises two parts. Part 1 employs a bottom-up teardown analysis to estimate vehicle manufacturing costs and market-level Total Cost of Ownership (TCO) for the period 2020–2030. This approach accounts for direct production materials, indirect costs such as research and development (R&D), manufacturer profit margins, and dealer markups. The analysis covers battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) across passenger car and truck segments, comparing them to gasoline ICEVs. Part 2 expands the scope to include fuel cell electric vehicles (FCEVs) and analyzes the cost of fleet electrification across six market segments defined by household income and housing type. This segment-specific analysis incorporates heterogeneity in annual vehicle miles traveled, access to home charging, electricity and gasoline prices, and vehicle resale values over a five-year ownership period. The results indicate that the initial purchase price of ICEVs remains lower than that of PEVs across all vehicle segments through 2030, even with stricter Corporate Average Fuel Economy (CAFE) standards. However, the upfront annualized capital cost difference between ZEVs and ICEVs is projected to decrease by 58% from 2020 to 2030 due to falling technology costs and economies of scale. While ZEVs offer lower operating costs, this advantage diminishes as ICEVs become more fuel-efficient. Crucially, TCO parity is not uniform; it varies significantly by consumer segment. High-mileage drivers, particularly those in the passenger truck segment, are more likely to benefit from PEV adoption. The study finds that cost parity between ZEVs and ICEVs is achieved between 2025 and 2030 for all six household categories, though the timeline depends on individual charging access and travel behavior. The significance of this research lies in its demonstration that TCO is not a single market-wide figure but varies based on sociodemographic and behavioral factors. The findings suggest that PEVs may not be cost-competitive without continued policy support and automaker initiatives, particularly for lower-mileage drivers or those lacking home charging infrastructure. These insights provide a foundation for policymakers to evaluate the welfare impacts of electrification strategies and design targeted incentives that address the specific barriers faced by different consumer groups, ensuring a more equitable and economically viable transition to a zero-carbon transportation system.

Key finding

Cost parity between zero-emission vehicles and internal combustion engine vehicles is projected to be achieved between 2025 and 2030 across all household segments, driven by declining technology costs and economies of scale.

Methodology

modeling

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