Is it time to switch to an electric car?

Is it time to buy and own an electric car?

It's a question many people ask. With strong electric vehicle interest, gradually increasing sales (largely due to the Tesla Model 3 and Model Y), and more EV models flowing into showrooms over time, should your next car in the garage be all-electric?

Well, it's probably "yes" for now ... with caveats.

JUMP AHEAD

• Current state of EV market
• Purchase price & depreciation
• Running costs
• Insurance
• Cost of ownership
• Other EV concerns
  • Battery life
  • Charging network
  • Apartment life
  • Driving range
  • EV taxes
  • Model choice
  • Resources & human rights

The current state of EVs in Australia

“Range anxiety” might be the dominant buzzword when it comes to explaining why the take-up of electric vehicles has been so glacial in Australia, but a quick glance at new car price guides provides a more convincing reason as to why battery-electrics are still so rare on our roads: they are expensive.

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Year to the end of October 2022, a total of 23,869 passenger, SUV and light commercial electric cars were sold in this country. While it represents a substantial increase of 83 per cent compared to the same period in 2021, it's still small bikkies in a total annual new car market of a million-plus despite ongoing supply shortages.

The sales success of EVs is spearheaded by the Tesla Model 3 small sedan and recently released Tesla Model Y crossover, the latter of which is poised to quickly climb up the overall sales charts in Australia. But even with Tesla's volume, the market share of electric cars is still minuscule at just above three per cent.

None of this is especially surprising given, depending on your circumstances, there’s still no such thing as an EV that could be considered “cheap”.

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Times are changing though, with the MG ZS EV facelift and BYD Atto 3 newcomer starting from around $45K. It’s worth pointing out that internal combustion engine and plug-in hybrid vehicles are creeping up their starting prices with every new generation, update or even month in today’s inflated and supply-constrained market.

Does that compensate for the high showroom sticker price? What about depreciation? Does the second-hand value of an electric car plummet any faster than a comparable internal combustion-engined vehicle? All good questions.

Even with skyrocketing electricity and fuel prices, EVs still have the critical advantage of lower running costs. Sourcing power from a household outlet is just more convenient if you adopt a charge-overnight regimen; it’s substantially cheaper on a per-kilometre basis than petrol and diesel. Servicing is simpler, more affordable and, in some cases, less frequent, too.

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BYD Atto 3

Does that compensate for the higher showroom sticker price? What about depreciation? Does the second-hand value of an electric car plummet any faster than a comparable combustion-engined vehicle? All good questions.

For now, the cheapest battery-electric you can buy is the MG ZS EV Excite, priced from $44,990 drive-away nationwide. It’s based on the turbocharged petrol MG ZST Excite which is priced from $30,990 drive-away, though it can be had with cheaper variants.

Both are Chinese-made five-door small SUVs, both are intended for mainly urban duty, and both wear the same fundamental underpinnings, design and badge. But which one makes more sense in the long term – petrol or electric? We’ve crunched the numbers in an attempt to settle this argument.

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Purchase price and depreciation

From the outset, the combustion-engined crossover grabs an early advantage with a $14,000 saving before it’s even rolled into your driveway.

Why the big price discrepancy? All of those fancy rare earth metals in the electric motor, the lithium and nickel in its battery pack are quite expensive. With a modest 50.3kWh pack, the pure electric ZS EV needs lots of them, despite using the more affordable lithium-iron-phosphate (LFP) chemistry that doesn’t contain cobalt.

However, purchase price is just part of the story. Another key concern associated with owning an electric car, where its battery technology is still developing, is depreciation.

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Based on the used pre-facelift 2020 MG ZS EV Essence and ZS Essence top-specs with 30,000km to 50,000km driven, Redbook estimates their three-year trade-in residual value comes in at least 37 and 31 per cent respectively. However, as the electric car costs more to begin with, this means depreciation hit is more substantial: $16,790 for the ZS EV versus $8090 for the petrol ZS.

It’s worth noting, however, that these are conservative valuations and sometimes have to be taken with a grain of salt. This is a guideline figure of how car dealerships assess reasonable values on traded-in vehicles based on the brand’s historical performance and demand in the new and used market, so if you’re selling a car on the private market you may fare better.

Over time, as carmakers transition to fully-electric line-ups, the EV market share grows and price parity is achieved, the tables could turn and traditional internal combustion models’ residual values may be harder hit.

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Running costs

According to the Australian Bureau of Statistics, the average Australian drives around 15,000km per year.

The MG ZST Excite has a claimed average combined fuel consumption of 7.1-litres per 100km from its 1.3-litre turbo-petrol engine and 45-litre fuel tank, meaning it provides 634km of driving range.

At today’s national average price of the cheapest 94RON E10 Unleaded fuel at $1.83 per litre, it’ll cost ZST drivers about $1065 per year.

In comparison, the full-electric ZS EV Excite has a claimed combined energy consumption of 17.1kWh/100km and 320km claimed range from a full charge.

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Electricity prices vary from state-to-state with South Australia being the most expensive. But assuming you have access to a standard socket at home and charge overnight using an off-peak energy tariff of $0.15 per kWh, it’ll only cost $384 per year. That’s a sizable $681 saving by opting for zero emissions motoring.

If you can take advantage of a solar panel system, recharging your electric car can almost be free during the day or even at night when combined with a home battery storage system. After all, Australia has one of the highest solar uptake and sun exposure.

However, if you can’t conveniently charge at home, plugging-in a standard 50kW public DC fast charger that costs $0.40 per kWh means the ZS EV costs $6.84 to travel 100km or $1026 per year. This puts it more in line with the petrol-powered guise.

Comparisons

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But, there’s maintenance to factor in as well.

The turbocharged combustion engine ZST Excite demands servicing every 12 months/10,000km, averaging to $318.50 for the first six visits or $1911 in total at the 72 months/60,000km mark.

Meanwhile, the pure-electric ZS EV Excite only needs maintenance every 24 months/20,000km, costing $268 for the first three visits or $804 in total at 72 months/60,000km. This represents a saving of $1107 over that period in servicing expenses by going electric.

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Insurance

After finance and fuel, insuring your car is another big impost – and one that’s ignored at your peril.

For the purpose of this story, let’s assume that the owner is a 30 year-old female living in Sydney with a garaged address, a clean driving history record, and purchased the vehicle in full for private use only.

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She quoted comprehensive car insurance with three providers – the state motoring club, a more popular insurer and a budget-orientated offering.

On average, the petrol-run ZST Excite has a premium of $1383 whereas the electric ZS EV Excite costs $1600 annually to fully insure.

Electric cars are currently more expensive to insure because of the higher upfront price tag, fledgling local parts supply chain and fewer trained EV technicians in the country. Other higher performing EVs like the Tesla Model 3, Kia EV6 and Porsche Taycan will likely be even more pricier due to their lightning acceleration times.

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Overall ownership cost breakdown

ICE vs EV three-year total cost of ownership comparison

For the first three years of ownership, the MG ZS EV saves owners around 18 per cent in running costs compared to the combustion ZST.

Using pre-update 2020 model depreciation estimates as a guide, the battery-electric small crossover will lose at least 38 per cent more of its value when it comes to trading-in compared to its petrol equivalent.

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VW ID.3

However, just based on running costs alone, it'll need to take around 6.2 years to recoup the $14,000 price premium for choosing the MG ZS EV.

For some, it might be easy enough to stomach putting an electric car in their driveway, getting rid of one less pollutant on our roads and having the thrills of instant torque anytime. What’s more, the more you drive and the longer you hang onto it, the more financial sense the electric car makes.

The silver lining is as the cost of EVs come down (and they are), the economics of ownership tips further in their favour. Are we at the tipping point where EVs are more financially feasible than combustion-powered cars yet?

Not yet, but it’s not as far away as you’d think with more affordable models like the MG4, BYD Dolphin and Volkswagen ID.3, plus further government action on the horizon.

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MG4

Other EV concerns

We’ve focused largely on the financial rationale behind whether an electric car makes sense, but there are other ancillary issues that will dictate whether an EV is the right choice for you.

These things will largely depend on your personal situation – for some they won’t be a problem, but for others they may be a deal-breaker.

Battery longevity

There are concerns that electric car batteries degrade too much over time and eventually require a costly replacement. First-generation EVs like the Nissan Leaf, Volkswagen e-Golf and original Tesla Model S have proven to degrade very little – typically one to two per cent per year at the start of its life, before slowing down the rate over time.

Most car manufacturers cover each model with a dedicated battery warranty of around eight years/16,000km, with some promising that it’ll retain at least 70 per cent of its health during that period – otherwise a battery replacement can be offered for free. In the case that it’s outside the warranty, technicians can replace individual battery modules most affected, instead of the entire pack to save costs.

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Not enough public chargers

It's true that there aren't enough public AC and DC chargers in Australia – which are also reliable – and satisfy the growing demand today. But, the best charger is your home plug.

Public EV stations should mostly be used on longer road trips that are beyond your vehicle's range capabilities (200 to 800km depending on the model) – especially because they're far more expensive to recharge than at home on an off-peak electricity tariff overnight.

Charging in an apartment block

For those without the luxury of a garage, carport or a driveway to park your car and run a charge cable to it for juicing overnight, you’ll need to discuss with your body corporate, owners and other stakeholders to consider installing a standard home socket or AC charging wall box. Otherwise, you’ll need to rely on public EV charging infrastructure (if available).

Charging time

It usually takes around anywhere from 10 to 50 hours to completely recharge an EV on an ordinary home plug depending on the battery capacity. It’ll top-up enough charge for most commutes, but unless you intend to use up all the vehicle’s claimed range every day (200 to 800km depending on the model), you’ll need to install an AC home wall box charger that can completely recharge it overnight or rely on public EV chargers.

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Driving range

It’s often mooted that electric cars don’t provide enough driving range for Australians. If you venture outside metro areas, EVs can be an inconvenience due to the pre-emptive planning required for charging stops. It pales compared to diesel, but this is where plug-in hybrid vehicles (PHEVs) and the emergence of hydrogen fuel-cell electric vehicles (FCEVs) are advantageous.

However, as the typical Australian passenger car only commutes around 37km per day and commercial vehicles like delivery vans and buses have fixed set routes, driving range isn’t a problem in most cases.

EV taxes are inevitable

Just like the fuel excise imposed by the government to fund road maintenance and infrastructure, electric car taxes are poised to be legislated by each state from around 2027 or as soon as its market share substantially grows. This is to compensate for lost tax income through reduced consumption of fuels.

Today, Victoria is the only state in the nation to impose an EV and PHEV tax that is calculated based on the distance travelled annually.

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Model choice and availability

Electric cars available in Australia pales in comparison to the combustion-engined models we all know and love. In Australia, EVs aren't usually sold in a cheaper lesser-equipped variant, their nameplates are different (eg: Toyota bZ4x instead of RAV4), and there's limited supply flowing Down Under due to a lack of ‘fuel efficiency standards’ and lagging demand compared to major developed nations. But, the list is growing gradually and the current Albanese-Labor government is giving some hope for carmakers to allocate more EVs here.

Resources and human rights issues

The raw materials needed to make a high-voltage vehicle battery are costly and come with an environmental, social and geopolitical impact – depending on where they come from.

Just as with drilling for oil, extracting precious and rare earth metals out of the ground isn’t the simplest – or cleanest – process. New battery developments like the LFP chemistry, which’ll be used on more entry-level EVs, and solid-state batteries will alleviate the reliance.

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