FINANCIAL MODELS
RETHINKING TCO FOR ELECTRIC VEHICLES Yves Helven
According to a part of the fleet expert community, it’s time to redefine the classic TCO model. Arguments in favour of revamping the old calculation are diverse: the transition from ownership to usership, impact of recyclable elements (batteries) in the automotive industry, volatility of residual values... Some even take into account elements that are external to the asset, such as the cost of congestion or the cost of sustainability. Buying an EV instead of an ICE simply in order to be able to use a vehicle on fast lanes or inside city centres might represent an additional cost indeed. The main question however is not so much the TC part of the calculation. It’s the O.
Linear Economies versus Circular Economies PWC’s “Road to Circularity” portraits in an excellent way the need for a different type of economy. It explains how, since the industrial revolution, industry and wealth-creation have operated in a “take-make-dispose” model, also called the “Linear Economy”. This involves extracting natural resources to make products that are used for a limited time and eventually discarded as waste. Here, the focus is on the product.
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The rapid consumption of finite resources (wood, oil, …) and the foreseeable end of their availability, asks for an economy where raw materials can be reused, recycled or reinjected into production; this is the “Circular Economy.” Here, the focus is on the service. Translating both types of economy into the fleet sector, PWC gives the example of BlaBlaCar. This mobility provider allows people to book a seat in a car for a specific ride through social media: you might be traveling from Amsterdam to
Brussels and have 3 free seats in your car. BlaBlaCar makes these seats available to other people. More generically and by extrapolation, PWC is telling us that “usership” of some kind is preferred to “ownership”. Since EVs contain one important ingredient that is both heavy on natural resources and offers the possibility of recycling – its batteries – there’s perhaps a case to be made for EVs in a TCU model rather than a TCO model.
EVs and traditional TCO Research and venture capital firm LoupVentures published an old-school 5-year/75,000-mile TCO comparison between a Tesla Model 3, an Audi A5 and a Toyota Camry LE. It’s an update
Purchase Price
of their 2017 study, which received quite a bit of press at the time. To be noted: this is a US study and therefore all costs are local to the US and in USD.
TESLA MODEL 3
TOYOTA CAMRY LE
AUDI A5
44,200
38,900
24,600
Financing
2,765
468
3,180
Tax, Licence, Title
3,025
2,050
5,405
Insurance
5,640
6,060
8,080
Fuel/Electricity
2,250
8,140
9,910
Maintenance/Repairs
1,200
4,000
8,000
Total
53,780
45,336
78,775
Remarketing Value
18,988
8,905
18,564
Total
34,792
36,431
60,211
0.46
0.49
0.80
Cost per Mile
An old-school 5-year/75,000-mile TCO comparison by research and venture capital firm LoupVentures.
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