Are Electric Fleets Viable in 2016?

This month, the world’s two largest economies signed the U.N. climate agreement proposed in Paris last year. Leaders recognize that climate change is a defining issue of our time, and the transition to green technologies is essential. The Government of Ontario, for example, has a Climate Change Action Plan, that suggests several ways to reduce provincial carbon emissions, like adopting fully electric vehicles.

Electric cars feature prominently in the news. Uber revealed the addition of 50 electric vehicles to their fleet, and China has at least 100,000 electric buses. Given all the investment by large firms and governments, should your business move to full electric for its transport needs? For Toronto logistics startups, being a first adopter of an electric fleet might grant an edge on the competition. Theoretically, a low maintenance, energy efficient, and environmentally friendly fleet is appealing, but is it currently viable?

This week we’ll be evaluating the viability of electric car ownership Ontario. Specifically, we’ll be looking at compact cars, one of the largest automotive segments in Canada. The breakdown will be covering cost of ownership in the first year, and the carbon cost of each vehicle.

To begin, we’ll look at the current options for purchase.

The Contenders

There are currently two battery electric compact cars available for purchase in Canada.

• Nissan LEAF: Introduced in 2010, this car features a 107 horsepower engine, and instant torque access from the electric motor. The LEAF has a maximum range of 172km on a single charge, roughly the distance between Toronto and Buffalo. Charging from empty to full takes five hours.
• Chevrolet Volt: This vehicle packs a 101 horsepower engine, plus a 1.5L gas engine as backup. The fully electric motor has a maximum range of 85km on a charge, which for reference is about the drive to Hamilton from Toronto. The Volt charges in 4.5 hours.

The LEAF and the Volt will be compared with 2016’s two best-selling, gas only, compacts in Canada.

• Honda Civic: With engine horsepower starting at 158, 138 lbs/ft of torque and over 33, 000 units sold as of July, the Civic is Canada’s most popular sedan.
• Hyundai Elantra: Slightly more than 3000 units shy of being the most sold compact in the country, the Elantra boasts 147 horsepower and 132 lbs/ft of torque.

Cost of Ownership

Fuel/Power Cost

The average Ontarian commercial fleet vehicle drives around 20, 000 km per year. Using the specifications of the vehicles, an average power consumption cost of 13.2 cents/kWh (using mid-peak power consumption figures), and using StatsCan figures for the average petrol costs of 2016 as 102.4 cents/litres, we can estimate the following yearly energy costs. Note that this assumes that the Volt is only driven as a battery electric vehicle.

From these calculations it’s clear that electric vehicles win the energy cost straight up, but what about insurance costs?

Insurance Cost

Ontarians pay the highest automobile insurance rates in Canada, in some cases as much as 60% of the cost of the vehicle. The median car insurance rate in Ontario is $1,538 per driver per year, and we can assume a commercial insurance premium to higher. For our example, we’ll use a conservative estimate of $1700. Electric vehicles can save quite a bit when it comes to insurance costs; Intact Insurance offers a 20% discount on commercial insurance expense of plug-in electric vehicles.

Purchase Price

Going green has a premium attached to it. A brand new, base Civic or Elantra will cost $16, 155.00 and $15,999.00 respectively. In comparison, the LEAF and Volt will cost upwards of $32,698 or $38,490, almost double the price. Even with discounts from bulk purchasing, the cost of buying a brand new electric fleet is daunting to say the least.

This premium is offset by the Ministry of Transportation’s Electric Vehicle Incentive Program (EVIP), which offers rebates on electric cars. This brings the net cost of purchasing a LEAF down to $23,099 and the Volt to $26,973.

Maintenance

Being brand new cars, we’ll assume that the first year maintenance cost of the vehicles is minimal. Electric cars benefit here due to fewer moving parts. Electric cars do have a major maintenance expense every few years, which is changing the battery every 100,000 km.

Assuming that the electric car requires nominal maintenance in the first year, and the gasoline cars only receive the recommended two oil changes a year at a minimum price of $25, this adds an additional $50 a year to the gasoline cars.

The Bottom Line

Adding our costs, and considering our rebates, the total first year cost of our vehicles amounts to:

LEAF: $24, 919.47

Volt: $28, 904.47

Civic: $19, 277.16

Elantra: $19, 264.52

Doing the math, ceteris paribus, it takes at least 5 years before an electric car’s maintenance, insurance, and fuel savings are able to offset the low initial price of the traditional gasoline offering. Strictly looking at the money, it’s clear that electric cars have affordability issues; outright purchase prices swallow the great cost savings offered by lower energy and maintenance cost. That said, a vehicle that truly reduces environmental impact is worth the premium to most consumers.

Carbon Cost

Energy and Fuel

Power generation has its own associated sets of costs. Ontario does not use coal, one of the chief carbon polluters, as an energy source. However natural gas is still burned, leaving a smaller, but still noticeable footprint. According to the Carbon Fund, each kWh of energy produced on average creates about 554g of CO2. As such we can calculate our electric vehicles to have carbon footprints of 1.93 (LEAF) and 2.39 (Volt) tonnes.

A litre of gas on the other hand releases about 2.31 kg of CO2 when completely burned, which brings the carbon footprint of the gasoline offerings to approximately 3.10 (Civic) and 3.42 (Elantra) tonnes of emissions.

Evidently, the electric vehicles win in this regard, but remember that manufacturing produces carbon as well.

Production

While electric cars are comparatively more environmentally friendly to run, their creation is often not a green process. Components of an electric car, such as the battery are environmentally costly. Half the carbon produced during the life cycle of an electric car is from the vehicle manufacturing process (for comparison, traditional automobile manufacturing only produces 17% of lifetime carbon emissions). A 2012 study published in the Journal of Industrial Ecology concluded that the electric vehicle supply chain creates a large amount of hazardous waste, and when incorporating the carbon cost of production, an electric car’s footprint over its life cycle in optimal conditions is about equal to a diesel car.

From our analysis, it’s evident that electric vehicles are quite affordable when it comes to upkeep and fuel costs. Initial purchase prices, however, still prove to be a large barrier to fleet viability; even when the net price is reduced due to insurance savings and government rebates. This premium provides greatly reduced carbon emissions through the consumer’s use of the car, but the potential environmental hazards in producing components (and the carbon cost of manufacturing the product), weigh down any true benefit at the current time.

The future looks bright for electric vehicles though. The Canadian market continues to demand more of them, and scientists are hard at work creating developing batteries that can be more efficiently produced and easily recycled.