What is Driving the Shift To Electric Vehicles?

Viraf Baliwalla, Car Smart Eletter, 2022-11-04, 2022-11-04

(Back to list)

As the auto industry is aggressively pushing towards fully electric vehicles, it is critical to understand what is driving this shift and who stands to benefit the most for each category of vehicle. At the first level of electric, there was the hybrid vehicle whose technology has been with us since the early 2000’s with the Toyota Prius. These vehicles have a regenerative braking system that puts some charge back into the battery while braking and uses gas when extra power is needed or the battery needs additional “juice” to recharge. Then came the plug-in hybrid which added the ability to plug the vehicle into a standard or fast wall charger. Both the standard hybrid and plug-in hybrid cost more initially to purchase and for repairs than their fully gas-powered counterparts, however the more time spent running on the battery, the less one paid for gas at the pump. Finally, the fully electric mass-market vehicle, pioneered by Elon Musk with Tesla, has seen a dramatic increase in popularity and adoption. These vehicles use a combination of technologies to keep batteries charged and vehicles moving. The clearest advantages are that there are relatively few moving parts or oil so less maintenance is required, no fuel emissions at all, and the cost of electricity today is typically a lot less than the cost of gas. At first glance, it seems obvious that consumers will benefit with cleaner air and money saved. However, a deeper analysis may prove otherwise. Let’s look at the two benefits just mentioned:

Cleaner Air? This depends on where you live and how your province/state generates electricity. If your area is still using coal based or older technology, then despite the lower emissions of the vehicles themselves, chances are that there is not as much of an environmental benefit because the electricity generated to power these vehicles is still quite dirty. In Ontario, you are doing the environment a favor by switching from a fully gas-powered vehicle. A quick check of the Gridwatch App tells us that Ontario generates 94% clean electricity. Other jurisdictions may not be so advanced in their generation of electricity. A hybrid or plug-in hybrid vehicle will certainly save on the overall environmental footprint of your car, but will still have fuel emissions when the gas is in use. Also, the emissions from the factories that manufacture the batteries are as great, if not greater than, the extra emissions from a gas combustion car. Finally, the eventual disposal of these batteries, if not recycled properly, can be an environmental hazard.
Who Stands to Benefit? Are we really saving money overall? If you are driving any level of electric vehicle, you are certainly saving on the amount of fuel you use now, but that is only one part of the picture, albeit most visible? Eventually, governments will compensate for their loss of income on the taxes at the pump with increased electricity rates! Currently, the vast majority of the profits on gas goes to oil producing nations while local governments only make their portion of taxes. However, the more electric a vehicle is, local governments stand to gain because all profits will stay at home, especially as electricity costs rise - and they are rising, so we will pay for it one way or another eventually. And let’s not forget about insurance rates which are typically higher for all levels of electric vehicles because, well, they can be. You must have insurance and don’t have a choice but to pay if you want such a vehicle. Margins on electric vehicles are currently much higher for manufacturers. Even once the supply shortages are resolved, there won’t be much negotiation on car purchase prices.

In our opinion, despite a higher upfront cost of the vehicle, more expensive repair costs down the road when needed, and a high cost to replace the batteries, we will have the satisfaction short term of overall lower operating and maintenance costs from driving any level of electric vehicle. Plus, it’s cool! However, in our humble opinion, we also think that the costs a few years down the road will normalize as the dust settles and hybrid and electric vehicles become more the norm and gas-powered vehicles are no longer being manufactured. It’s not that far away. We’ll just become used to a new normal at which time, overall total cost of ownership will be about the same. If you are thinking of buying or selling a vehicle, remember that our advisory services are always free at Automall Network. Even in today’s market, we are still saving money for our clients and more importantly helping them get their hands on a vehicle faster.

(Back to list)