Is the Tesla Model S Really For the Rest of Us?
What does a Tesla Model S really cost to operate? Crunch the numbers and the results may be a bit surprising.
By now we’ve all heard about the new four door, seven seater (5 adults + 2 kids), all electric eco monster from Tesla — the Model S. We’ve seen the pictures of the gorgeous beast and we’ve had our chance to let the lust settle.
But the thing that’s been bothering me, and surely many of you, is that it still feels like Tesla is making cars with a decidedly un-populist bent. Tesla has been claiming for a long time now that their business plan is to start with the high end market, make some money, learn some lessons, and subsequently release cars that the rest of us can afford — using that money and those lessons to get there.
- » See also: Is the Renault-Nissan Alliance Going in Two Different Electric Car Directions?
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You know what though? For a sophomore offering, the Model S is still gonna cost $50,000 to start — and that’s with the low end battery pack that can take you a scant 160 miles. Even so, Tesla claims that the Model S is a car for the rest of us after you consider the cost to operate it over its lifespan as compared to a typical $35,000 gas guzzler.
So, being the bit of a dork that I am, my immediate thought was to test Tesla’s theory myself and pop some numbers into a spreadsheet. My basic assumptions were:
- My hypothetical average car buyer will need a loan to buy the car.
- To get a yearly payment, I set that loan at a 5.5% interest rate for 5 years.
- In my simplified world, after 5 years the loan payments stop and all you have left are energy costs (fuel/electricity) and service costs.
- My hypothetical average car buyer is financing the whole price of the car.
- Electricity costs remain constant over the life of the car and follow the current US average of 11.47 cents per kWh.
- I’m estimating that the Model S has a 4 mile per kWh efficiency which results in about a 3 cent per mile cost given average US electricity prices.
- Service cost for an electric vehicle will be about $50 per year over the lifespan of the vehicle. In the 10th year of ownership I’ve added a $4,000 service charge to that base level to replace the battery. Tesla claims battery replacement will cost “well under $5,000″ and that the battery pack will last 10 years (this value was changed from $500 after it came to light that the autobloggreen post from which I obtained this number had a typo).
- Service and maintenance cost for a gas vehicle will be about $600 per year over the lifespan of the vehicle (this value was changed after reader input in the comments section).
- My hypothetical average car buyer drives about 15,000 miles per year, half on the highway and half in town.
- My hypothetical $35,000 gas guzzler gets 20 mpg in the city and 26 mpg on the highway.
After crunching the numbers, I’ve made four graphs (below) that show the cumulative costs of owning the Model S vs. owning a hypothetical $35,000 gas guzzler. The four graphs differ based on the price of fuel: $2/gal, $3/gal, $4/gal, and $5/gal.
You can see for yourself that at $2/gallon gas it would take 15 years before the Model S made up for its initial cost. However, at $3/gallon it’s 8-9 years, at $4/gallon it’s 6-7 years, and at $5/gallon the costs are nearly identical for the first 5 years. It’s worth noting that in all cases, after you make up for the initial cost of the Model S, the savings really start to pile on.
So, the question is, how much of premium is it worth to you to reduce fossil fuel consumption and dependence on foreign oil and how long are you willing to wait for the payback?
Plus, you never know when oil prices will jump back up to $4/gallon — or go even higher. In that case, you could think of a Model S purchase as a hedge against future oil prices.
You did not factor in the cost of maintenance for either car. For a typical ICE you have to change the oil, transmission, differential (rear wheel drive), and brake fluids. Along with engine and cabin air filters. And tires.
For an electric car you will need only need to change brake fluid, cabin air filter and tires. Plus the battery at the end of it’s life.
Nice article, I have a comments though. The service cost seem quite low, they might cover maintanace but not repairs. I’ve attached a link to Edmund’s True-Cost-To-Own numbers for a comparable 3-series BMW. I’d expect the repair cost on an electric car to be much lower because there is only one moving part in the drive train.
http://www.edmunds.com/new/2009/bmw/3series/101082772/cto.html
Hello Nick.
Firstly, this is a good article and this kind of comparison needs to be done. It’s very easy to jump on the electric bandwagon without looking at the data.
I have a nearly 7 year old Mini Van that fits the general description of your comparison vehicle. It cost a little more than $35K when new (but let’s forget the difference for now) and my mileage runs in the 20-26 range.
I must point out that servicing my gas powered minivan runs a bit more than $250 a year. Regular servicing on this vehicle runs in the range of $300 to $800 dollars a shot and this happens twice a year. If the brakes need attention (remembering that the disks seem to only last as long as the pads now-a-days) we are looking at another $500. Through the past 6 years that’s been once every 1-2 years. I am told my 90K service will be in the range of $2,500 dollars!! So, including this year as the 7th year of ownership (inc. 90K service), my yearly servicing costs come to about - $1,700. I have not included new tires (I am at the end of my 2nd set already) as the Model S will still need tires just like anything else with wheels.
So, that’s going to add $1,450 to the yearly cost of operation, after seven years, even with $2/gal gas, the cost of the Model S breaks even with the gas guzzler. The crossover just appears quicker the more gas goes up.
But, even with that said, it would still take seven years to financially make sense - which is still quite some time for the average car buyer.
One last thing though - the Model S looks way cooler than my minivan
All,
Thanks for the comments so far!
G, I certainly did include maintenance in my costs for both cars under the “service” category.
I realize my maintenance costs for the gas car may be a little low, but I wanted to be conservative in my estimates. In some cases, maintenance for a $35,000 gas car may be as much as 5-600 dollars a year. It gets complicated by the fact that service and maintenance for a car is going to be very low initially (almost nil) but will increase over time. However, for the purposes of this comparison imagine my hypothetical car to be one of those rare cars that has the minimum amount of service requirements — thus my $250 per year estimate.
“So, the question is, how much of premium is it worth to you to reduce fossil fuel consumption and dependence on foreign oil?”
I would just like to comment, okay your stats are interesting, I am all for reducing our consumption of fossil fuels, and it’s very interesting that at current electricity rates, there’s not so much difference, good article, really.
But, imagine hypothetically if all motorists suddenly switch to electric cars, hypothetically remember. Where does all the electricity come from? There are no where near enough renewable resources (hydroelectric, wind, solar etc.) to meet that demand at this moment. One solution in the short-term is to burn oil to generate electricity. Which is the same as the initial situation, except even more oil was burnt in the production of new cars.
My point is that electric cars can be a great way of harnessing renewable energy sources in the future, but we don’t have that many right now. Wouldn’t it be more wise to invest in reasearch and development of these new energy resources first?
Nezhac,
Thanks for the compliments and very good question…
It is true that, given our current sources of electricity, we would still be using fossil fuels (mostly coal; 70% by some estimates) to generate most of the electricity that would run our electric cars. However, it is worth pointing out several things that make the switch to electric cars worthwhile even if we never moved away from “dirty” sources of electricity:
1) It is much easier to regulate and control pollution from single large point sources (powerplants) than it is to control it from a couple hundred million cars.
2) When new technology becomes available that can either reduce the pollution from power plants (i.e better pollution control devices) or nearly eliminate it altogether (i.e. a wholesale switch to wind or solar), it is much easier to implement those new technologies for a handful of powerplants than it is for a couple hundred million cars.
3) Distribution of electrical energy is hugely more efficient than distribution of liquid fuel energy, therefore, even if fossil fuels are powering our cars through power plants, the amount of fossil fuel used per mile of car traveled is way less.
4) The conversion of electrical energy into movement in an electric car is roughly 80% efficient. The conversion of fossil fuel energy to movement in a gas powered car is roughly 30% efficient. This means much less wasted energy in an electric car.
5) Electric cars have a fraction of the amount of moving parts and, hence, lubrication requirements of gas powered cars, which means less petroleum products used for lubrication as well.
The other problem is that the average person doesn’t drive a $35,000 vehicle, at least not here in the Midwest. Knock about $10,000 off your gas-guzzler and rerun the numbers and then you will see how the masses will do!
AB,
It may be that the average sale price of a car in the US is lower than $35,000 (not sure how much lower though, Edmunds estimated the average US new car sale price in 2006 was $27,800). However, trying to match the features of the Tesla Model S to other gas cars, $35,000 is about right. And, I don’t think anybody would argue that the $35K range is certainly within the reach of an average middle class American… it may not be what most people decide they can afford, but certainly with a little budget stretching, and depending on their priorities, if they really wanted a $35K car they could do it.
Edmunds link:
http://www.edmunds.com/advice/buying/articles/45310/article.html
If you still have the spreadsheets saved somewhere can you please calculate a 10 year lease and 4$ a gallon(which is the price here in Europe now - March 27th 2009). You will probably be surprised what turns out.
Another suggestion is to calculate one of US scenarios you wrote here but for double the miles per year.There are people that drive alot.
Another suggestion. Ask a taxi driver how much miles he drives per day, and annually. And make a calculation for taxi driver
This gives me a great Idea. It will be nice to have it on a site as real time calculator
The first time I looked at the specs on AutoBlogGreen, I also saw the $500 battery replacement figure, which seemed pretty remarkable to me. I think this may have been a typo, however, because when I looked at the specs again later on it had been changed to $5000. Might be good to clarify and factor that into the equation. Thanks for the article.
Thanks for the good eyes Mr. Sinister, I’ve made the changes in the text and graphs.
-Nick Chambers