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.
A few more additonal notes to the above.
6) The Tesla is a WAY COOL car.. very nice inside and out, the cool factor accounts for something, just ask Apple.
5) The intangibles of running an electric car, namely the environ impacts have a value associated to them beyond the $ amounts assigned to the care and maintenance of the car itself.
4) I agree, the actual maintenance cost of a gas car is much higher per year, unless of course you have a nice total care maintenance package from a luxury (or even non-luxury brand)
3) As often commonly misquoted and understood, the Telsa and for that matter any other 100% electric car has more than “ONE” moving part on it, unless of course you don’t want it to roll! The axles, wheels, wheel bearings and all the associated parts for the suspension and steering and pedals etc etc etc.. They do wear out and need replacing occasionally. Tires, brakes (unless you have regen braking and can greatly reduce the break wear). But yes, the engine on a gas car is associated for a major portion of the cost of maintaining a car.
2) Chances are, you WON’T be using this car for any serious long distance traveling. I can fuel up my car and go from LA to San Fran on one tank, the Tesla would require a few multi-hour pit stops and an electrical outlet (if your average gas station will let you plug into their power even). IF there were a network of good 240V service outlets on the major highway routes, then maybe you can reduce those stops to 30 minute “breaks”. So scaling the higher mileage to faster cost savings really gets harder to do the more miles you pour on per year. A salesperson that travels about 100 miles a day might be able to cut it with a car range of 160-200 a charge, but not someone driving all over the state of California on a regular basis, and that is what you would need for someone to put say 50,000 miles a year on a car.
And the #1 gotcha! quoting Nezhac “But, imagine hypothetically if all motorists suddenly switch to electric cars, hypothetically remember. ”
1) If all motorists were to suddenly switch to electric cars.. Well that WOULD be something, and I realy don’t think that would be a problem. Because well you would put about 10,000 gas stations out of business which would greatly lower the power grid usage. Also, you would be charging these cars at night at home during off peak power usage, not during the heat of the summer when everyone is running their A/C full tilt. AND the biggest payback calculator difficulty would be, the massive decrease in the gasoline/oil usage would drive down the price of gas to probably 50cents/gal (not including taxes) which would really make the justification for paying the higher price for the car pretty difficult.
But as we all know, there is a balance, gas ISN’T going to go to 50cents/gal in our lifetime, and you are future proofing your car against the whims of OPEC and the Big Oil companies. Image always having transportation even if there is no gas/oil available! A few solar panels on your roof keeps you always mobile.
Actually to get a gas powered car that performs like the Tesla S you will probably spend close to $50,000 to start with and if you do all the scheduled maintenance on a new car as I have done for the past 4 years even the $600 a year estimate is a little low.
CNCMike,
You know, you’re probably right about the comparable car costs (especially when you factor in the ultra cool 17 inch touchscreen uber-console on the Model S). But Tesla’s claim that the Model S is a car for the rest of us is what’s under the microscope… and given my calculations it seems that Tesla may really have a leg to stand on there.
Also, I changed the calculations to factor the service costs for the gas car at $600 per year. Even though this may still be a little low, I think it gives a better comparison.
Thanks!
I enjoyed this article immensely. However, I believe a more realistic scenario would be to consider the Tesla against a hybrid, say, the new Prius. Most people looking to go this way will choose not between a gas guzzler and the Tesla, but rather between a hybrid and a Tesla.
Just my two cents and keep up the good work.
With Obama’s promised taxes on carbon, and any other source of energy that you can think of, and his promotion of “Value Added Taxes, or whatever other name you wish to use for taxes hidden from the end user, who is the only one who pays the tax,which is used to generate electricity and the increased costs of other fuels, how do you justify using only the current U. S. average cost for electricity?
Either use only current costs or use inflation costs for all fuels and don’t forget the promised hidden taxes.
It’s entirely arbitrary that you picked $35k as the price of the alternative car. The BMW 5 series is $45-60k.
The lexus GS is 45k-53k. Audi A6 is also 45-60k.
It’s still a premium brand, and to be meaningful, the analysis should be on an apples to apples basis.
Start with two cars with the same sticker price, and you come out with a different answer. Alternatively, you could calculate the annual cost of fuel consumptions (12k miles / 20 mpg * 2.50 per gallon = $1500). So $1500 is your upper bound. And then subtract out the cost of electricity (12k miles / 4 miles/kWh * 11 cents = $330). Subtract one from the other and you get an annual savings of $1170.
Financing adds nothing to the analysis.
I believe the author excluded the most critical justification of his analysis - whether the $35k “gas guzzler” is a reasonable comp for the Tesla. From the pictures i’ve seen this compares more to a 5 series BMW than a 35k car.
I’m no car expert so I’d love to see the author’s justification of the comp since it’s clearly the most critical assumption of them all.
Jason and Patrick,
As I’ve mentioned in the other comments, the 35K comparison is not so much to compare the car to another similarly equipped vehicle, but to calculate if the Model S really is a car for the “rest of us” as Tesla claims it is (and as the title of my post should clue you in). A $50,000 Beemer is not a car for the rest of us. A 35K Buick is. In fact, I didn’t come up with the 35K claim myself. This was a comparison that Tesla made and I’m trying to verify.
Also, the loan is in there because that’s how 80% of the “rest of us” buy cars in reality - so it is meaningful.
Although it’s true that with the Tesla S you will find features that you would normally only find in 45-50K gas cars such as upper end BMWs, but the claim isn’t that it is a good value compared to a BMW, the claim is that it is a good value even when compared to a 35K Buick.
Just for fun? I totaled up what I have spent on a 2004 Mazda 6 Sport Wagon that I bought new in March 2005 and was quite surprised. It stickered for $26,675 and with rebates $22,675. When new I averaged 20 to 23 MPG and since July 2007 when I started driving conservatively I have averaged 27.025 MPG. Here are my real world numbers from March 2005 to March 2009.
GAS - $7202.36
MAINT AND REPAIRS - $2881.56
DOWN PAYMENT - $2700.00
TOTAL PAYMENTS - $16,759.20(@8%)
TOTAL - $29,543.12
Averaging the gas and maint for the next 2 years based on the last 4 plus the 2 more years payments(yeah I know but at the time I had to go 6 years) puts me at $42,964.68.
If it was and electric car, taking away the gas and maint and repairs for 6 years brings that down to $27,838.80 plus the cost of electricity and any maintenance electric cars may need. I wanted an electric car before and now I REALLY want one.
You have to compare the financing apples to apples. Not one with a loan and one with cash. Financing shouldn’t be part of the equation. Just compare cash deals.