NEW YORK (TheStreet) -- The purpose of this article is to sort out some of the main argumentsfor and against electric cars.For reference and clarification, by"electric" I hereby mean both pure electric cars and those accompaniedby an on-board generator, such as the Chevrolet Volt or the upcomingBMW i3. Basically, any car that plugs into a wall in order to storeenergy in a battery that will (help) drive the car. 1. "Electric cars save money on gasoline." Duh! Sure they do. But how much? Anything worth writing home about? Let's take a simple mathematical example. Consider the alternativeif you are pondering buying an electric car. This alternativepurchase could reasonably be a regular Toyota Prius, which can be hadfor $25,000. The average American drives 12,000 miles per year. The Prius yields50 miles per gallon. That's 240 gallons per year. Multiply by $4 per gallon andyou have $960 per year.
Let's stop there for a minute. Ponder that number -- $960per year. That's the maximum you can save, assuming your cost ofelectricity is zero. How much are you willing to spend upfront in order to save $960 peryear? $5,000? $10,000? What's your payback calculation? $960 per year is not nothing, but how large a percentage of yourannual spending budget is it? I buy two lattes a day at my favoritecoffee shop. They're $3.75 apiece, or $7.50 a day. Multiply by 360days, and you get $2,700 per year. Whoops! There went your best-case,electric-car gasoline savings, multiplied by three. 2. "Electric cars save money overall." Now you're talking. Electric cars may save you money outside ofspending on gasoline. Specifically, you can save money on service andmaintenance. The calculations here are complex and depend heavily on assumptions.For starters, many new gasoline cars have free service for two orthree years. That said, in many electric cars you don't have any oil changes,transmission issues, timing belts or spark plugs to worry about. Evenin range-extenders such as the Volt, here are fewer of them. Clearlythis will save the electric car owners serious money over a car'slifetime. After the initial "free service" period, whether one year or threeyears or longer, how much should one assume for service for a used car,per year, that's being driven 12,000 miles per year? I would say theminimum is $600 per year, but at least over time it is likely toaverage a lot more. Some pay thousands per year in car service, for a5- to 30-year-old car.
You will hear that batteries are falling in cost from 5% to 8% peryear on average. I believe they are falling in cost a lot fasterright now for car applications. It's not just about the basicbattery chemistry but also cooling, heating and packaging thesebatteries inside a car. We are probably in the middle of a period inwhich car battery costs are falling much, much faster than 8% per yearright now. Overall savings will also depend on your personal circumstances andhow much you are driving. One big variable: How much are you payingfor electricity? It makes a world of difference if you are paying 5 centsper kWh or if you're paying 20 cents. What about cost of gasoline over the lifetime of the car? This isobviously the other side of the coin. Again, it makes a world ofdifference if you are assuming $3 per gallon, $6 per gallon or evenworse. If you don't drive very much, you may be better off with a gasolinecar. On the other hand, if you're driving 35 miles to work every day,another 35 miles coming home, have access to inexpensive electricity,and you are guarding yourself against sharply increasing gasolineprices, then an electric car may be for you -- strictly based on cost.