09 February 2024

The Total Cost of Ownership (TCO) of electric cars: a comprehensive perspective

The current process of electrification of the automotive industry is leading to an increasing diffusion of battery electric vehicles (BEVs), attracting growing interest from potential customers and industry experts. A crucial aspect to consider when evaluating the affordability of electric cars compared to conventional cars is the Total Cost of Ownership (TCO), which includes all costs associated with owning and using a vehicle over its lifetime. Let us then explore, in depth, the components of the TCO of electric cars and the key considerations to keep in mind.


Let’s start with the initial purchase cost: it is indeed common knowledge that, at least to date, electric cars tend to have a higher initial cost than conventional cars, mainly because of the high impact of the battery pack relative to the total cost of the car. However, the price gap separating electric cars from conventional cars is narrowing more and more, thanks to a steady improvement in battery range and the imminent entry of new economical electric car models on the market. In fact, over the past decade, the cost of lithium-ion batteries per unit of energy has been reduced about tenfold and is steadily declining.


Not only that, new battery technologies in addition to lithium-ion are mature or are at an advanced level of development for adoption by car manufacturers and will help to further reduce the cost of the battery component in the coming years, as well as to ensure increasing performance and range.

In addition, eco-incentives made available by the government for the purchase of electric cars can significantly reduce the cost of purchasing the vehicle and make the initial investment more affordable, improving the overall TCO.

Another crucial aspect to consider is fuel or energy costs: indeed, electric cars are distinguished by their remarkable efficiency in energy use.Thanks to their ability to optimize the management and use of the electric charge stored in the battery, electric cars use, on a ratio basis, much less energy than traditional cars to travel the same distance: about three times less! This, combined with the lower cost of electricity compared to gasoline or diesel, helps to further reduce the operating costs of electric cars.


Maintenance and service is another factor to consider when talking about the Total Cost of Ownership of electric cars. These, in fact, have significantly lower maintenance costs and generally require less maintenance than conventional vehicles because they have fewer wear and tear components, such as the internal combustion engine, oil change, air filters or spark plugs. In addition, regenerative braking contributes to less wear and tear on discs and pads, further reducing maintenance costs over the life of the vehicle.

Then there is the myth that the battery may need to be replaced during the vehicle’s useful life.In fact, the battery is guaranteed by most manufacturers for at least 8 years and still retains, at the end of the vehicle’s useful life, an important energy storage capacity, so much so that there is the possibility of giving the battery a “second life” by taking it out of the vehicle and adapting it for uses such as residential or industrial, for further years of operation. At the end of this further period it is then finally possible to recycle the materials that compose it, which are useful for producing new batteries, closing the circle of a virtuous circular economy.


Insurance costs are another aspect to consider, as they are lower for electric cars than for conventional cars.

This is because, being fundamentally less complex than traditional cars and having fewer mechanical components, electric cars are less prone to wear and tear, deterioration, technical failures and, consequently, accidents.


Finally, depreciation must also be taken into account: although the market for used electric cars is still evolving, there has been an emerging trend lately toward better value retention than traditional cars. This is influenced by the evolution of battery technology and the growing demand for electric vehicles.


In conclusion, it is important to note that the Total Cost of Ownership of electric cars can vary depending on a number of factors, such as energy costs (whether it is mainly recharged at home or at the workplace or thanks to public charging stations), annual mileage driven, purchase incentives, and conditions of use, but, making a comparison over the long term with a conventional car with comparable characteristics, an electric car results in significant savings for many use cases overall.