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How cost-effective are electric cars?

Posted 26 July 2017

Two electric cars parked up getting charged in a charging station

With the sale of new diesel and petrol vehicles banned from 2040, is now the time to switch to electric? Motoring journalist Simon Heptinstall weighs up the key costs.


  • Government grants go some way towards the initial cost
  • The engines use fewer parts - but could require specialist attention
  • As they use new tech, the value of electric cars often depreciates faster


According to Morgan Stanley, the costs of EV batteries could drop by 40% in 2017. EV battery prices have dropped 80% in the last six years, from roughly $1,000/kWh (£768/kWh at the current exchange rate) to around $227/kWh (£174/kWh), according to a recent report by McKinsey & Company.

The top spec Nissan LEAF has a 30kWh base battery pack, which, in 2010, could have cost around $30,000 – or £23,000 at the current exchange rate. That's a significant part of the full price, especially considering a Nissan LEAF 30kWh Acenta currently starts at £26,190 . Now, after the reduction in price, 30kWh batteries cost around £5,230.

This drop in price, as well as the news that the government is planning on tackling the high costs of charging stations , could help to make electric vehicles a more cost-effective option for UK motorists - especially those who want to do their bit to help the environment.

a graphic of a green box with a arrow pointing down. On the graphic the writing says 'Electric vehicle battery prices have dropped 80% in the last 6 years'

But there are a number of other factors to take into account when totting up the price of a new electric car. And when everything is taken into account, how cost-effective are electric vehicles?


What is the initial price of an electric car?

An electric car costs much more to buy than a conventional vehicle. For example, the newest model of the Nissan LEAF, the bestselling electric car in the UK, costs around £8,000 more than the petrol Ford Fiesta, which is the most popular car in the UK of any fuel type.

Even though the difference is slightly offset by grants – the government gives grants up to £4,500 towards the cost of electric cars and up to £8,000 for vans – the initial cost of an electric car puts off many buyers.


What are the running costs of electric vehicles?

The majority of electric cars are exempt from the car tax and congestion charges – something they certainly have in their favour.

If they're cheaper than £40,000 when new, they're exempt from Vehicle Excise Duty (road tax). If the car is lighter than 3.5 tonnes, emits 75g/km or less of CO2 and meets the Euro 5 standard for air quality, the driver doesn't have to pay the Congestion Charge, which is worth up to £2,900 a year.

A graphic of a car next to a charing station. The text on the graphic says 'Charging an electric car at home costs £2-£4 for every 100 miles'

The Energy Saving Trust also claims that, as they have fewer mechanical components, it's cheaper to get an electric car serviced. But due to the lack of mechanics and engineers familiar with electric cars, it can be more expensive to get them repaired if something goes wrong. This also affects the cost of car insurance , as specialist mechanics usually charge higher rates.

To tackle this skills gap, the Institute of the Motor Industry has called on the government to invest £30 million in training technicians in specialist electric and hybrid vehicle repair.


Does an electric car retain its value?

Those who adopt new technologies often suffer from prices that later drop, and electric car pioneers are no different. The Nissan LEAF E, for example, loses 66.77% of it's value in the first year. On the other hand, this does mean that they are usually much cheaper if bought second-hand.

Before buying any new car , check how much it costs second-hand to get an idea of its depreciation.


What about the savings in fuel costs?

Like petrol cars, fuel economy in electric cars depends very much on the make, model and driver.

For example, the latest Tesla offers an extraordinary maximum range of 335 miles , while the Nissan LEAF often needs a charge after around 100 miles in real world driving.

Just as miles-per-gallon on the road can be less than manufacturers claim, don't expect electric cars to do as well outside the lab. Turn your heater and stereo on, for example, and the range drops substantially.


How much does charging cost?

The cost of a charge varies dramatically, depending on where you do it. The cheapest option is at home with overnight low-rate domestic electricity. It costs only around £2-4 for 100 miles worth of charge , but more if you use normal tariff electricity.

To charge cars at home you may need a special charger. Want a good, fast one? That could cost you at least £1,000 . However, the government has made grants available to help, in an effort to encourage more road users to choose electric.

A graphic of a queue of cars. The text on the graphic says 'Electric vehicles could save up to £2,900 in congestion charges a year'

If you need to recharge out on the road, prices are unpredictable. A few of the UK’s 10,000-plus public charging points are still free – but others are now so expensive they are pricier mile-for-mile than a diesel car. Ecotricity, the company that manages car charging stations on the UK motorways, charges drivers £6 for a 30-minute charge .

As this useful map shows - which can also be downloaded as an app - there are charging stations all around the UK, though they are clustered around urban areas.


How long will the battery last?

If you buy a new Nissan LEAF model with a 30kWh battery pack, it will be covered for eight years or 100,000 miles , whichever you hit first. This protects LEAF owners against capacity loss of more than 25%, allowing them a replacement should this happen.

The average age of a vehicle on a UK road is 7.8 years, according to the SMMT , so many LEAF drivers will be covered for the whole period of ownership.

The latest battery pack in the Tesla Model S, meanwhile, will only lose 8% of its capacity within the first 100,000 miles.


So what's the verdict?

Your best bet is to do the calculations for your own vehicle requirements. Think about how you use your car and list the costs and savings you could make before making your decision. If you drive in London a lot, an electric vehicle could save you on the congestion charge – but if the charging stations near you charge high rates, you'll be spending more than petrol pumpers.

For more motoring stories from Simon, follow him on Twitter @sheptinstall .

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