Are battery electric vehicles cost competitive? An income-based analysis of the costs of new vehicle purchase and leasing for the German market
New battery electric vehicles (BEVs) are entering the German market. In the first quarter of 2023, they represented 14% of total new vehicle registrations. While the adoption has quickened over the past years, questions about the cost-competitiveness of BEVs against gasoline models remain. Research shows that total vehicle costs stand as a key barrier to the adoption of BEVs, and that these vehicles are more likely to be owned by those with higher incomes.
This study seeks to clarify the implications of cost barriers for decarbonizing the private passenger car fleet in Germany. We analyze the total cost of ownership for selected vehicle models over a four-year holding period in the compact and mini segments. In the compact segment, we compare the battery electric Volkswagen (VW) ID.3 Pro and the gasoline VW Golf VIII Style 2. In the smallest category, the mini segment, the compared models are the battery electric Dacia Spring Extreme Electric 65 and the gasoline Toyota Aygo X 1.0. The report then compares these costs as a share of net household income in Germany for different income groups. It further discusses ways to enhance access to BEVs in Germany more broadly.
Some of the high-level findings include:
- Battery electric cars in the compact segment already prove more cost-effective than comparable gasoline models, boasting a cost advantage of €12,300 with purchase incentives and €5,100 without.
- In the mini-car segment, purchase incentives become the decisive factor in making battery electric cars the more economical choice compared to gasoline cars.
- Leasing costs over a four-year period for the selected BEV models are cheaper in the compact segment, but not in the mini car segment without incentives.
- Given a diverse range of charging scenarios, all BEV models were found to be cheaper to charge than fueling the comparable ICE gasoline models.
- The vehicle ownership tax and the greenhouse gas (GHG) quota both have a marginal effect on total vehicle costs.
- Income-based incentives can help households with lower incomes to participate in the transition to electric vehicles and accelerate the adoption of battery electric vehicles in the market.
These results underscore that costs remain a major barrier to BEV uptake and are, for many in Germany, a significantly higher portion of their net income than what these groups would, on average, pay for transportation. Understanding the costs of new BEV ownership in comparison to gasoline models can help the German government make informed decisions on transportation policy going forward.