## Electric Car’s High MPG Equivalent Doesn’t Equal to Savings on Driving Costs

Electric car’s MPG equivalent (MPGe) can be impressively over 100. One might assume that this is how much the driving costs can be saved by. Like if you compare 100 MPGe and 25 MPG for a regular car, three quarters of the driving cost could have been saved when go with 100 MPGe. This is not really the case.

MPG equivalent actually is based on energy equivalent. One gallon of gas and 33.7 kWh of electricity contain same amount of energy, which is 121.32 megajoules. So for electric cars, MPGe equals the number of miles the car can drive using 33.7 kWh of electricity. For example, if an electric car is rated 101.1 MPGe (that is 3 times 33.7), what it means is that the car would use 1 kWh for every 3 miles.

Now we can convert MPGe into something related to driving costs – miles per dollar equals to MPGe divided by the product of 33.7 kWh and the electric rate (like \$0.1/kWh). Similarly, for regular MPG, the miles per dollar equals to MPG divided by the gas price.

For example, if we still compare 100 MPGe and 25 MPG for driving costs, here is how they look. If your electric rate is \$0.1/kWh, 100 MPGe means roughly 30 miles per dollar [100/(33.7X0.1)=29.7]. For the 25 MPG car, assuming a gas price of \$2.5/gallon, then 25 MPG means 10 miles per dollar (25/2.5=10). So two thirds of the driving cost could be saved when go with 100 MPGe.

You can plug in real numbers and calculate real savings.

The MPG label (the Monroney label) has the car’s estimated annual fuel cost and for electric cars, how much can be saved over a 5-year span. The numbers are based on some estimated (not may not be up-to-date) numbers like gas price, electricity rates and annual mileage (which usually is 15,000 miles). Therefore, it will be more accurate to estimate using your actual situation.

One more word on electricity rates – the electricity you use to charge the electric car at home is somehow included in your overall household usage. With this being said, you may want to do a little research to find out which electric rate plan fits you better, as you add a few hundreds of kWh to your monthly energy consumption.

For example, the utility company PG&E in the Bay Area has a plan for EV charging. During off-peak hours (11pm to 7am), the rate is as low as 11 cents/kWh. On the flip side, during peak hours (2pm to 8pm), the rate is 44 cents/kWh, which is quite high compared to other rate plans.

Back to MPGe, if it is confusing to electric car buyers, why is it still there? For one thing, the officials use this number to calculate each carmaker’s average fuel economy. Many countries set standard on the average fuel economy. For example, for Model Year 2020 in the US, carmakers need to reach 49 MPG on average for compact cars. In this regard, electric cars with high MPGe helps a lot.

Some of the top runners in terms of MPGe: BMW i3 (124 MPGe), Chevy Spark EV (119 MPGe) and Fiat 400e (116 MPGe).

## Newer Technology Fuel Cell Cars Enter Market

You may have heard of electric cars and how great they can save on monthly driving expenses. There are not a lot of them on the road yet (last year, 0.6% of new car sales in the US went to electric cars), but many people see electric cars as the future. Talking about future, it makes sense that carmakers do not put all in on electric cars. So, while electric cars are still making their case as your next car, fuel cell cars start to join the competition, like Toyota Mirai and Hyundai Tuscon Fuel Cell.

A little background – a fuel cell uses fuel and oxygen to electrochemically generate electricity. Then the electricity can be used to power a car. Regarding the fuel, hydrogen is a common one and as you can see, the product of hydrogen and oxygen is pure water. To some degree, a fuel cell car is also an electric car, but is very different from the more popular lithium-ion battery powered electric car.

Fuel cell cars (FCV) have distinct advantages and limitations over battery electric cars (EV).

In terms of advantages, 1) FCVs take comparable time to fill up hydrogen as regular cars do with gas; 2) the range on a single tank of hydrogen can easily reach 300 miles.

In terms of limitations, 1) the cost and the dependence on platinum catalysts need to be significant reduced; 2) the availability of hydrogen stations is very limited right now and it is not something you can do at home.

There are a few noticeable models around or planned to launch in the near future.

Toyota seems to be the most devoted carmaker when it comes to FCV. In fact, it considers FCVs to be the prevailing car technology in the future rather than battery electric cars. Toyota Mirai was launched in Japan in late 2014 and was introduced into the US one year later. The MSRP is \$57,500. The leasing is \$499/month with \$3,649 down payment. The EPA range is 312 miles or 512 km. The hydrogen tank can accommodate 5kg. The total power is 113 kW or 151 hp. 0-60 mph acceleration takes 9 seconds. 2016 Hyundai Tucson Fuel Cell is available through leasing. The 36-month lease is with \$499 monthly and \$2,999 down payment. The max range is 265 miles. The hydrogen tank can store 5.63 kg. The fuel cell outputs 100 kW and the car has 134 hp. 0-60 mph acceleration takes 12.5 seconds.

Moreover, Honda Clarity plans to come to the US later this year. Mercedes-Benz GLC EV will arrive in 2017. Audi showed Q8 h-tron concept during 2016 Detroit Auto Show. Lexus LF-LC concept was exhibited during the same event.

FCVs enjoy similar government incentives in the US as EVs. For example, \$4,000 federal tax credit is available through Dec 31 2016 for vehicles no more than 8,500 pounds. In California, owners can get \$5,000 rebate from the state.

## 2016 smart Fortwo Electric Coupe Priced Below \$20,000 Before Incentives

The MSRP of 2016 smart Fortwo Electric Coupe from Daimler starts at \$19,990.  It should be the first electric car in the US selling for less than \$20,000. The actual cost can be only around \$10,000 after government incentives – There is \$7,500 federal tax credit as well as rebate from state government available (e.g., California offers \$2,500 rebate for buying an all-electric car). Besides, the buyers can enjoy low driving cost and may have carpool lane access and/or tolls exemption.

(smart Fortwo Electric Coupe. Credit: Daimler)

The all-electric car can run for 76 miles (city), 59 miles (highway) and 68 miles (combined) on a single charge. The MPGe is rated at 122 (city), 93 (highway) and 107 (combined), which is lowered than EVs like BMW i3, Chevy Spark EV, Fiat 500e and Nissan Leaf, but higher than Ford Focus Electric and Tesla Model S. The battery pack is 17.6 kWh. 0-60 MPH acceleration takes 11.5 seconds. Top speed is 78 mph.

There also is a convertible version Electric Cabriolet as well. The MSPR is \$3,000 higher at \$22,990, than the Electric Coupe.

Right now, smart Fortwo electric cars are available in California, but not yet in places like Rhode Island and Georgia where state governments also offer incentives.

In 2015, 1,387 units of smart Fortwo electric cars were sold in the US, ranked at 14th place among different all-electric and plug-in hybrid cars. The leaders include Tesla Model S (25,700 units), Nissan LEAF (17,269 units) and Chevy Volt (15,393 units). The price for the 2015 model was over \$25,000 before incentives though. Therefore, there is reason to believe the 2016 sales should see big increase.

Apparently, Daimler is confident with the future of its electric cars. The company is spending \$543 million on its second battery pack factory. It is right next to Deutsche ACCUmotive – Daimler’s first battery pack factory. This new plant will be up and running in mid 2017 and is expected to triple battery production area. Battery packs produced will be supplied to Daimler’s smart and Mercedes-Benz brands.

Mercedes-Benz has two electric cars on sale in the US right now – the all-electric B250e and the plug-in hybrid S550e. The brand plans to roll out 4 all-electric models around 2018. (Please see our previous post on Summary on Electric Vehicles at 2016 Detroit Auto Show).

Besides smart Fortwo Electric Coupe, there are other electric cars with attractive price as well. Mitsubishi i-MiEV Electric has a MSRP of \$22,995 before incentives. Chevy Spark Electric’s MSRP is \$25,995.

## Thoughts on Forecasting 35% of New Car Sales from Electric Vehicles by 2040

A few days ago, Bloomberg New Energy Finance (BNEF, owned by Bloomberg L.P.) published a forecast on global electric vehicle sales. The study suggested that, by 2040, 35% of new car sales will come from electric cars, which equals a total of 41 million electric cars sold annually. In 2015, 462,000 electric vehicles were sold worldwide, accounting for half of a percent of total car sales.

In order to reach 35%, electric car sales will need an “S” trend to happen in the future. There are basically three stages in terms of the “S” trend – an initial acceptance period with slow growth, followed by a period of rapid market growth, and then entering another slow period after saturation. Things like smartphones and color TVs and even the hybrid cars to some extent all have followed this trend.

For electric cars, the kickoff on sales will mainly rely on two factors according to the report – drop of battery cost as well as decrease in oil demand.

Regarding the battery cost, BNEF anticipates the pack cost to be \$120/kWh by 2030. The timing is less aggressive (and maybe more realistic) than that set by USABC (a consortium formed by GM, Ford and Fiat Chrysler). USABC targets year 2020 for the pack cost to go below \$125/kWh. Carmakers think electric cars will have a comparable cost to regular cars when the battery cost decreases to this level.

The battery pack cost has been dropping over the years. It is around \$300/kWh for the upcoming Chevrolet Bolt. Korean battery maker LG Chem will build the pack together with other powertrain components in the car, which helps reduce the cost.

Regarding the oil demand, the report argued that when 2 million barrels of oil per day are replaced by driving electric cars, the sales will take off. 2 million barrels per day surplus is believed to cause the plunge of oil price in 2014. This day would come as early as 2023.

2 million barrels of oil equal to 84 million gallons. In 2013, the average fleet light duty vehicle fuel efficiency in the US is 21.6 mpg. Assuming a 5% annual improvement, the fuel efficiency will become 35.2 mpg by 2023. Say cars drive 35.2 miles per day on average (or about 13,000 miles per year), then they will consume 1 gallon of oil per day per vehicle. Therefore, 84 million gallons mean 84 million electric cars on the road in total. Considering that there are 1.3 million EVs on the road right now, 84 million is really a very exciting number.

The BNEF report also indicated that plug-in hybrid sales will reach the peak around 2030 and then starts to drop down. Plug-in hybrids, as a transitional new energy vehicle technology, should have their reasons to stay on the market for longer time: 1) since the battery size is usually smaller than that of all-electric cars, the costs of plug-in hybrids are less sensitive to battery cost; 2) plug-in hybrid cars can run all-electric for short range commuters and run hybrid for longer range, both of which have much better mpge than regular cars; 3) plug-in hybrids can be easier for consumers to accept than all-electric cars. After all, electric cars not only need to be cost competitive, but also rely on breakthroughs in other areas like fast charging and charger infrastructure construction.

In this regard, plug-in hybrids may have a chance to follow the growth pattern of hybrid cars. Carmakers are acting too. For example, BMW and Mercedes-Benz have plans to build plug-in hybrid versions of the majority of their lineups in 2020-2025 timeframe.

It is also interesting to notice the shift of views on the future for oil over time. Initially, it was concerned that oil would be depleted before alternative car technologies become mature. Then, there was a theory that the depleting oil would drive up the price and force the alternatives to become mainstream. Now, people start to think that someone may end up holding the useless barrel. Electric cars have helped shape the shift of views.