Pick your extravagance of choice. Chocolate, coffee, fruit, whatever. If I offered you a free single serving of your indulgence immediately OR a full day with free access to your preference if you went without for a week, would you wait for the greater reward?
This is the basic premise of the Stanford Marshmallow Experiment. Young children sat down with one marshmallow in front of them. If they could resist eating the single marshmallow for fifteen minutes, they would receive two. In follow-up studies, those that resisted had better life outcomes.
We all struggle to plan for tomorrow because we see our future selves as strangers. The problems of tomorrow can be dealt with by someone else – even if that someone else is us in the future. It is why we have compulsory superannuation and why COVID-19 has resulted in more government action than Climate Change.
Most people acknowledge that electric cars are our future. In my role as a technologist and futurist, I was recently asked when I thought electric cars (EVs) would achieve price equivalence with petrol cars (ICEVs). I told the audience we are already there! The outbursts were instant with people quoting ticket prices of EVs versus equivalent ICEVs. This was a perfect example of the present ignoring the future.
The largest single cost of owning a motor car is not the purchase price. It is the depreciation cost. This is followed by registration and other fixed costs and then running costs such as fuel and maintenance. The actual purchase price is not the only factor you should be looking at. If people used the same logic when considering their home, we would not have the 67 per cent level of home ownership we have in this nation. Rent is cheaper than the huge price you pay for a home so logically everyone would keep renting!
Assume I am about to purchase a new small vehicle for my daily commute to work. This segment makes up 15.4 per cent of our one million annual sales. I am trying to decide between a $30,000 ICEV and a $50,000 EV. The EV seems significantly dearer but assume the following: Five year ownership; 70 per cent depreciation of ICEV versus EV 50 per cent; rego and CTP the same but insurance dearer on the EV; annual service costs lower on the EV; fuel price average of $1.55/litre over the next five years and average electricity cost of 10c/kWh (combination of free charging stations and off-peak).
The fixed annual costs are $5,900 for an ICEV versus $7,100 for an EV. Variable costs, such as fuel and maintenance, delivers a per kilometre cost of 12.4 cents per km for an ICEV versus 3.28 cents for an EV. Multiply those costs by the 13,400km ABS average for all Australian vehicles and the total is $1,662 versus $440. Bring it all together and you have a total annual cost of ownership of $7,562 for an ICEV versus $7,540 for the EV. The gap widens for every kilometre you travel over the national average. If you look at the overall cost of owning a vehicle, admittedly with many assumptions that could vary over the next five years, the price of an EV is on the money.
I like to walk the walk and my household is now proudly ICEV free. Having owned a Tesla for almost three years I have now added a 2020 Nissan LEAF to our garage to replace a hybrid vehicle.
I believe the electric future is here now!
Tell me if your next purchase will be an EV at email@example.com.