Unveiling the Real Cost of Electric Vehicles: State of the Switch 2024 Report Analysis
Purchase price parity for EVs has variously been tipped to be achieved in Europe in 2024 by Exeter University, 2025 according to Goldman Sachs, the mid-2020s according to the International Energy Agency or 2030 according to the CEO of Ford. But sometimes it is worth looking up from down the road, and at what we can see for certain: how much EVs cost - and can save - consumers right now.
Our State of the Switch 2024 report highlighted that more low cost new EVs are coming to market - Citroen (owned by Stellantis) will launch the eC3 at approximately £21K in 2024, whilst Dacia (owned by Renault) are set to launch a £15K EV (down from the expected price of £17K when we published) EV. Meanwhile Renault themselves are expected to launch a revamped electric Renault 5 at less than £25K in early 2025 - all at lower cost than the current cheapest vehicle, the Chinese-made £26,140 BYD Dolphin. Which itself has been subject to steep price cuts, although not yet in the UK market.
Turning to the cost of charging, New AutoMotive analysis using January 2024 consumer electricity, fuel pump and public charge point costs estimates that an EV charged on a standard tariff is approximately 30% cheaper than running a diesel vehicle, and 36% cheaper per mile than a petrol vehicle. However, this saving balloons to 78-80% cheaper per mile if the EV is charged on an overnight/EV-specific tariff. All of the big six electricity suppliers now also offer an EV tariff, providing off-peak or all-day low-cost EV charging, allowing consumers to cut costs by up to 80% without switching electricity provider.
For an average driver of 7,400 miles per year, this equates to a saving of more than £1000 per year. No wonder the fossil fuel industry incumbents are frightened.
There is a much more mixed picture for the price motorists pay to use the public network of chargers - which are subject to VAT of 20%, compared with 5% for home charging . This effectively eliminates the savings that can be made by the 20% of the public who do not have access to off-street charging.
A cut in standard tariffs under the price cap and predicted further cuts in Q3 will benefit domestic charging, but public EV charging is not subject to the domestic price cap. So 2024 price trends are unlikely to make switching to EVs economically rational for people who are wholly dependent on public charging. As the chart below shows, harmonising the VAT rate of public charging with that paid by domestic users is necessary to ensure that the average public charger is cost-competitive with petrol or diesel refuelling.
Government could go further and incentivise switching through the way that they levy “policy costs”, the fees used to cover schemes to support energy efficiency improvements in homes and businesses, help vulnerable people and encourage take-up of renewable technology. This has been talked about since at least 2021, but we are yet to see a consultation.
In the meantime, Ofgem data shows that from April a typical consumer will be paying £142 towards these schemes from their electricity bill, and only £46 from their gas bill. Moving more of these costs from electricity to gas will lower the unit price of electricity - encouraging switching to EVs, as well as low carbon heat such as heat pumps - whilst also offering greater benefits from the very energy efficiency improvements that the policy fees help to fund.
Current costs of charging or refuelling, and the potential for reductions in charging costs, in £ per 1000 miles travelled
