Electric vehicles (EVs) are one of the hottest trends in the automobile world. Every automaker is scrambling to produce EVs. Automakers such as GM have started on a pathway to an “all electric future”. Numerous states have announced plans to ban internal combustion engine (ICE) vehicles. With vehicles often being the second largest investment (following a house) for many Americans, it is worth considering if there is a sustainable investment case for electric vehicles. In this post, we look at EV purchase cost, tax credits, resale values, maintenance costs, charging/fuel costs, emissions, and impact on the electricity grid.
Bottom Line
In terms of maintenance costs, charging/fuel costs, emissions, and potential positive impact on the electricity grid, all electric vehicles are a win when compared to ICEs. In terms of purchase cost, it will take 3-5 years before EVs (ignoring tax credits) achieve cost parity with ICEs. The sustainable investment case for purchasing new electric vehicles may not fully be there yet. Depending on investor priorities, it may be best to purchase a used EV or lease an EV until EV technology improves and battery costs decrease.
Purchase Cost
New
EV upfront costs are considerably higher than ICE purchase costs. The average cost of an EV is roughly $19,000 higher than an ICE ($55,600 vs $36,600). This is prior to any tax credits (see below) for which the buyer may be eligible. Researchers have modeled that EVs may reach cost parity with ICEs as early as 2023. This is largely due to the falling prices of lithium-ion batteries.
Tax Credits
The federal government’s offer of a federal tax credit worth up to $7,500 if you purchase an eligible EV or plug-in hybrid has been a major economic incentive for purchasing an EV. It is worth noting that not all EVs or plug-in hybrids are still eligible. When a manufacturer sells its 200,000th qualified vehicle, the tax credit winds down. The $7,500 EV credit reduces by half to $3,750 and then half again over a period of time before being reduced to nothing. Tesla sold its 200,00th vehicle in 2018, and the credit fully expired at the end of 2019. Another popular EV, the Chevrolet Bolt EV, also is no longer eligible for any tax credit. The Department of Energy (DOE) provides an updated website with information about federal tax credits for EVs and plug-in hybrids.
State tax credits for new or used EVs and plug-ins may also be available. A list of state credits can be found on this DOE website.
Resale Value
One element to consider when debating about purchasing a new vehicle is its resale value. Many EVs have depreciated significantly faster than the average car. The average vehicle depreciates 39.1 percent after the average car lease term of three years. The Chevrolet Bolt has a 3-year depreciation rate of 47.5%. The Hyundai Ioniq Electric has a 47.7% depreciation rate. Certain Tesla models, however, have depreciated at a rate lower than the average car due to high demand. The Tesla Model 3 has a 3-year depreciation rate of 10.2%.
The greater depreciation rate is due to a combination of credits applied to reduce the sale price paid by “early-movers” and fears of range anxiety. “Categorically, electric vehicles depreciate more than the average vehicle because resale values take into account the $7,500 federal tax credit and other state and local credits that were applied to these vehicles when they were bought new,” said iSeeCars.com CEO Phong Ly. “Because the technology of EVs changes at a rapid pace, obsolescence also plays a role in their dramatic depreciation as well as consumer range anxiety and lack of public charging infrastructure.”
For the sustainable investor, the high depreciation rates have a mixed impact. Early purchasers are stuck with low resale rates if they want to sell their EVs. The high depreciation rates may support the leasing of a new EV, at least until battery ranges improve. Later purchasers, however, can find bargain rates for used EVs.
Maintenance Costs
Survey data from Consumer Report members found that drivers of electric vehicles are saving an average of 50% on maintenance and repair over the life of a vehicle compared to owners of gas-powered vehicles. Likely reasons are simpler powertrains resulting in less engine maintenance and lack of a need for oil or air filter changes.
Average maintenance/repair costs over the vehicle lifetime are:
- Battery-Electric Vehicle (BEV): $0.03/mile
- Internal Combustion Engine (ICE): $0.06/mile
It should be noted that maintenance/repair costs will be adjusted in the future, as more EVs are on the road for longer, as battery prices decrease, and as automakers learn from early EV models.
Charging
Fuel Cost
One of the major operations costs of a vehicle is fuel costs. The cost to charge an EV will vary based on electricity rates in your charging area. Using a broad national average, the electricity required to drive 15,000 miles per year in a compact electric vehicle costs an average of $546, while the amount of gas required to drive the same distance costs $1,255 (or 130%) more. The West Coast of the US offers the greatest lifetime fuel cost savings for EVs in the baseline scenario. This is mainly due to high gasoline costs and lower electricity costs.

Home Charging Infrastructure
Having a home charger increases the convenience of an EV. There are three levels of EV chargers. Level 1 is a standard 120 volt (V) household outlet. Overnight Level 1 charging is suitable for low- and medium-range plug-in hybrids and for all-electric battery electric vehicle drivers with low daily driving usage. A Level 2 charging unit requires a 240V circuit. Most public chargers and home chargers are Level 2. Depending on the vehicle and available current, about 180 miles can be added during an eight-hour charge on a Level 2 charger. The average national cost of installing a Level 2 home charging unit is $800-$1300. This cost may vary significantly based on local labor rates, materials used, and government permit costs and requirements. Level 3 are DC charging systems. These are expensive ($50,000) typically public charging stations which can deliver 60 to 80 miles of range in 20 minutes of charging.
Public Charging Units
Public charging units can be found across the country. One fear of many drivers is being unable to find a charging station. However, there are currently almost 29,000 charging stations across the US and this number is consistently increasing.There are numerous apps and websites that help you find charging stations. They include PlugShare and ChargeHub. Charging rates vary; some stations offer free charging. The three biggest non-Tesla networks in the U.S. are operated by EVgo, ChargePoint, and Electrify America. Tesla users need to use the adapter that comes with their vehicle to use non-Tesla charging stations.
Emissions
Direct
There are two aspects of emissions to be considered for EVs: direct and lifecycle. Direct emissions are those emitted by a vehicle’s tailpipe. EVs produce zero direct emissions. This is particularly important for air quality. Poor air quality increases respiratory ailments like asthma and bronchitis. It also increases the risk of life-threatening conditions like cancer. Switching to clean vehicles can help prevent:
- 40,000 premature deaths
- 34,000 avoided hospitalizations
- 4.8 million work days lost
Lifecycle
Life cycle emissions include all emissions related to fuel and vehicle production, processing, distribution, use, and recycling/disposal. All vehicles result in significant life cycle emissions. However, EVs result in lower life cycle emissions due to greater vehicle efficiency and the cleanliness of grid electricity versus fossil fuel combustion. How many emissions result from charging the EV depends on where the EV is charged and what fuel source is used to power the local electricity grid. In all states, even those that rely on high-emitting coal, EVs generate fewer greenhouse gas (GHG) emissions than the average gasoline-powered vehicle by at least 20%. In a state like Washington, where most electricity is produced by hydropower, GHG emissions of an EV are 88% lower than an ICE. Compare ICE and EV emissions in your state using this Department of Energy tool.
Electricity Grid Impact
The electric utility business model is evolving. Electricity generation patterns are changing as more renewable energy comes online. Electricity consumption patterns are shifting as appliances become more efficient, extreme cold and hot spells become more frequent due to climate change, and buildings are electrified to help meet zero carbon targets. Some fear that EV may result in increased outages. However, with planning, EVs have the capability to support a more reliable, resilient, and affordable grid.
Using smart chargers and economic incentives, EV owners can be encouraged to charge up when demand is low. This can make use of surplus renewable energy such as solar. Additionally, the batteries in EV can be used as an energy resource, supplying the grid with energy when it is needed. This may help to prevent blackouts.
The Sustainable Investment Case for Electric Vehicles
The sustainable investment case for electric vehicles is continuing to be built. Prices are dropping and will continue to fall. Low resale values may make leasing or buying used the preferred option for now. Maintenance costs are significantly lower for EVs/PHEVs than ICEs. EVs cost less to charge than ICEs cost to fuel, especially in states where electricity costs are low.
EVs cause no direct emissions resulting in major air quality benefits. Greenhouse gas emissions from EV lifecycles are lower for EVs than ICEs in all states. Emissions are dramatically lower in states whose grids are mainly powered by clean energy. With proper planning, EVs can play a role in helping to make electricity grids more reliable and cleaner.