Cheaper running costs are one of the biggest incentives for switching to an electric vehicle: After all, it’s generally acknowledged that the cost of charging is much lower than it is for filling up with petrol or diesel.
But is that still the case, even after many people in the UK have seen electricity prices rise by roughly a third since April 2022? And will an EV still be cheaper to run, even after energy prices rise still further – as they’re predicted to do in October 2022?
Put simply, yes – electric cars are still much cheaper to run, even compared with an efficient petrol or diesel car. But the disparity in overall ownership costs is not as great as it was, not only because of the rise in electricity costs but because there is also no Plug-in Car Grant to reduce purchase costs, while various other global factors have pushed the price of new cars – electric or not – up even further. In essence, it is now pricier to run an EV, just as it is also more expensive to fuel a petrol and diesel car.
Price Cap Impact on EV Running Costs
Gas and electricity prices are governed by the government body, Ofgem, which sets a default ‘price cap’ in April and October each year. That price cap is typically set as a result of predicted wholesale cost of gas and electricity, and it dictates the maximum price per unit that energy providers are allowed to charge for their default variable tariffs. That’s the tariff that you’ll automatically be put on if you don’t specifically sign up to a chosen tariff from your energy provider. As of April 2022, the price cap jumped from 18.9 pence per kilowatt-hour (p/kWh) to 28p/kWh.
Fixed-rate tariffs have to remain at the price agreed for the duration agreed, and many providers continue to offer tariffs that mean you’ll pay less than 28p/kWh, so it’s more important than ever that you think about what tariff suits you, and shop around for the best utilities provider.
A number of energy providers offer EV-specific tariffs that still bring very cheap electricity during late night hours, including Octopus Energy, EDF and British Gas, with prices per kWh as low as 7.5p at these off-peak hours representing a huge potential saving.
It’s not yet confirmed yet what the price cap will be when it’s revised in October 2022, but it is estimated that it could rise to as much as 39p/kWh.
EV Running Costs in Detail
So, how does all of that that impact the running costs of an EV?
Here’s a table to show how much it costs to run a Peugeot e-208 doing 3.2m/kWh (representing a realistic average real-world range of 150 miles per charge, even with regular motorway miles and cold conditions), compared with a Peugeot 208 1.2 PureTech doing 45mpg. Electricity is factored at 28p/kWh for all calculations, while fuel is calculated at £1.86 per litre - the UK average at the time of writing.
†At 28p/kWh and efficiency of 3.2miles/kWh
††At 45mpg and £1.86 per litre
*^ £5000 deposit, 37 month contract, 10,000 miles per annum
^^ 40% tax payer in 2022/23
The higher PCP costs of the electric Peugeot e-208 are such that it still works out more expensive than the petrol car with all running and maintenance costs factored in over a three-year period, so it’s score one for fossil fuel.
However, it is worth considering that you can cut the fuel costs on the e-208 by as much as three quarters if you routinely use your home charging point at off-peak times, with a full charge costing £3.47 at 7.5p/kWh, and fuel costs per mile dropping to 2.3p, or just £694 for 30,000 miles. The flip side to that is that public charging can cost more, so do look at those costs if you regularly expect to use public charging stations.
Employees with company car benefits will find electric cars a no-brainer provided they have access to a charging point at home or at the office; Benefit in Kind company car tax is vastly cheaper for zero emissions vehicles than for any other car, including plug-in hybrids and hybrid cars.
Conclusion
Ultimately, it’s very easy to see from these figures why some 89% of new car buyers still chose a petrol or diesel car in 2021. However, EV charging is still much cheaper than fuelling a petrol or diesel car, and will still deliver cheaper motoring even if electricity bills rise further. Servicing and tax also routinely costs less, while reliability promises to be usefully better given that an electric vehicle has far fewer moving parts.
Not only that, but other models of EV may well be more affordable on overall ownership costs compared to equivalent rivals, with options such as the MG ZS EV and Nissan Leaf promising very similar purchase costs and much lower running costs than similar combustion-engine equivalents. Many of the premium EVs such as the Tesla Model 3 or Kia EV6 stack up well next to similarly high-performance rivals, too.
However, purchase prices are undeniably still higher for an electric vehicle than for a petrol or diesel car, so it still requires many years to offset that greater purchase price. In the case of the Peugeot e-208, likely some five years and 50,000 miles before the electric car becomes cheaper overall, albeit we’d expect better residual values on the e-208 to help significantly if you’re planning on buying the car rather than leasing or paying on a monthly PCP plan.
EVs still make a huge amount of sense for many new car buyers but, with purchase prices still high, it’s also easy to see why the majority of new car buyers in the UK still go for a combustion-engine model for now.