Total cost of ownership and other guesswork

Those selling electric vehicles want to talk total cost of ownership, not price. But can we trust TCO calculations?

By and large truck manufacturers are not keen to talk directly about the price of electric trucks. Like the name of the Scottish play, prices must not be said aloud lest they conjure the ghost of bankruptcy to haunt prospective customers. Instead, prices are discussed entre nous and in confidence, presented as a ‘total cost of ownership’ (TCO) scenario, rather than an upfront price. But how useful are TCOs to operators?

Total cost of ownership certainly puts the high capital cost of zero emission vehicles into perspective, and a TCO calculation has always informed leasing repayment schedules.

If operators are using TCOs to build a business case for EVs however, they should use caution.

TCO typically includes:

• Cost of the asset
• Cost of the financing (interest/fees/balloons etc)
• Fuel
• Maintenance
• Urban use charges – ULEZ, congestion charge, Clean Air Zones
• Vehicle tax
• Minus its productivity (the income generated by that truck).
• And minus the residual value. If the lender owns the asset, then the RV will be effectively deducted from the lease payments in advance. If the operator owns the asset, then the RV could be realised upon resale.

Let’s look at those more elements of TCO more closely:

Fuel. Trying to forecast prices for any type of fuel at the moment is a mug’s game. Trying to predict the differential between two fuels (eg electricity and diesel) is like trying to hit a bee by throwing another bee at it. Everything is moving way too fast in relation to everything else.

The energy density of electricity and diesel are not the same, and we still have no reference figures for Km/kWh at given payloads. This is partly because the range of EVs is affected far more dramatically than ICE mileage figures by weather, gradient, driver style, road type, amount of braking, auxiliary equipment, or what you had for lunch (OK, we’re kidding with that last one but you get the idea). That makes it hard to predict how often you’ll have to recharge, or how much real scope there is for double-shifting vehicles.

The other crucial variable with electricity is that the price varies wildly by location. At-depot charging may be a few pence per kWh but a motorway services fast charge could cost 20 times that. The diesel market has never been subject to such wide and unpredictable variations in fuel cost. 

This means operators must have a charging policy laid out in advance and be rigorous about avoiding contingency charges. 

Optimisation companies will sell the idea of rapid charging mid shift in order to extend range - but you need to know in advance what that would cost.

Maintenance. In theory EVs are cheaper to maintain. EVs have a handful of moving parts against the 2,000 components of a diesel drivetrain. Having said that, it may only be cheaper for leasing companies or manufacturers and their dealers. Chances that independent or operator-owned workshops will be able to charge less once they have new bays and diagnostics and have trained enough people are slim.

There’s also the issue of wear and tear – these vehicles will be run longer in order to achieve ROI. Urban distribution is hard on vehicles and the longer they run, the more attritional damage they are likely to take. Novuna Vehicle Solutions (formerly Hitachi Capital) is exploring adding a mid-term body refresh into its leases but again, that adds to cost.

Clean Air Zones (CAZ)

Clean Air Zones will spring up around the UK – Bradford and Bristol are the next to join Birmingham, Oxford, Bath, Portsmouth and London. But other cities have already cancelled their plans because the uptake of electric cars and taxis is faster than they had anticipated. So not all fleets will be affected by CAZ, and those that are may find the schemes dismantled as soon as the cities can achieve their air quality targets by other means.

Any TCO calculation should therefore treat CAZ contributions with caution. It is possible that they will be replaced by road charging some time before 2030, which would negate the advantage to electric vehicles.

Infrastructure Total cost of ownership of the vehicle is not the only major cost here. Infrastructural changes, including charging points and grid upgrades will be a major investment.

What’s the moral of this tale? While TCOs will always be an important tool, they should also be iterative, being updated regularly as we get more real-world data and in line with events.

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