Why is a sensible person like you driving a car like that?

 

No-one has asked me that question yet, but I thought I should have a speech ready just in case it happens.

The car is a BYD Atto 3. It is an electric vehicle, made in China.

A sensible person? Why would anyone say I was a “sensible person”? Some people might think I would be sensible enough not to choose a car which takes more than half an hour to power up at a charging station, when I could have a car which could be filled with petrol in less than 5 minutes.

My wife and I don’t anticipate spending much time at charging stations. We have decided that at our age the time has come to stop driving on long trips. We expect to be able to charge our new car at home nearly all the time.

Our choice of car has more to do with saving money than saving the planet. I am not going to attempt to justify the government incentives that made this a good decision for us. I will just try to explain why our decision makes sense from our perspective.

The main reason why our decision makes sense can be illustrated from this graph which shows our production and consumption of solar power one day a few weeks ago. The horizontal axis shows the time of day and the vertical access shows power production and consumption in kWh.

 

• The orange area shows what we purchase from the grid at a cost of 42 cents per kWh. 
• The green area shows what we export to the grid. Before we bought the car, we received about 10 cents per kWh for about half of that and only 4 cents per kWh for the rest.
• The blue area shows the amount of our solar energy that we consume ourselves. You can see the point at which I plugged in the car around noon and the point at which I unplugged the car at about 5 pm.

It costs us about 64 cents in foregone revenue to have the car plugged into the power for 10 hours. In that time, we would have added 112 km to the distance we could drive. The cost of petrol to drive that distance in our previous car (Subaru forester) would have been about $20.

Before we bought the new car, we usually spent about $100 per month on petrol. I assumed that home charging might cost us $20 per month, allowing for some charging on cloudy days. So, I estimated that we could have a potential saving in total power bills (difference between saving in cost of petrol and additional cost of electricity) of about $80 per month or $960 per annum. There are also savings in the cost of servicing which have been estimated at around $350 per annum.

So, that means a total saving of about $1,300 per annum.

However, at this point, I needed to take account of the additional cost of EVs (electric vehicles) by comparison with ICE (internal combustion engine) vehicles. I used a KIA Seltos GT-Line FWD as the basis for comparison. At the time I was doing my calculations that was priced at around $47,000. That was about $3,900 less than the BYD Atto 3.

Since we are saving about $1,300 a year in running costs, the additional purchase price of the BYD Atto 3 would be recovered in about three years. That is much less than the expected life of the BYD's battery, which comprises a high percentage of the cost of the car. BYD offer an 8-year warranty on the car's battery.

We also looked at other electric cars. The comparable Tesla, VW and KIA cars were a lot more expensive at that time. The MG was cheaper, but we chose the Atto 3 because we liked its shape, color, and battery technology. Unlike the batteries in some other electric vehicles, the lithium iron phosphate battery in the Atto 3 can be fully charged frequently without degradation.

The Atto 3 has everything we were looking for. It has a range of over 400 km on a full battery. It fits our garage; has adequate boot capacity; it can be configured in a way that makes it fun to drive; and it has comfortable seats. It also has lots of safety features which can be switched on and off as required.

The car is naturally silent, but it can be made to emit sound so that blind people are able to hear that it is in their vicinity. I understand that for a few hundred dollars I might be able to make the car sound like an Aston Martin. However, my wife doesn’t think it is worth paying that price.

One thing that concerns me a little about buying a Chinese car is that it might be difficult to get spare parts if Australia goes to war with China. In that event, however, getting spare parts for the car might be the least of our worries.

Summing up

We have bought an electric vehicle because it suits our circumstances. We no longer drive long distances, and we have been exporting a lot of solar power to the grid.

The main point I would like to leave with you is that buying an electric vehicle can sometimes be a sensible choice, irrespective of any feel-good considerations about reducing CO2 emissions. At the same time, I admit that it does feel good to own a solar-powered car.

Addendum

This post was prepared for a speech delivered a couple of weeks ago at Charlestown Toastmasters. 

My wife and I purchased the car about 7 weeks ago. We have not yet visited a charging station.

I noted in my speech that I would not attempt to justify the government incentives that influenced our car purchase. I will now outline briefly the main impacts of government policies on the prices we faced.

It is possible that policies of the Chinese government provide an implicit subsidy to foreign consumers of Chinese-made electric vehicles. If so, I am grateful to the people of China for their assistance.

The cost of installing solar panels is subsidized by the Australian government. I expect we would still have installed solar panels if the Australian government had adopted a more rational approach to reducing greenhouse gas emissions, with a modest carbon tax rather than the mishmash of policies that currently apply. Even so, it may well be that a free market in energy without any carbon tax or other interventions would produce better outcomes for the people who live in this country, since our government's interventions have a negligible impact on the global climate.

The existence of fuel excise, which comprises a substantial proportion of the retail price of petrol, favours EVs relative to ICE vehicles. This excise is sometimes viewed as a road user charge. If that is appropriate, the absence of a similar charge on users of EVs is a price distortion favouring EVs relative to ICE vehicles.

However, in my view the fuel excise lacks the desirable characteristics of a road user charge – it doesn’t accurately reflect marginal costs of road usage, which are associated with congestion costs and road damage. It seems to me that there may be a stronger case for the fuel excise to be viewed as a carbon tax than as a road user charge. Purchase of fuel for use in ICEs is directly related to carbon emissions.  

That brings us back to the question of whether there is a case for Australia to have a carbon tax, given that Australian interventions have negligible impact on the global climate. If fuel excise cannot be justified as a carbon tax, it seems to me that a strong case can be made to eliminate this discriminatory tax, accompanied, if necessary, by an increase in a more broadly based tax such as the GST.

That leaves me doubting whether it would be possible to justify the government interventions that affect the prices on which our purchase decision was made. 

Nevertheless, from the perspective of individual consumers, distorted prices are a feature of the real world that they must accept. There is no prospect that relevant price distortions will be removed in the near future.

I will end on a personal note about the process I went through in contemplating purchase of an electric vehicle. There was an initial psychological barrier associated with the fact that I didn’t see myself as the kind of person who would own an electric vehicle, and particularly not one made in China. I had to acknowledge (to myself) that it didn’t make sense to see car choice as making an ideological statement - except insofar as basing the choice on utilitarian considerations could be said to be making an ideological statement.

I also needed to consider how I might feel if other people assumed that our choice of car involved some kind of virtue signaling about saving the planet from CO2 emissions. I decided that I would probably feel bemused rather than offended if that happened.