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 1
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.
Addendum 2
In response to one of the comments below, I estimated the additional cost of electricity for a person in my circumstances who did not have solar panels. Assuming an off-peak rate of 22 cents per kWh, I estimated that the additional cost of electricity from ownerships of a BEV would be about $15 per month. That is still lower than the $20 per month I allowed in my calculation.
Addendum 3
John Freebairn has sent me the following comment relating to the suitability of the fuel excise as a road user charge.
"I offer some contrary arguments to your statement that the fuel excise is not a useful road user fee. Primarily, the fuel excise applies only to fuel purchased for use by on-road vehicles. The excise is exempt for all off-road vehicle uses, including mining,
agriculture and shipping. The exemption does not make sense as a CO-2 pollution tax.
While one can agree that the correlation between fuel consumption by on-road vehicles and social costs of road construction and maintenance, and of congestion, are not equal to unity, I'm sure they are positive. And fuel excise is a relatively simple and low
cost tax or vehicle user fee. Modern technology may support more highly correlated and direct road user fees.
To exempt EVs from any form of road user fee means a subsidy and too much investment in and consumption of government supplied road services.
Another issue is that the fuel excise is not a hypothecated road user fee. In fact, the revenue is collected by the Commonwealth, and most road construction and maintenance is paid by the states and local governments. Yet, the Commonwealth in making its revenue
grants to the states with advice from the Commonwealth Grants Commission includes consideration of relative costs across the states to provide comparable levels of road services per capita.
Reform of fuel excise as part of a pollution tax, and the introduction of a road user charge for all vehicles to reflect the social costs of investment and maintenance of roads and other transport infrastructure, policing, ambulances and other operating costs,
should be on the tax reform agenda."
