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Will an EV end up costing more or less than a petrol or diesel car?

Insurance, fuel, purchase costs and depreciation ... motorists must carefully weigh the pros and cons

With the launch of 241-registered cars just around the corner, some people will have their eye on one for their driveway.

Electric cars have fast become one of the biggest draws, in line with Government targets to have 950,000 electric vehicles on the road by 2030, but they aren’t the only option around.

Here, we take a look at where you will save – and where it will cost you – when buying an electric car compared with petrol and diesel equivalents.

Insurance

In the UK, media reports have increasingly pointed to a sharp increase in the cost of insuring your EV. The Financial Times reported a 72 per cent increase in average EV insurance costs in the year to September, compared with a rise of just 29 per cent for petrol and diesel models. The reason for this? The industry blames higher average claims and more expensive replacement costs for EVs.

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But what’s the experience in Ireland?

Paul Walsh, chief executive of Peopl Insurance, says that, when you compare the “pure” car engine type, and when all other risk factors are equalised (such as driver details and age, location, no-claims discount and so on), it’s 10 per cent cheaper to insure an electric car in Ireland compared with the petrol/diesel and hybrid versions of the same or similar car.

“Insuring a car with a hybrid engine is producing identical rates when compared to its petrol/diesel alternative,” he says.

Interestingly, the insurer’s analysis also shows that there is less rate disparity across insurers for electric cars compared with petrol/diesel engines and hybrid cars.

“Put another way, there are more insurers producing very competitive rates for electric cars than there were for the same customer in a car powered by a petrol/diesel engine or hybrid engine,” he says.

He gives the example of the cost of insuring a Ford Kuga. Both the petrol and hybrid versions will cost €465.55 at best, for a 50-year old woman with full no-claims bonus living in Dublin. The cost of insuring an electric version of the car for the same customer drops to €418.45.

Motor tax

You can also expect to pay less to tax your EV. As our table shows, it costs just €120 a year to tax an EV such as a Tesla Model Y or a Volkswagen ID4.

A hybrid car on the other hand, which avails of electric energy as well as another source such as petrol, is a bit more expensive, at about €170 a year, while a larger petrol car, such as a Skoda Kodiaq, will cost about €280 a year.

So opting for electric over petrol could save you about €1,600 over 10 years.

Fuel costs

When it comes to fuel costs, running an electric car is undoubtedly cheaper than its petrol or diesel equivalent. The Sustainable Energy Authority of Ireland (SEAI) suggests that fuel costs alone are 50-60 per cent cheaper.

Consider running the following similar midsized cars: a petrol or diesel Volkswagen Golf, an electric VW ID.3 and an electric Audi Q4 Etron.

According to the SEAI, the Golf running on petrol or diesel will cost almost €1,400 a year in fuel costs, while the electric options will cost less than, or about, half of that – €640 a year for the VW, and €704 for the Audi.

However, these costs are rising. And Ireland is already one of the more expensive countries in which to charge an electric car.

An analysis from comparison site Switcher.ie suggests the average cost of charging an electric vehicle rose nearly 20 per cent between the first half of 2022 and the end of that year.

Moreover, in a survey of 39 countries it carried out, Ireland emerged as one of the most expensive countries in which to charge an electric car at home, itself considerably cheaper than using chargers – especially fast chargers – elsewhere.

Denmark was the most expensive, with a cost of €36.17 to charge a car, followed by Belgium (€27.66) and Czechia (€23.68). Ireland came in ninth, with a cost of €19.87, behind Germany (€20.68), but ahead of the UK (€17.87), Norway (€14.18) and France (€13.58). Kosovo was the cheapest, at just €3.92.

Cost to buy

This is where the comparison can swing in favour of a traditional petrol or diesel model. Electric cars are not cheap.

While sales here have been very buoyant in recent years, with almost 100,000 electric vehicles on Irish roads, sales globally have hit a slump and the cost of buying them is being blamed. Last month, Elon Musk’s Tesla cut the price of its Model 3 compact sedan and Model Y SUV cars – the second reduction in a year – by as much as $2,000, to help spark demand.

Consumers have also been hit by a reduction in the level of grants the SEAI will offer buyers of EVs. Until June 30th, buyers benefited from a grant of €5,000 when buying a new EV; since then, it has shrunk to €3,500.

A petrol or diesel Volkswagen Golf, for example, retails for about €36,025 new, while an electric equivalent, the ID.3, has a retail price of €43,960, or 22 per cent more.

And Ireland’s best-selling car, the Hyundai Tuscon, is just shy of 30 per cent cheaper in a diesel version – €37,795 new – compared with €48,995 for a plug-in hybrid, according to the SEAI.

Unsurprisingly, this is among the factors leading to a dip in sales. Figures from the Society of the Irish Motor Industry show that sales fell by almost 18 per cent in the year to October, for example.

It’s not just down to price, although, with higher interest rates, that is clearly an important factor. There is also general acceptance in the industry that the initial demand surge, fuelled by early adopters, has come to an end and the wider market will require more persuading on the merits of switching, including addressing concerns over range and charging infrastructure.

But if demand falls, the cost may also fall. Motor manufacturers are investing heavily in electric; they need to move those cars. In October, the Done Deal car price index showed that the average price of a new EV has fallen below €50,000. The average price for 231 registrations stood at €53,250, but fell back to €49,900 for 232 registrations.

Nissan has just announced a €5,000 price drop for its Leaf model. It means that the cheapest electric model, the XE 40kWh, will now retail from €28,495.

Those holding out for an electric car, particularly for city driving or shorter trips, might welcome the arrival of newer, cheaper alternatives next year. Dacia expects to launch its spring model in Ireland next summer, which is already on sale across Europe, for about €20,000 or so, and has an expected range of about 160km.

Fiat also has plans for a lower cost Panda, while Citroën is to launch a C3 hatchback at an expected starting price of below €25,000.

Depreciation

Another issue aspiring EV car owners need to consider is the potential loss in value of their cars. Given the relative novelty of electric cars, there is not a significant track record in terms of how long batteries will last in many of the newer models. And this uncertainty can affect how much people are willing to pay for such cars on the second-hand market.

According to the latest Done Deal car price index, the price of used EVs fell 7.1 per cent in the year to October. In contrast, the price of hybrid cars rose 6.5 per cent over the same period, while, overall, prices in the used car market rose 10.5 per cent. It should be noted, however, that the survey is based on low volumes, with EVs accounting for just 2.3 per cent of the stock of used cars on Done Deal.

In the UK, Car Dealer magazine reported in the summer that EVs accounted for 29 of the 30 cars that had dropped the most in value from their initial purchase price, with pure electrics dropping 33 per cent in value. The Nissan Leaf 2017 model was the worst performer, dropping 39.4 per cent.

But many of the worst performers, such as the 2017 Leaf, are older EV models; as second-hand sales of newer EVs increase, depreciation values will become clearer.