If not for subsidies, regulations, and other hidden costs, electric vehicles would cost almost $50,000 more to own over ten years than internal combustion vehicles, according to a new study by the Texas Public Policy Foundation (TPPF). The hidden costs of fueling an EV add up to more than $17 per gallon equivalent.
TPPF reports that direct federal and state EV buyer tax credits and rebates comprise almost $9,000 of the extra 10-year cost of an EV. The Inflation Reduction Act (IRA) maintained a $7,500 tax credit for EV purchasers who qualify, and state tax credits often help the consumer further. EVs also avoid paying gasoline taxes and, therefore, do not contribute to the building and maintenance of federal and state roads—which TPPF notes “is ironic given that EVs are heavier… and exert more wear and tear on roads and infrastructure.”
However, regulations contribute most to the hidden costs of EVs. The Corporate Average Fuel Economy (CAFE) standards set by the National Highway Transportation Safety Administration (NHTSA) have required automakers to reduce greenhouse gas emissions from the cars they produce since 1975. TPPF estimates that CAFE standard credits, which give EV manufacturers “6.67 MPG of credits per every 1 MPG of actual fuel economy improvement,” subsidize each EV sold by $19,678. This cost will likely increase, as Biden’s NHTSA is working on an aggressive proposal that would force automakers to make 67% of new light-duty vehicles all-electric by 2032.
Separate greenhouse gas emissions standards set by the Environmental Protection Agency (EPA) average $3,322 per EV sold. Of course, states like California that impose stricter “zero emission vehicle (ZEV)” mandates also subsidize EVs to the tune of $4,881 per EV sold.
Mainstream calculations also tend to downplay the strains on the electric grid caused by charging EVs—and by extension, the costs borne by utilities ratepayers. TPPF estimates that the infrastructure costs of building enough private charging ports, electricity losses, and billing and overhead accrue to $4,569 per EV to the owner. Public charging infrastructure accounts for another $1,318. Infrastructure needed to upgrade the electric grid may cost anywhere from $3,750 to $17,280 over 15 years.
Even built-in subsidies, credits, and tax breaks for the industry are not enough to stop automakers from hemorrhaging money. Ford admits it lost $37,000 on each EV it sold in the past three months. GM and Honda have canceled their plans to jointly create sub-$30,000 EVs, and GM plans to slow the release of planned EV models to “adjust to slower near-term growth in demand” in 2024. TPPF’s study also does not include “the tax credits, grants, and loans for domestic battery manufacturing,” promised by the IRA, battery replacement or disposal costs, and a laundry list of other subsidies, credits, and costs.
Electric vehicles should always be available for consumers who judge them best for their needs. But that choice shouldn’t be made $50,000 less expensive for them—to the detriment of the U.S. taxpayer, utilities ratepayers, and purchasers of gas-powered vehicles. A free market would require EVs to compete on their merits.