• EXPERT STUDY ON AFFORDABILITY OF CAR OWNERSHIP

    21 November 2022

    The FIA European Bureau (EB) commissioned a study investigating the implications of the proposed Fit for 55 policy measures and the current energy crisis on the affordability of future car use in the EU. It compares the main determinants of the Total Cost of Ownership (TCO) of fossil fuel cars (ICEVs) compared to electric passenger cars (EVs) and identifies the driving factors behind affordability and equity.

    First, the study analyses the three relevant proposals for the passenger car market – namely CO2 standards, EU Emission Trading System (EU ETS), and the Social Climate Fund. The impact assessment of the European Commission, developed before the energy crisis, assumed that BEVs would become affordable over time, price decrease being a consequence of declining production costs. Nevertheless, manufacturers will likely keep prices high to recover the high investment costs since many EVs are currently sold below production costs (due to the energy crisis).

    As part of the study, a Total Costs of Ownership (TCO) model, for different passenger cars, was developed in three EU countries (Denmark, Germany, and Italy) with different fiscal treatments of EVs and ICEs. The TCO, based on actual sales prices, foresees 3 different scenarios (baseline, Low EV-cost and a High EV-cost) seeks to understand the potential range of cost differences between EVs and ICEVs. The study shows that, in the three countries, EVs are more affordable than comparable ICEVs for first owners due to generous financial incentives, but the cost advantage of EVs is much smaller for second owners, since these incentives are usually limited in time, or only apply to first registrations. Likewise, sensitivity tests demonstrated that purchase price and the resale value are the main determinants of the TCO. Depending on the depreciation pace of EVs, price differences could be negligible between 2025 and 2034.

    Finally, the study looks into the potential flanking measures helping consumers making the transition to electric vehicles. Regarding non-financial measures, the development of a dense and high-quality public charging network is of the utmost importance for EV uptake, especially for lower income households, which represent a larger share of consumers without any opportunity to install a charging station at home. Financial incentives are very efficient to support consumers but should be designed to benefit those who need them most. For instance, measures to support the second-hand market, which are paramount to support lower-income households, are currently insufficient.

    READ THE FULL STUDY ON THE AFFORDABILITY OF FUTURE CAR USE IN THE EU