Total cost of ownership and its potential implications for battery electric vehicle diffusion

TLDR

Battery electric vehicles have diffused slowly worldwide and in Sweden, with studies indicating that economic factors, vehicle size, and performance largely influence purchasers’ choices. The study aims to examine how a consumer‑centric total cost of ownership model can reveal differences between purchase price and long‑term cost among internal combustion, hybrid, and electric vehicles. The authors develop and apply a total cost of ownership framework that aggregates purchase price, operating expenses, and future cost predictions for each vehicle type. The model shows that calculating total cost is difficult for consumers due to limited data access and future uncertainty, yet it indicates that BEVs can be cheaper than ICEVs and HEVs, offering insights for policy and marketing to accelerate BEV adoption.

Abstract

Battery electric vehicles (BEVs) have been slow to diffuse on the international as well as the Swedish market. Previous studies have indicated situational factors such as economic factors, size and performance to be of major importance for vehicle purchasers in their choice of vehicle. In this paper, the authors explore a consumer centric total cost of ownership (TCO) model to investigate the possible discrepancy between purchase price and the TCO between internal combustion engine vehicles (ICEVs), hybrid electric vehicles (HEVs) and BEVs. The creation and testing of the TCO model reveals that computation could be a challenging task for consumers due to bounded access of relevant data and the prediction of future conditions. The application of the model to the vehicle sample found that BEVs could be cheaper compared to ICEVs and HEVs. The findings in this paper could prove to be of importance for policy and marketing alike in designing the most appropriate business models and information campaigns based on consumer conditions in order to further promoting the diffusion of BEVs in society.