Electrifying vehicles: assessing the efficiency/price trade-off

Conventional combustion engine cars will continue to achieve improvements in fuel economy allowing them to comply with new regulatory standards - but their price will rise. Meanwhile, hybrids and full EVs will get cheaper as efficiency improves.


Vehicle price and fuelling costs are important factors consumers take into account when deciding to purchase a new light-duty vehicle. While vehicle purchase is influenced by cost and fuel economy, other important factors such as environmental concerns, performance, and style also play a part. Comparison of the fuel savings and incremental vehicle cost among various vehicle fuel types sheds light on how at least some consumers may perceive the value of purchasing a given vehicle fuel type relative to another.

The chart below illustrates US Energy Information Administration projections of how different vehicle engine technology platforms are expected to evolve in terms of fuel economy (solid lines) and purchase price (dashed lines) taking into account US EPA fuel efficiency regulatory standards.

Graph for Electrifying vehicles: assessing the efficiency/price trade-off

Source: U.S. Energy Information Administration, Annual Energy Outlook 2014. (Note: Years represent vehicle availability in the midsize passenger car size class.)

Standard gasoline vehicles

The compliance fuel economy of midsize passenger cars using gasoline is projected to increase from about 35 miles per gallon (mpg) today to more than 53 mpg in 2025 by adding fuel efficiency technology, including micro and mild hybridisation. These additions raise the average vehicle price from about $25,000* (2012$) to more than $27,000. For a vehicle driven 12,000 miles annually, 116 gallons of fuel are saved annually compared to a midsize car today, or $408 per year if gasoline is $3.50 per gallon (2012$). Because of diminishing returns from improved fuel economy, future highly efficient standard gasoline vehicles are a strong competitor compared with other more efficient vehicle technology types.

TDI diesel vehicles

Compliance fuel economy for midsize turbocharged direct injection (TDI) diesel passenger cars increases from 45 mpg in 2010 to 55 mpg in 2025, while vehicle price remains about $28,000. Although a midsize diesel vehicle achieves slightly higher fuel economy than a standard gasoline counterpart, this difference amounts to only about a 10-gallon reduction in annual fuel use for 12,000 miles of travel. Because diesel fuel is more expensive than gasoline, the annual fuel cost is about $25 more per year if diesel is $3.75 per gallon (2012$).

Hybrid electric vehicles

For fully hybrid electric vehicles (HEV), projected compliance fuel economy increases from around 50 mpg in 2010 to 71 mpg in 2025. The vehicle cost remains just over $30,000, as the addition of more fuel efficient technology is offset by the reduction in cost of the battery electric system. Because of diminishing returns to improved fuel economy, the 20 mpg improvement of an HEV over a conventional gasoline counterpart represents only a 57 gallon annual reduction in gasoline consumption, or about $200 per year in fuel savings.

Plug-in hybrid electric vehicles

These vehicles offer fuel savings because they use electricity instead of liquid fuel for some share of travel (charge-depleting mode) and then operating similarly to an HEV when usable battery charge is depleted (charge-sustaining mode). For a plug-in hybrid electric with a 10-mile range (PHEV10), around 21 per cent of average daily travel is within all-electric range. In contrast, a plug-in hybrid electric with 40-mile range (PHEV40) accounts for an average of 58 per cent of daily travel. PHEVs achieve relatively high fuel efficiency and take advantage of using electricity at US12 cents per kilowatt-hour (2012$). PHEV incremental costs compared to a standard gasoline counterpart are $8000 or more before tax credits, even considering projected battery systems cost reductions. Compared to a conventional gasoline counterpart, annual liquid fuel consumption is projected to be reduced by about 100 and 155 gallons for a PHEV10 and PHEV40, respectively, amounting to annual fuel savings (including gasoline and electricity) of about $207.

Plug-in electric vehicles (EVs)

EVs operate exclusively on battery power and achieve relatively high efficiency. An EV with a 100-mile range is projected to save around $385 annually in 2025 compared to a standard gasoline vehicle. These fuel savings come at an incremental vehicle price before tax credits of around $10,000.

*All figures in US dollars

This is an edited version of an article originally published by the US Energy Information Administration. Republished with permission.

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