Cost components

Cost components

The need to introduce e-mobility in commercial fleets is growing and companies across Europe are starting to investigate new business scenarios and price models for this transition. According to Transport & Environment it is estimated that already today about 800,000 delivery vans in Europe could be replaced by electric vehicles without additional costs to their owners.

Generally though, the costs structure of electric vehicles is different from vehicles with combustion engines, resulting with the consequence that a shift to electric propulsion needs to be linked to reorganization of processes and fleets (Ehrler, Lobig, Rischke (2020): “ E-vehicles for urban logistics — why is it not happening yet? — Requirements of an innovative and sustainable urban logistics concept”, Elsevier: Urban Freight Transportation Systems 2020, Pages 223-238).  Furthermore, resale values of electric vehicles and batteries are only emerging. As a consequence, estimating the financial impact of a shift to electric vehicles or fleets is complex and challenging. A focus on minimizing the costs associated with the transition to a green and sustainable fleet is important for organisations though.

TCO calculations in general

When comparing electric vehicles with internal combustion vehicles higher purchase costs and lower operating costs must be taken into account. The concept of a Total Cost of Ownership (TCO) analysis is very useful as it summarizes all relevant costs from the purchase to resale of the vehicle (Redelbach 2012, Levay et al 2017). In addition to the purchase and resale value, it also takes into account energy costs, maintenance costs, taxes or subsidies. This allows a realistic impression of the investment and provides the reasonably basis for the investment decision. TCO calculations may vary and decision makers have to decide which costs to include in the TCO, e.g. do they only want to consider the vehicle, or do they also want to include the infrastructure needed for a shift to e-vehicles. This is called the definition of the “cost object”. In a second step, the costs related to the defined cost object need to be identified and the related data needs to be sourced. Important for the TCO analysis approach is, that not only direct expenditures are relevant, but all costs occurring over the cycle of use of the cost object – in our case the electric vehicle – during its ownership or use (e.g. for leased vehicles) by the company.

The purpose of the TCO analysis is, to generate a basis on which investment decisions may be taken, for example by establishing the TCOs of different vehicles or a “lease” versus “buy” solution, but also to generate an overview over all costs related to a specific investment.

TCO costs usually are divided into two different cost types: capital expenditures CAPEX (e.g. costs related to the acquisition of a vehicle) and operating expenditures OPEX (e.g. costs related to the operation of the vehicle). These two cost categories can be divided into sub-categories, depending on the cost structure of the specific vehicle and organization (see figure 1).

Figure 1 provides an overview of potential relevant sub-categories of OPEX and CAPEX to be taken into consideration.

Figure 1 - Overview on typical cost categories for TCO analysis of electric vehicles.

Source: Copenhagen Electric

CAPEX (Capital expenditure)

These can be divided into infrastructure expenditures and purchase associated costs.

Infrastructure Expendtitures

Operating an electric vehicle requires access to charging infrastructure. This can be own infrastructure or public infrastructure. When calculating the capital expenditures related to one’s own infrastructure it is important to gain overview of all relevant costs. These may include, depending on the infrastructure chosen:

Cost of charging point

Costs of the charging pole or charging station. If several vehicles are using the same charging point, costs may be divided between the vehicles. Alternatively, additional costs for the additional vehicle costs may be considered (marginal accounting approach). Usually costs for charging points vary from 1,000 – 3,000.

Cost of installation

These costs include the cabling, installation work etc. from the installer. It is recommended to ask for specific offerings as prices vary, depending on locations and solutions needed.

Cost of power connection

If energy is purchased, provider may charge for connection to their infrastructure. These fees vary and depend on the local energy supplier as well as on the existing electricity connections in the area or in the building.

Power generation infrastructure

As alternative to purchased energy, the generation of energy might be considered. In these cases, the calculation of the costs related to the power generation and the needed infrastructure need to be taken into consideration. At the same time, the reduction in energy costs needs to be included in the operational costs, sub-category energy costs.

Purchase Associated Costs

All costs related to the direct purchase of the vehicle should be part of the CAPEX. These include costs of the actual vehicle purchase, costs of capital and total depreciation costs.


An analysis carried out by the Dutch research institute TNO has identified an annual depreciation rate of 20.75 % on the value of a diesel, 17.27 % on the value of a petrol, and 15.24 % on the value of an electric vehicle. These figures were computed based on the average residual values after five years published by ING Economics Department assuming a constant depreciation rate. This means, that the value-decrease of electric vehicles progresses slower than that of vehicles with combustion engines. This difference in depreciation should be reflected in the resale value and impacts the TCO analysis.

Interest rate

This includes the cost of the money for the purchase, and any costs related directly to the vehicle’s financing. In case of vehicle leasing, the leasing rate should be taken into consideration for the TCO analysis.

Residual value of car

Due to the limited number of electric vehicles currently in use, and, subsequently the limited resale market, it is possible to name the exact residual value of electric vehicles. Instead, these have to be estimated. The depreciation values mentioned above give an indication for the resale-value estimation of electric vehicles and a close observation of the market can be used for validating the calculated resale value.

OPEX (operational expenditures)

These can be divided into operational costs and maintenance costs.  While the operating costs are caused by the regular use of the vehicle, the maintenance costs serve to maintain the usability of the vehicle. In a way, the maintenance costs represent preventive measures to ensure that the vehicle does not break down.

Operational Costs

These costs include costs occurring during the ongoing use of the vehicle. Energy expenditures are often the key element, but also costs related to dispositioning of vehicles might be considered here, if expenditures differ between options which are to be compared.

Energy costs

Energy costs need to cover all costs of recharging or refuelling, at the vehicles home base as well as elsewhere. Where fixed prices are agreed for energy consumption (which e.g. might be the case for all-inclusive leasing or rents), these have to be taken into account on a pro-rata-basis, i.e. as relevant for the duration of the intended use of the vehicle. 

CO2 emission charge

The European Union CO2 emission targets will decrease from currently 120 g/km to 95 g/km by the end of 2020.

In some countries already today different taxations for vehicles, depending on their emissions values, exist, and it is to be expected that in the future, these differentiation of taxation by emission values will be further developed. Any emission-related taxes need to be included in the OPEX part of the TCO analysis, therefore.

Emission zones access fee’s

As far as emission restrictions for specific zones are concerned, a differentiation has to be made between those zones, which are inaccessible for higher-emission vehicles, and those zones, where fees are charged to the access of these vehicles. Should relevant zones be completely out of access for some vehicles, these limitations in operation need to be included in the purchase analysis (CAPEX). Is the access linked to a specific, emission-level related fee, though, the resulting cost need to be considered in the operational cost analysis.

Parking and road pricing   

Since more and more municipalities are introducing a differentiation in parking and access fees for their cities. Depending on the routing and use of a vehicle, these different pricing structures can have a significant impact on the TCOs of a vehicle and need to be taken into consideration.


It is recommended to check with the specific insurance company what the exact insurance costs for a specific vehicle are.

Dispositioning of vehicle

The limited range of electric vehicles requires detailed route planning of the routes to be driven daily in order to enable suitable charging times and necessary break times. Cleverly, the drivers' break times coincide with the charging times. The larger the fleet and the more diverse its composition, the more complex the disposition of the vehicles becomes and the disposition costs increase in the TCO analysis. 

Maintenance Costs

Analysis so far has shown, that electric vehicles’ maintenance costs are between 15 – 25 % lower than those of vehicles with combustion engines (Volkswagen 2020). Electric vehicles do not require oil and oil filter changes, the energy-recover of the brake-process, etc. contribute to this reduction in costs. Sound data basis are still missing though, and maintenance costs of electric vehicles, in particular electric vans and trucks, still need to be estimated.


The inclusion of the battery in the TCO analysis often poses the most challenges. This is due to the fact that currently the resale market for batteries is still young and limited data on resale value is available for calculation.

Generally, three cases can be distinguished when considering battery prices and values:

For leased vehicles, battery costs are often included in the leasing rate. A further consideration of the battery value and battery-related costs is therefore not necessary.

For bought vehicles, in most cases the battery is included in the vehicle price. In these cases the core question is, whether the vehicle will be used beyond the life-time of one battery. In these cases, battery prices and resale value need to be considered in the CAPEX calculation. In some cases (e.g. Renault Kangoo), vehicles can be bought while the necessary battery can be leased. In these cases the vehicle costs are to be considered within the CAPEX calculation, whereas the battery leasing rates are part of the operational costs.


On average maintenance costs for brakes are expected to be between 10 – -20 % lower for EVs due to the regenerative braking system and therefore less tear and use of brakes during operation.

Car tyres

As a guiding principal, the same cost of car tyres for both ICE and EVs can be assumed. However, the pricing on car tyres for EVs have been 5-10 % higher than on ICE in the introduction period of EVs due to low volume and specialized shapes optimized for EV driving.


Since the transmission in EVs is much more simply, there is not much maintenance to be expected in this area compared to ICE-vehicles, that will be affected over time of use.

General service cost

A general and standard cost should be expected for the normal service of the electric vehicle. This service should be of less magnitude and lower cost for the EV compared to an ICE van since the wear and tear on the EV is expected to be less than on ICE models.

In a TCO comparison of EVs and internal combustion engine, the cost elements that remain the same in both variants examined are not necessarily required.  Since the TCO analysis contributes to an individual investment decision, other components that are not listed here may be individually relevant.

  • Lebeau, P, Joeri Van Mierlo and Cathy Macharis 2019. How to Improve the Total Cost of Ownership of Electric Vehicles: An Analysis of the Light Commercial Vehicle Segment. World Electric Vehicle Journal 2019, 10, 90.
  • ING Economics Department. Future Residual Values of Battery Electric Vehicles Benefit from Increased Rang, ING Economics Department: Amsterdam, The Netherlands, 2019; p. 9.
  • Volkswagen, financial services. Help and advice. Assessed 15.04.2020:
  • Lévay, P.; Drossinos, Y. Thiel, C.: The effect of fiscal incentives on market penetration of electric vehicles: A pairwise comparison of total cost of ownership. Energy Policy, 2017
  • Redelbach, M.; Propfe, B.; Friedrich, H.E.: Competitive Cost Analysis of alternative  powertrain technologies. Conference Paper. 2012
  • Transport & Environment 2018. CO2 emissions from vans: time to put them back on track, T&E position paper on the post-2020 CO2 standards for vans. February 2018.
  • Ehrler, Lobig, Rischke (2020): “ E-vehicles for urban logistics — why is it not happening yet? — Requirements of an innovative and sustainable urban logistics concept”, Elsevier: Urban Freight Transportation Systems 2020, Pages 223-238

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