Clocking 50,000 miles on my Tesla Model S has me pondering the value of electric vehicles. During my 85-mile, round trip commute from Yorba Linda, California USC’s Marshall School of Business in central Los Angeles, I fight the worst traffic on Earth. I’m always searching for a better and more economical driving experience. So, in May 2016 my son and I picked up the Model S (70D) at the Tesla’s Fremont factory. I purchased the car online without a test drive or even a passenger experience and it did not disappoint. My Model S continues to be the best product of any kind that I have ever purchased.
I was not an electric newbie, however. I traded in my 2014 Chevy Volt, a comfortable, decent looking plugin hybrid that could just barely get me to work on battery. As its internal combustion engine (ICE) almost never kicked on, the Volt required little service. I drove 40k miles in two years and changed the oil once. This experience alerted me to the low Total Cost of Ownership (TCO) and lifespan advantages of electric vehicles.
In shopping for my first electric, I had tested the Ford Fusion EV and found the acceleration so poor that pulling into LA traffic would have been scary. The sales person said “electric cars just don’t go fast.” No wonder Tesla ate their electric lunch. I also looked at the Nissan Leaf, but the alien design aesthetic of that car left me cold. Why must “green” vehicles go out of their way to look bizarre? Even the BMW i3 looks like a lunar ground car from an old sci-fi movie. Ruining the best thing the Volt had going, GM has bestowed their all-electric Bolt with the insipid “I’m doing penance for the environment” look of a Prius. Only Tesla has bothered to offer consumers the obvious: an attractive electric car that flies like a rocket.
Tesla was also smart enough to innovate from the top of the demand curve. By starting out in the performance-luxury segment they were able to maximize revenues on low volume production. They also established an aspirational brand, queuing up demand for the cheaper Model 3s which now clog the streets of LA. Meanwhile, nobody would buy an luxury version of the Leaf or Bolt because they set the bar so low to begin with. Each semester, I teach undergrad students that pushing a consumer brand upscale is hard. GM should hire one of them as chief strategist.
Why an electric vehicle? Environmentalism and the techno-nerd factor are part of it, but it’s mostly economics. I paid $95k (after taxes, registration, etc.) for my Model S, far more than the @$45k I would typically shell out for a car. The federal government nicely handed $7,500 in tax credits and California chipped in $2,500 reducing my Model S cost to $85k. I also have solar on my roof with extra charging capacity that I sell back to the utility so I have credits to cover charging. When I received an appointment at NASA HQ in December of 2016, my wife and I drove the Model S across country to DC and back for free using Tesla’s extensive supercharger network. (Note: “Environmental” NASA had no electric vehicle charging!) No gas bills for 50k miles driven has saved me $5,000 (assume 30mpg and $3/gal). Model S cost down to $80k. Current Tesla buyers aren’t grandfathered into free supercharging and some don’t have solar but it’s still way cheaper than gas. Analysis estimates charging costs at $4.40 per 100 miles, yielding 68mpg equivalency. So, the gas savings for most folks is more like $2,800.
People who don’t drive electrics worry about charging but I don’t waste any time “fueling.” I wake up in the morning with @230 miles of travel. When I come home, I plug in. Gas stations are for bio stops, window washing and little packs of donuts. Occasionally I drive 350 miles to ski Mammoth and I have to stop in Lone Pine for a free 45-minute charge while grabbing lunch at The Grill (highly recommend), which I would do anyway. My wife was so jealous of my never stopping for gas that she bought a Tesla Model X in late 2017.
I also spend no money and no time on service. The only real service I’ve had was an in-warranty replacement of the regular 12v battery that supports the car’s computers and infotainment system. No oil changes, no cooling flushes, no brake jobs (magnetic mostly), no transmission servicing and no time wasted on that stuff. Tesla’s recommend maintenanceincludes (seriously) changing the batteries in the key fob, checking the wiper blades and topping the off washer fluid. They suggest replacing the brake fluid every 25,000 miles, but they don’t require that. Estimated savings from 20 oil changes at $50 each and $50 for my wasted time is $2,000 plus a couple of cooling flushes and brake jobs = $2,500. Model S cost down to $77.5k.
The largest savings from an electric vehicle is found in their longevity. The Tesla drivetrain has less than a dozen moving parts. Combined with its all-aluminum construction it will last a very long time and could easily travel to 1 million miles with only battery swaps. Some folks have wrongly predicted those swaps will be expensive. With production scaling and new technologies for accessing and recycling critical minerals like lithium and cobalt the cost of Li-ion batteries actually falls year after year. (See chart from Union of Concerned Scientists). The replacement of my batteries at 150,000 + miles will be way cheaper than the engine rebuild and tranny swap an ICE car would need and the demand will drive technology and scientific research forward.
The only serious draw back with my Volt was the GM software and User Interface (UI). The crazy matrix of tiny buttons and buggy software reminded me of Sir Edward Lutyen’s comments on the architecture of the British Hill Station at Shimla India, “If I had been told it had all been built by monkeys, I would have said, what wonderful monkeys; they must be shot in case they do it again.” The Tesla UI is great and constantly improves via updates and features on my smartphone that BMW wisely copies. Tesla even upgraded my 70D to 75D (5 more kWh) for $500 with a software flip that activated additional batteries already installed. Model S cost up to $78k.
During our drive to DC we frequently had to leave our dog in the car and I had to leave notes indicating that the Tesla had remote climate control, least overzealous animal lovers bust the windows. Even if I forgot, the Tesla automatically prevents the interior from reaching dangerous temperatures. Tesla got this and announced Dog Mode which displays the interior temperature on the car’s large LCD. Last year some fool backed into my Model S and did not leave a note (please look for a yellow car with a dent at USC). I sent Tesla a suggestion that it would be cool if the car’s camera(s) could record alarm events and Tesla just released that feature as Sentry Mode! That’s how a car should work and all cars will, because Tesla is driving the feature set for the entire industry.
This level of excellence brings us to the return from governmental subsidies for EVs. Growing up in LA when the air was nearly as bad as Beijing’s is today is enough to make me support no emission vehicle incentives. However, I worry about our economy as much as our environment. Subsidizing 200,000 Teslas in order to drive an entire industry forward and move a U.S. brand to the peak of the global car market is the sort of smart industrial policy that our global competitors have been using to beat us in trade for decades. That @$1.5 billion was a far better investment than the $81 billion we put into the GM bailout loan. When I travel abroad Teslas are the cars foreigners say they aspire to. There is no German translation for, “I want a Cadillac.” Teslas are sweeping Audis and Mercedes aside from Europe, creating American manufacturing jobs and helping our trade imbalance. Teslas made up half of the few U.S. cars I counted in Tokyo during a visit last month.
Back home, we have a host of critics bemoaning EV subsidies while cruising down the National Highway System, which was built in the 1950s with 59 Billion Federal tax dollars. Adjusted for inflation that’s a half a $Trillion subsidy to the auto industry (using a curious defense angle). Further, Tesla dominance over every other electric car has created the false impression that the subsidies only benefit them. Ironically, the $10k the government gave me to buy a Volt represented nearly a third of the Chevy’s value, a huge motivator. With my Tesla, the subsidy came to about 10%, not such a significant influence.
Based on my experience as well as the simplicity and quality of the car, I plan to keep my Model S at least 2x as long as any other car. Assuming I drive 150k miles my savings on gas and maintenance scales to $22.5k and my Tesla cost drops to $63,000. If I did sell, studies show the resale value of the Model S exceeds other cars in its class and the Model 3 is probably even stronger. According to a 2018 report by Loup Ventures a 50k Model S has lost just 28% of its value versus 40% for a BMW 7 series. That extra retained value is worth 12% of my $87 pre-tax purchase price, or $10,400. Pushing my Tesla cost down to $52,560. Way cheaper than any car in its class.
Now for the kicker. Keeping the Tesla twice as long also means I won’t buy another car, saving me 50% off the purchase price or $47.5k. That’s about what I’d pay for another car after taxes and all. So, my Tesla will cost just $5,060 if driven for 150,000 miles! Additionally, there is the incalculable value to my family of driving the safest car ever built.
For those who can’t get the tax credit and have to pay for juice, let’s just take out the $10k subsidy and reduce the gas savings by $6,600 ($2,200/50k miles). That puts the cost of a new Model S driven 150k miles at $21,660, which poses the important question “Do you want a Tesla Model S or a Kia Optima?”
14,000 Leagues Under Electric Power: My Tesla Cost Me Almost Nothing