The Price of New Technology

New technology is expensive, we're all accustomed to that. High development costs, low production volumes and rapid evolutionary cycles mean that the first generations of now technologies to reach the market are going to be costly and suffer high depreciation - they are for early adopters.

A particular new technology that has captured my interest is Electric Cars, in fact I am so interested that I own an electric car company, e-Go.  The silence and smoothness of electric cars make the best petrol-engined luxury cars seem crude and primitive, so despite the restrictions of this emerging technology (range and cost) it is very attractive.

I've been running an electric car for a year, and considered the economics carefully, so I have a head start on most pundits. Ordinary motor retailers won't start selling them until next year (2011), but as that time approaches the commentators are starting to punt their opinions.

The BBC has published an article warning that "Electric cars 'may be costlier than petrol vehicles'". Well whoopee! Yes, a £29,000 electric car may well seem to be more expensive than a £10,000 petrol car - but are the two comparable? What happens if we consider the electric Citroen C1 ev'ie sold by my company e-Go, with similar capabilities and of similar size to the Mitsubishi?

Comparative costs of petrol v electric cars.
	Fiat 500 Lounge 1.2 petrol	Mitsubishi i-miev electric car	E-Go Citroen C1 electric car
SOURCE: MITSUBISHI. OVER THREE YEARS, 12,000 MILES A YEAR. ELECTRICITY BASED ON DOMESTIC CHARGES.
Purchase price	£10,610	£28,990	£19,860
Registration	£55	£55	£55
Road tax	£60	£0	£0
Fuel	£3,280	£432	£432
Servicing	£533	£300	£300
Depreciation	£5,411	£14,785	£9,731
Minus government subsidy		-£5,000	-£5000
Total running costs	£9,339	£10,572	£5248
London congestion charge	£5,088	£0	£0
Costs including congestion charge	£14,427	£10,572	£5,248

 

Oh dear, that somewhat squashes the story doesn't it? Working on the same depreciation rate as given for the Fiat and the Mitsubishi (51% over 3 years), with the same other running costs as for the Mitsubishi (which will be about right, the C1 fuel is c. 1p per mile), the £20,000 electric car looks c. £4,000 cheaper than the £10,000 petrol car, albeit with the benefit of £5,000 subsidy. Over four, or five years, or longer, the advantage of the electric car is much greater, in fact it gets better the longer you keep it. Over 10 years the petrol car is going to look very expensive by comparison, and we expect motor cars to last rather longer than 10 years - 20 years is nearer reality.

New technology is expensive. It usually brings benefits that would justify the additional expense or we technologists wouldn't bother making it - contrary to popular opinion most of us are not ignorant of business or hopeless optimists, if we were the world would have a lot less technology.

As the figures show (I expect the BBC reporter would be mortified to have his story destroyed), new technology may be more expensive to buy, but it is often cheaper to own; Total Cost of Ownership (TCO) is an economic measure invented by the technology industry to reflect this.

Irrespective of financial costs, the reality remains, electric cars are quieter, smoother, more energy efficient and less polluting than petrol cars - benefits which the article doesn't even attempt to value. Just considering the price of new technologies is often unwise. It is very difficult to compare the value of apples vs. bananas.

I'm very disappointed that the BBC bothered to run this "story", it was pointless, meaningless rubbish, the headline might just as well have been

"Electric Cars will save you £,000's"

and we would be none the wiser. The point of new technology is rarely to save money, most new technology is developed to improve our lives, make things easier, cleaner, safer, quicker etc. The electric car fits the bill admirably, it brings several improvements to the personal transport sector. The price, like the BBC's "story", is not particularly relevant.