When Does Electrifying Shared Mobility Make Economic Sense?
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WORKING PAPER 2019-01 When does electrifying shared mobility make economic sense? Authors: Nikita Pavlenko, Peter Slowik, Nic Lutsey Date: January 2019 Keywords: electric vehicle; ride-hailing; total cost of operation; payback period Introduction The use of shared and electric vehicles analysis, we also assess the importance together offers a promising opportu- of driver access to home charging on Over the past several years, the nity to accelerate the benefits of each. electric vehicle operating costs. We reach and use of shared vehicles has Given the high annual miles traveled track the shift in per-mile operating expanded significantly throughout the of vehicles used in shared fleets, TNC costs and the associated payback United States, particularly in large met- drivers have an opportunity for greater period for BEVs relative to conven- ropolitan areas. Examples of shared annual fuel savings from hybrid and tional and hybrid vehicles under a vehicle fleet applications include taxis, battery-electric vehicles (BEVs) than variety of use cases. carsharing, and ride-hailing. Use of private drivers. This, in turn, is likely to ride-hailing fleets, often referred to mean lower per-mile operating costs, as transportation network companies and shorter payback periods, depend- Methodology (TNCs), is especially on the rise. ing on the exact vehicle and energy This study develops a TCO approach to TNC fleets account for a major prices. Although TNC vehicles are con- evaluate the relative costs of purchas- share of trips in major cities—and nected with many broader questions ing and operating vehicles for TNC, this sector is pro-jected to both related to congestion and transit use, taxi, and carsharing applications. We intensify and expand its geographic their electrification offers an oppor- evaluate costs over a five-year owner- scope (Sperling, Brown, & tunity to eliminate TNC vehicles’ local ship period, consistent with typical D’Agostino, 2018; Transportation emissions. Excitement about such con- ownership duration of both Kelley Research Board, 2018). vergence opportunities has led to the Blue Book and Edmunds TCO assess- policy investigation into the viability ments. The costs incorporated in the Largely a separate trend, the of new regulations to increase zero- TCO analysis include upfront vehicle deploy-ment of electric vehicles emission vehicle adoption in fleets cost and taxes, discounted annual has accel-erated in many of the (California Air Resources Board, 2018). energy costs (i.e., electricity charging same urban areas experiencing or gasoline fueling), and maintenance growth in shared mobility. The This report assesses the timing of cost- costs. We apply a 5% discount rate on increased adoption of electric effectively electrifying shared mobility future expenses beyond the purchase vehicles results from the con-fluence fleets in U.S. cities, with a focus on year. We also incorporate an estima- of local level policies, financial ride-hailing. We develop a total cost tion of the opportunity cost of public incentives, charging of operation (TCO) metric for conven- charging for electric vehicles in ride- infrastructure, and awareness tional, hybrid, and electric vehicles hailing operations. campaigns (Slowik & Lutsey, in eight U.S. cities. We incorporate 2018). Improvements in battery regional variation in incentives, taxes, The vehicle types assessed in this technology have continued to and energy costs and apply vehicle study include a reference conventional decrease the price of electric technology improvements to assess vehicle, a reference hybrid vehicle, vehicles and increase their the changing purchase and operat- and three reference BEVs (150-mile, driving range. However, electric ing costs through 2025. Within the 200-mile, and 250-mile electric range), vehicles remain several thousand dollars more expen-sive than their conventional counter-parts in 2018. © INTERNATIONAL COUNCIL ON CLEAN TRANSPORTATION, 2019 WWW.THEICCT.ORG WHEN DOES ELECTRIFYING SHARED MOBILITY MAKE ECONOMIC SENSE? each with separate cost and effi- in high-annual-mileage fleets. Fuel cell our analysis includes efficiency ciency specifications. We assess the vehicles are in a nascent stage and face improvements over time for all vehicle shifting upfront and operating costs greater barriers with model availabil- types, including reducing test-cycle of BEVs, relative to conventional and ity, refueling infrastructure, and higher and real-world per-mile CO2 and fuel hybrid vehicles, from 2018 to 2025. upfront costs (see, e.g., Isenstadt & consumption by 3% per year for con- This allows us to estimate the payback Lutsey, 2017). Beyond the informa- ventional vehicles, and 1% per year for period—the number of years of use tion in this section, we include further hybrid and electric vehicles, through required to offset the difference in details in tables in the appendix. 2025. Taking into account those upfront costs—over time, factoring annual efficiency improvements, we in regional variation, shifts in energy Battery costs are expected to decrease estimate that the fuel economy of significantly from 2018 through 2025, costs, and technological improvement. conventional and hybrid vehicles will largely due to economies of scale from Applicable near-term state purchasing improve from approximately 30 and higher-volume battery manufactur- incentives are included but generally 53 miles per gallon in 2018, respec- ing. We base our battery cost reduc- are phased out around 2019–2021 and tively, to approximately 37 and 57 tions on the best available bottom- are excluded for 2022–2025. miles per gallon by 2025. up material and production battery manufacturing studies, vehicle engi- VEHICLE SPECIFICATIONS neering teardown analysis, and direct SHARED APPLICATIONS Upfront purchase costs are one of automaker statements about battery To assess the use-phase costs incurred the largest factors in the TCO of each costs (Ahmed, Nelson, Susarla, & Dees, by vehicle use, this analysis highlights vehicle. In 2018, BEV purchase costs 2018; Anderman, 2016; Anderman, four different shared applications 2018; Berckmans et al., 2017; Davies, are typically a few thousand dollars to assess the relationship between C., 2017; Lienert & White, 2017; UBS, more than comparable hybrid vehicles, vehicle use, TCO, and payback period. 2017). Based on this information, we which in turn are typically a few The daily driving distances for ride- assume per-kilowatt-hour battery pack thousand dollars more than compara- hailing drivers are inferred from costs decline at a compounded 5.5% ble gasoline models. The largest deter- Uber’s 2015 driver roadmap and an per year from $205 in 2017 to $130 in minant of electric vehicle purchase assumption of 20 miles driven per 2025. Also, based on UBS (2017), we prices relative to conventional vehicles hour of work, split out across full- assume non-battery electric vehicle is the cost of battery packs, which, time drivers (40 hours per week) and components (e.g., motor, power elec- based on an industry survey, were part-time drivers (18 hours per week) tronics) will decrease by 21% from 2017 approximately $205 per kilowatt hour (Benenson Strategy Group, 2015). to 2025. (kWh) in 2017, down from $1,000 in Maven Gig drivers log an average of 2010 (UBS, 2017; Chediak, 2018). Our For conventional gasoline vehicles, approximately 135 miles per day, with reference vehicle is a car with utility we assume additional technology approximately 10% of drivers going and size specifications that approxi- costs to comply with efficiency stan- beyond the vehicle’s range on a given mately match models like the Nissan dards. Between 2018 and 2025, the day. Taxi services, which often operate Sentra, Toyota Corolla, Chevrolet upfront purchase costs of conven- fleets with drivers sharing multiple Cruze, and Toyota Prius. For BEVs, our tional gasoline models are assumed to vehicles over several daily shifts, fre- utility dimensions roughly match the increase by 0.5% per year, meaning the quently have even higher daily driving Nissan Leaf and Chevrolet Bolt, but we 2018 reference conventional vehicle distances (Metro Transportation consider varying electric battery pack sees an increase in price from $19,000 Denver, 2018; New York City Taxi & size and electric range, as discussed to $19,700 due to its additional effi- Limousine Commission, 2014, 2016). further below. We do not assess ciency technology, based on infor- Carsharing fleets tend to be used for plug-in hybrid electric vehicles or fuel- mation from the U.S. Environmental short, intra-urban trips; data for this cell electric vehicles here. Compared Protection Agency (EPA, 2016) and assumption were taken from car2go to BEVs, plug-in hybrids are chal- Lutsey et al. (2017). For hybrid costs, in five major North American cities lenged by relatively high fueling and we assume a decrease in costs from (Martin & Shaheen, 2016). We rec- maintenance costs, and higher upfront $23,000 in 2018 to $22,000 in 2025 ognize there is broad variation and costs when battery costs drop in or approximately 0.6% per year, uncertainty in these applications, future years, and they often operate based on EPA (2016) and German and we focus on average applica- similar to non-plug-in hybrid models (2015). Based on the same sources, tions because we are more interested 2 INTERNATIONAL COUNCIL ON CLEAN TRANSPORTATION WORKING PAPER 2019-01 WHEN DOES ELECTRIFYING SHARED MOBILITY MAKE ECONOMIC SENSE? in the broader overall implications Table 1. Summary of assumed average driving patterns for selected shared applications. than seeking out the implications for Private Ride-hailing Ride-hailing early-adopting drivers and fleets with vehicle driver driver higher annual travel activity. owner (full-time) (part-time) Carsharing Taxi driver Annual The four shared applications, along driving 15,000 40,000 18,000 8,000 70,000 with comparable approximate (miles) numbers for private vehicle owner- Days driving 365 280 150 320 280 ship as a reference, are presented in per year Table 1. The table shows the annual Daily miles 41 143 120 25 250 number of miles traveled for each of the shared applications, along with the Table 2.