Transportation is the source of 25% of the EU-27 greenhouse gas emissions. Specifically, cars are responsible for around 12% of the EU-27 emissions of carbon. Additionally, emissions from the transport sector have increased continuously since 2014. Therefore, the reduction of emissions from the transport sector is an integral element of the EU climate and energy policy to comply with the Paris Agreement.
The electrification of the transport sector offers the opportunity to utilize the increasing share of renewable energy generation. Thus, scholars believe that electric vehicles, such as battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs), hybrid electric vehicles (HEVs), and fuel cell electric vehicles (FCEVs), have the potential to lower emissions and contribute to the transformation of the mobility sector.
However, the breakthrough of electric vehicles still faces several barriers. Perhaps the most significant barrier appears to be the public's general consensus that electric drivetrains are more expensive than conventional drives. However, the literature suggests that electric vehicles might already be more cost-efficient than comparable conventional drives. Yet, the cost-benefits are mostly non-transparent to consumers as they put too much weight on the high initial investment costs compared to conventional internal combustion engine vehicles (ICEVs) and underestimate the cost savings through lower operating costs. In order to overcome this misjudgment and to help consumers make more profound purchasing decisions, the literature suggests the total cost of ownership (TCO) approach, which includes both investment and operating costs over the ownership period.
This study aims to compare the consumer-oriented TCO for different drivetrains of private transport vehicles in Germany. Although the transportation sector emits 19% of Germany’s greenhouse gases, electric vehicles only account for 17% of the newly registered vehicles in the first half of 2020. As a result, the German government approved an increase in subsidies for the purchase of electric vehicles in June 2020 to promote the attractiveness of more environmentally friendly vehicles. Against that background, this study investigates whether conventional drives still exhibit a financial advantage over electric vehicles. For that purpose, this study compares the TCO of BEVs, PHEVs, HEVs, FCEVs as well as petrol and diesel ICEVs.
Table of Contents
1 Introduction
2 Literature Review
2.1 Drivetrains of Private Transport Vehicles
2.2 Total Cost of Ownership
2.3 One-time Costs
2.3.1 Investment Costs
2.3.2 Battery Replacement Costs
2.3.3 Resale Value
2.4 Annual Operating Costs
2.4.1 Energy Consumption Costs
2.4.2 Inconvenience Costs
2.4.3 Other Operating costs
3 Design of Total Cost of Ownership Analysis
3.1 Model and Data
3.1.1 TCO Model
3.1.2 Vehicle Sample
3.1.3 Driver Profile
3.2 One-time Costs
3.2.1 Investment Costs
3.2.2 Battery Replacement Costs
3.2.3 Resale Value
3.3 Annual Operating Costs
3.3.1 Energy Consumption Costs
3.3.2 Inconvenience Costs
3.3.3 Other Operating Costs
4 Total Cost of Ownership Estimates
4.1 Base Case Scenario
4.2 Sensitivity Analysis
4.2.1 Driver Profile
4.2.2 Investment Costs
4.2.3 Resale Value
4.2.4 Energy Consumption Costs
4.2.5 Inconvenience Costs
4.2.6 Discount Rate
5 Conclusion
Research Objectives and Topics
This thesis examines the financial competitiveness of various vehicle drivetrains in Germany by applying a consumer-oriented Total Cost of Ownership (TCO) model. The study aims to clarify whether electric vehicles—specifically battery electric, plug-in hybrid, hybrid, and fuel cell electric vehicles—offer a genuine cost advantage over traditional petrol and diesel internal combustion engine vehicles, considering both acquisition and long-term operating expenses.
- Comparative TCO analysis of conventional vs. alternative vehicle drivetrains.
- Evaluation of cost components including investment, battery replacement, resale value, and operating expenses.
- Investigation of the impact of government subsidies and fiscal incentives on TCO.
- Sensitivity analysis regarding driver profiles, energy prices, and discount rates to address market uncertainties.
Excerpt from the Book
2.2 Total Cost of Ownership
The TCO is a purchasing tool and a philosophy aimed at understanding the true cost of buying a particular good or service from a particular supplier. Because the TCO is a complex approach, the buyer needs to determine which present and future costs are considered the most important or significant in the acquisition, possession, use, and subsequent disposition of a good or service.
Scholars propose the TCO as an alternative metric that a rational buyer should take into account when deciding which vehicle to acquire. The TCO captures the total discounted costs of the acquisition, operation, and sale of the vehicle. The TCO provides a long-term purchasing orientation and deemphasizes the investment costs. Hence, the TCO approach provides the opportunity to justify higher initial prices based on lower total costs of the vehicle in the long run.
In theory, the TCO approach is not equivalent to the life cycle costing methodology. Instead, life cycle costing represents a subset of TCO activity. TCO is more comprehensive and includes pre-purchase costs. However, most reviewed research designs use the terms interchangeably, as they do not include pre-purchase costs in their TCO calculations.
Summary of Chapters
1 Introduction: This chapter contextualizes the role of transportation in greenhouse gas emissions and introduces the TCO approach as a method for consumers to make more informed purchasing decisions regarding vehicle drivetrains.
2 Literature Review: This chapter defines the various vehicle drivetrains and the theoretical framework of the TCO approach, covering key cost components such as one-time acquisition costs and ongoing operating expenses.
3 Design of Total Cost of Ownership Analysis: This section presents the mathematical TCO model used in the study, specifies the vehicle sample, and defines the assumptions for the driver profile and cost parameters.
4 Total Cost of Ownership Estimates: This chapter calculates and presents the TCO estimates for the base case scenario and performs extensive sensitivity analyses to determine how variations in key parameters influence the economic competitiveness of different vehicles.
5 Conclusion: This chapter summarizes the research findings, highlights the sensitivity of results to subsidies and driver profiles, and provides suggestions for future research.
Keywords
Total Cost of Ownership, TCO, Electric Vehicles, BEV, PHEV, FCEV, Internal Combustion Engine, Investment Costs, Operating Costs, Sensitivity Analysis, Drivetrains, German Automotive Market, Sustainability, Financial Competitiveness, Vehicle Depreciation
Frequently Asked Questions
What is the core purpose of this Master's thesis?
The thesis evaluates whether electric and alternative fuel vehicles are financially competitive compared to conventional petrol and diesel internal combustion engine vehicles in the German private transport market by calculating their Total Cost of Ownership.
What are the central thematic areas covered in this study?
The study covers drivetrain technology specifications, the TCO methodological framework, consumer cost components (investment, energy, maintenance), and the impact of government subsidies on vehicle purchasing decisions.
What is the primary research question addressed?
The research asks whether modern alternative drivetrains (BEVs, PHEVs, HEVs, FCEVs) provide a financial advantage for private vehicle owners over traditional ICE vehicles when considering the entire holding period.
Which scientific methodologies are applied to perform the analysis?
The author uses a consumer-oriented TCO calculation model, incorporating discounted cash flows, probabilistic modeling for daily driving patterns, and a comprehensive sensitivity analysis to test the robustness of the results against market changes.
What is covered in the main section of the document?
The main section details the TCO model design, provides data on vehicle samples (Small, Medium, Executive), establishes realistic driver profiles based on German Mobility Panel data, and presents detailed cost calculations and scenario variations.
Which keywords best characterize this research?
Key terms include TCO (Total Cost of Ownership), Drivetrains, Electric Mobility (BEV, PHEV, FCEV), German transport market, Sensitivity Analysis, and Investment Costs.
How does the study account for the uncertainty of battery degradation?
The study evaluates battery cycle life and replacement costs using mathematical models derived from literature, ensuring that if a battery's capacity falls below 80% during the holding period, the financial impact of replacement is integrated into the TCO.
Why are subsidies considered a critical factor for the executive vehicle segment?
The study reveals that while small EVs often rely on subsidies to be cost-competitive, the executive segment shows specific sensitivities where high list prices often disqualify models from subsidies, fundamentally altering their financial ranking against conventional luxury vehicles.
- Quote paper
- Simon Kröger (Author), 2020, Total Cost of Ownership Comparison for Different Drivetrains of Private Transport Vehicles, Munich, GRIN Verlag, https://www.grin.com/document/993819
