Global Energy Crisis Increases Electric Vehicle Expenditure

Automotive

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With motorists eyeing greener transport options, electric vehicles are gaining ground in Hungary. Yet, driving a pure EV has gotten considerably more expensive as the unfolding energy crisis has pumped up electricity prices. The Budapest Business Journal looks into price changes in the market.

The pool of vehicles with green license plates, available since October 2015 for plug-in hybrids and EVs and which give owners some benefits such as free parking in the capital, stood at 65,187 in Hungary in January 2022, according to data published by the Ministry of Interior Deputy State Secretariat for Data Registers. Full EVs made up 35,761 of those.

The number of these vehicles, more environmentally friendly than their internal combustion engine (ICE) peers, form a thin slice of the overall transportation pie for now. At the end of 2021, there were a total of 4,885,598 vehicles registered in Hungary, according to the latest figures from Hungary’s Central Statistical Office (KSH).

Electric rides might be considered a fad among early adopters, but their popularity is growing in a market characterized by older autos. The average age of cars in Hungary was 14.2 years in 2020, according to the latest figures from the European Automobile Manufacturers’ Association (ACEA).

The youngest auto fleet can be found just next door in Austria, with an average age of 8.5 years, while the oldest rides are in Lithuania at 17 years. Hungary scores over the past two years for which data is available are below the European Union average of 11.8 years. There is room for improvement.

The European Union is applying pressure across the bloc; new ICE vehicles cannot be sold after 2035. Also, the willingness among Hungarian drivers to consider an EV is rising. Recent data by Generali Hungary, the local arm of the Italian insurer, found that one in six Hungarians would buy an electric car if they could. That is not a decision vehicle owners should take lightly, though.

While people are increasingly environmentally conscious and willing to invest in a more sustainable future, going green with cars is a costlier alternative right from the initial investment. While a well-equipped auto with an ICE engine is available for around HUF 6 million-8 mln (in a country where the minimum wage, according to KSH, was HUF 232,000 in January 2023), the electric version of the same vehicle hovers around HUF 10 mln-11 mln. That would take 43 minimum wage monthly installments to pay off instead of 25.

Complex Calculations

Is working nearly twice as long to pay for an EV worth it? Would the initial heavier investment come back in the long run? The answer to those questions is complex for two reasons.

Firstly, electricity prices have recently risen sharply due to the energy crisis caused by the continent’s traditional dependence on Russian gas and the ongoing war in Ukraine. When prices first started taking off, the Hungarian government initially capped them. But recently, it identified 210 kWh as the monthly average for household electricity consumption. Anything below the cutoff line is subsidized, while the rest must be purchased at market value, which obviously makes electricity significantly more expensive.

Calculating with a typical e-car’s energy demand of 17 kWh per 100 km, the subsidized price for the required energy is around HUF 627. Above the threshold, the same consumption costs around HUF 4,290, an almost seven-fold difference. This puts electric cars in the same garage as ICE cars when considering energy cost per mileage. 

At the beginning of January, the market price of fuel rose again. Gasoline costs around HUF 631 per liter, while diesel is around HUF 693. Tallying with an average consumption of seven liters per 100 km (which may creep beyond 10 liters for older autos or those with more powerful engines), the cost comes between HUF 4,417 and HUF 4,851, respectively, per 100 km.

The lucky can save, for now. Hungary is equipped with public charging points, many offering free charging. But these are usually occupied. The public bays that charge the users for electricity have seen prices increase almost three-fold since January 2, 2023, according to Generali.

Beyond the cost of getting around, EV maintenance costs are higher for a handful of reasons. As with all innovations, electric cars are more challenging to service, which means the engineering expertise to handle such work is relatively scarce on the market, hence costlier.

Costly Repairs

Additionally, spare parts are more expensive, another characteristic of new technology, which is further exacerbated by sputtering supply chains in the aftermath of COVID-19 and since the war in Ukraine. The average expenditure to cover damage repairs on an EV can be up to HUF 200,000 more than on a non-green model, according to the Hungarian Association of Insurance Companies (Mabisz).

According to Generali’s research conducted early last year, Hungarians viewed electric cars as an attractive alternative before the energy crisis snowballed. Some 16% of the respondents in the insurer’s survey said they would be willing to switch to a pure EV or plug-in (rechargeable) hybrid vehicle if they could.

A year ago, most of the respondents, some 57%, said they were motivated by environmental concerns, the rising cost of conventional fuel (53%), and innovative technology (45%) to consider the switch. Back then, however, they were put off by the expected repair costs (52%) and the price of spare parts (46%). Today, they can add electricity prices to the pool of concerns, too.

József Szikszai, head of claims at Generali Insurance, points out that with EV maintenance costs, people must consider factors that make servicing cheaper. An electric auto needs no timing belt, clutch, gearbox, or engine oil change. Szikszai adds that the brakes wear out slower. Yet, Szikszai also notes that the labor required to service electric cars is more expensive.

“The length of the checklist for servicing electric cars is shorter than a conventional car, but those items come at a higher price,” he says.

Figures suggest that going green with an EV is not more economical right now. Sooner rather than later, people will not have a choice, though. One can only hope Moore’s law (that the number of transistors per silicon chip doubles every year, according to britannica.com) will make both electric cars and electricity more affordable, and the energy required to charge our autos greener.

This article was first published in the Budapest Business Journal print issue of March 10, 2023.

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