Rational Actors & EVs

Richard Thaler, a scholar from the University of Chicago and winner of the Nobel Prize in Economics, developed what is called "behavioral economics."

Neoclassical economics holds that people are rational actors and consequently make decisions based on what they "should" do. They collect information, analyze it, and then make the choice.

You can check your own behavior when it comes to decision making and know that that just isn’t what happens. To be sure, some people when making decisions, particularly big ones, create an Excel spreadsheet and weigh the pluses and minuses. For most people it is more likely a back-of-the-napkin calculation, and even then the napkin is used to wipe away the crumbs from the cookie that they really shouldn’t have eaten.

Electric vehicle (EV) purchases have, until very recently (and not by much, all things considered) been largely made by the so-called "early adopters," for whom the fear of missing out outweighs any concern regarding risks that may have a financial impact on them.

You can't put a price on cool.

But OEMs need the early majority to start buying EVs if they are going to gain any traction in a market that is now becoming increasingly slippery, with tax credits set to disappear soon.

While those people may be more risk-averse than early adopters, this does not take away the behaviors that have little to do with the mathematics of the transaction.

Atlas Public Policy, an organization that provides data-driven policy work with a particular focus on electric vehicles, released a study last month that compares the total cost of ownership (TCO) of an EV and a comparable gasoline-powered vehicle.

The findings are not at all surprising:

Our findings show that in all but one case, EVs today deliver savings to owners compared to a similar gasoline powered vehicle over a seven-year period.

(Because you are now wondering what the exception is and consequently will be distracted from the rest unless you find out, it is a 2025 Ford F-150 XLT versus a 2024 Ford F-150 Lightning. The Lightning owner will have, Atlas calculated, a net loss of $2,458.)

The approach they take is this:

We calculated all expenses incurred by a household to own the vehicle, including purchase price (minus any federal or manufacturer incentives), resale value after seven years, fuel or electricity costs, maintenance and repairs, insurance, as well as taxes and fees.

So it found that someone who buys a 2025 Nissan Leaf FWD rather than a 2025 Toyota Corolla will realize a $2,098 net savings. And the purchaser of a 2025 Chevy Equinox EV FWD will really save compared with the owner of a gasoline powered Equinox: a $9,463 net savings.

Wowza!, right?

Well, perhaps not.

Which brings me to behavioral economics.

It is typically thought that whether you're buying a vehicle or a machine tool to build vehicles, total cost of ownership is the way to think. What's it going to cost in the long run?

But most people don’t think about the long run. They think about now and the near-future.

In the case of the Leaf versus the Corolla, the Atlas numbers price the Leaf at $28,140 and the Corolla at $22,235. That is a difference of $5,905.

For the EV Equinox the price is $33,600 and the ICE Equinox $28,600. A $5,000 difference.

Although there are expected to be those TCO savings over a seven-year period, I would argue that when buying a vehicle, people want to know whether they can afford it now, not over a period between now and 2032.

Monthly loan payments start immediately. Then there is the issue of insurance. Electric vehicles are generally more expensive to insure than ICE vehicles, and, once again, the insurance company, despite cute and clever TV ads, wants insurance premiums paid, right away.

But wait," you think. "EVs are cheaper to charge than gas vehicles are to fill, so that's an immediate boost to your wallet.

Yes, and according to Electric Vehicle Nation, which, as its name implies, is very much about EVs, "Based on current energy costs and electric vehicle efficiencies versus gas-powered vehicle efficiencies, charging an EV is about 3 times cheaper than filling up the gas tank on a comparably-sized car."

So even for the non-rational actor, that is obvious.

But here's a kicker from Electric Vehicle Nation:

It is important to note that these larger scale cost savings are mostly only achievable if you charge your EV at home and pay residential rates for electricity.

And it goes on to note:

For road trips, or any situation where you need to charge quickly, using public Level 3 DC Fast Chargers will be roughly equivalent to the cost of filling a gas tank.

So for people who live in apartments or don't own their homes, or who are on a road trip, it's a wash if the DC fast charger is used. Another factor that needs to be taken into account is the cost of time: a fuel tank can be filled in five minutes. A battery takes many multiples of that. (Yes, charging stations are being opened with all of the amenities that one could desire, but doesn't the charm wear off after a while and there becomes a sense that you just want to get the juice and get out of there?)

And let's face it: even people who own their homes may find that installing an electric charger in their homes is not as inexpensive as the price of the boxes might indicate: good luck if there is a need for electrical upgrades or a long distance between the panel and the placement of the charger.

Over seven years, there may be savings, but the odds are that the electrician is going to provide "affordable, competitive pricing" but not years between installation and invoice.

According to the most recentCox AutomotiveEV Market Monitor," in June "the price gap between EVs and ICE+ [including hybrids] vehicles narrowed to $8,785, down from $9,260 the previous month. EV incentives rose for the third consecutive month, reaching a record 14.8% of ATP, or $8,451 - more than twice the incentive level offered on ICE+ vehicles.

That $8,785 is not a trivial number. And recognize that that includes the adjustment made to include incentives, which are likely to disappear as EV supply decreases due to the rush to get an EV before September 30.

(And let's not exaggerate the size of said rush: according to the latest) Kelley Blue BookEV Sales Report, in the first half of 2025, 607,082 EVs were sold in the U.S. A couple of ways to think about that number. One is that in the first half, Chevrolet sold, subtracting all of its EVs, 874,247 vehicles. That's one brand versus the 25 listed by KBB. And here's this: of the 607,082 EVs, 271,635 were sold by Tesla. Remove Tesla and there are 24 brands responsible for the sale of 335,447 vehicles. And to put that into perspective, subtracting the 13,029 Lightnings sold, in the first half Ford sold 399,819 F Series trucks.

But let's grant that the math adds up, that the TCO is in favor of electric vehicles. What is thecompellingThe reason for someone to agree to pay several thousand dollars more today for an electric vehicle? That's what the ordinary shopper needs to know now.

Long-time automotive journalist Gary Vasilash is co-host of "Autoline After Hours" and is a juror for the North American Car, Truck & Utility of the Year. He is also a contributor to Wards Auto and a juror for its 10 Best Interiors UX and 10 Best Engines & Propulsion Systems awards. He has written for a number of outlets, ranging from Composites Technology to Car and Driver.

TheTTAC Creators Seriestells stories and amplifies creators from all corners of the car world, including culture, dealerships, collections, modified builds and more.

Check out Gary's essay hereand his Substack here.

[Image: Chevrolet]

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