The Impact of Uncertainty on the Economics of Electric vs. Gas Vehicles
Open Access
- Author:
- Pandey, Naya
- Area of Honors:
- Energy, Business, and Finance
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Seth Adam Blumsack, Thesis Supervisor
Seth Adam Blumsack, Thesis Honors Advisor
Gregory Robert Pierce, Faculty Reader - Keywords:
- Electric vehicle
Monte Carlo
Gasoline
NPV
Sensitivity Analysis
environmental
threshold analysis - Abstract:
- Electric vehicle usage has been increasing for several years now due to the environmental attractiveness compared to conventional gasoline cars. There has been lots of research conducted to show that electric vehicles are better for the environment over their entire lifecycle. However, the big question of cost still remains. Electric vehicles typically have a higher purchase price than equivalent regular cars but other benefits, such as lower fuel cost and maintenance, that conventional cars do not. I conduct a net present value (NPV) analysis and build a cost model that considers multiple factors. To build on this base model, I perform a Monte Carlo simulation using historical gas price data to generate NPV samples for conventional cars that account for price volatility. Then, based on the resulting distribution, I find the threshold value where 95% of the gasoline car samples are more expensive. By comparing this to the NPV of electric vehicles and holding other variables constant, I determine what cost variables can impact the breakeven point between the two types of cars. To model the uncertainty of future prices, I also conduct sensitivity analyses to examine how the economics respond to changes in gas price volatility and EV upfront cost, and the resulting difference in NPVs. I find that in general, the electric vehicle is more favorable with higher gas price volatility and the gasoline car is more favorable with higher EV upfront costs.