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Energy crisis means petrol and diesel cars to remain cheaper than electric for years

By Rachel Millard

PETROL and diesel cars are set to remain cheaper to own than electric vehicles until well into the second half of this decade because of soaring electricity prices.

High electricity costs mean the “tipping point” for when electric cars become cheaper than petrol or diesel will now not be reached until 2026, according to analysts at EY. Their previous forecast was 2023-24.

“Higher energy costs are offsetting the reduction in vehicle [costs],” says Maria Bengtsson, partner and UK electric car lead at EY. “So the tipping point has moved further out and we are looking tentatively at 2026.”

The slipping threshold risks setting back the Government’s ambition to phase out fossil fuel cars as part of netzero targets. The sale of petrol and diesel cars is to be banned by 2030, potentially creating problems for drivers if the tipping point for value continues to be pushed back.

Ms Bengtsson said there is scope for drivers to cut costs by seeking out better deals or changing their charging habits. The range in cost for charging is much bigger than the range of fuel rates for petrol and diesel cars, and can add a large amount to the cost of running a battery-powered vehicle.

“It’s really important as a consumer that you consider your charging options and make sure you get the best rates,” Ms Bengtsson said. “If you do, that tipping point hasn’t really changed.” Drivers typically try to charge at home where electricity is cheapest. Charging points on the street, at work or on the motorway can be far pricier.

EY looked at the cost of running an EV based on typical charging habits and predicted electricity prices, including the unit rates for the next two years set by the Government under its “energy price guarantee”. It also looked the car cost of the car, registration tax, insurance and repair costs. Its analysis covers three years of ownership on a Personal Contract Purchase finance plan.

Currently, EVS are more expensive to buy than petrol and diesel. Ms Bengtsson estimates that the gap between the costs of owning an EV and a petrol car will narrow to single digit percentage points by 2025, before closing in 2026.

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