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My Tesla Story - and why a Model S is less expensive than a Honda Odyssey
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brucet999
Active Member
I don't understand NPV calcs, but TCO model works for me
I read your blog and was excited by the NPV result that put a Tesla nearly the same NPT as Honda Odyssey, so I copied the spreadsheet and entered values for the cars I am comparing, namely Lexus ES350 and Lexus ES300h hybrid. The numbers looked pretty good for those too, but the more I looked, the more common sense got in the way of my enthusiasm. Maybe I just don't understand what I am looking at, so can you help me?
If I understand correctly, NPV is a tool meant to produce a present value for an annuity or other fixed return investment at some future date.
By common sense I calculate upfront outlay ($102.2k for a Tesla) ($45.7k for an Odyssey) plus operating costs for 8 years minus residual value yields the true cost of ownership (TCOO). So Tesla's upfront $102,200 + $9,000 maintenance - $30,160 residual = $81,040 TCOO. For Ody. $45,700 + $28,950 - $16,800 = $57,850 TCOO. Tesla therefor costs $23,190 more to own over 8 years. The difference is even greater when residual values are discounted to a PV of about $20k and $11k respectively, yielding a TCOO difference of about $28,000.
Your NPV produces a difference of only $4,848 between the two. Please help me to understand that.
In your model, you discount maintenance costs, which then must assume that price of shop labor rates, replacement parts and materials (antifreeze, oil and waste fluids disposal fees, for instance) will remain constant over 8 years. I would imagine that maintenance costs would increase about the same as inflation, canceling out the discount.
In your model you discount the paper expense of depreciation as if it were an actual additional expenditure of cash and not a measure of devaluation of original outlay. I don't understand.
BTW, given the benefit of another year of actual resale figures, I found Model S depreciation values in SoCal for 2014 to be around 18% and 2013 about 23%, making your conservative assumptions a year ago of 20% and 28% for years 1 and 2 look pretty safe.
THANK YOU! In spite of my doubts of the usefulness of the NPV figures, I must thank you for producing an excellent framework to account for operating costs and residual value, which I used in a modification of your model to convert results to TCO. Relatively high scheduled maintenance and more frequent brake jobs on ICE models greatly narrows the initial outlay gap such that the difference between MS and Lexus ES300h ends up at 5 yr about $12k and at 8yr about $18k (greater depreciation amount even at same depreciation rate makes difference grow each year) The non-hybrid ES 350 differences were only about $8k and $12k. So for an average $2,250 or less per year I can drive a fantastic car instead of a very nice car and make less impact on the environment as well.
When I figured in cost and savings of self-installing a solar array on my house big enough to offset the Tesla's consumption and most of our present electrical usage, and realizing that upon sale of the house (a likely prospect for us in the next several years) we would at least recover the cost of the solar array (probably plus $5k, but I did not add that in), then the Tesla TCOO becomes only about $5k more than the ES300h and $4k less than the ES350 at 8 years. As a bonus, by driving on sun energy, we would conserve 300 to 500 gallons per year of non-renewable energy resources and emit 6,500 to 11,000 lb less CO2 per year.
I read your blog and was excited by the NPV result that put a Tesla nearly the same NPT as Honda Odyssey, so I copied the spreadsheet and entered values for the cars I am comparing, namely Lexus ES350 and Lexus ES300h hybrid. The numbers looked pretty good for those too, but the more I looked, the more common sense got in the way of my enthusiasm. Maybe I just don't understand what I am looking at, so can you help me?
If I understand correctly, NPV is a tool meant to produce a present value for an annuity or other fixed return investment at some future date.
By common sense I calculate upfront outlay ($102.2k for a Tesla) ($45.7k for an Odyssey) plus operating costs for 8 years minus residual value yields the true cost of ownership (TCOO). So Tesla's upfront $102,200 + $9,000 maintenance - $30,160 residual = $81,040 TCOO. For Ody. $45,700 + $28,950 - $16,800 = $57,850 TCOO. Tesla therefor costs $23,190 more to own over 8 years. The difference is even greater when residual values are discounted to a PV of about $20k and $11k respectively, yielding a TCOO difference of about $28,000.
Your NPV produces a difference of only $4,848 between the two. Please help me to understand that.
In your model, you discount maintenance costs, which then must assume that price of shop labor rates, replacement parts and materials (antifreeze, oil and waste fluids disposal fees, for instance) will remain constant over 8 years. I would imagine that maintenance costs would increase about the same as inflation, canceling out the discount.
In your model you discount the paper expense of depreciation as if it were an actual additional expenditure of cash and not a measure of devaluation of original outlay. I don't understand.
BTW, given the benefit of another year of actual resale figures, I found Model S depreciation values in SoCal for 2014 to be around 18% and 2013 about 23%, making your conservative assumptions a year ago of 20% and 28% for years 1 and 2 look pretty safe.
THANK YOU! In spite of my doubts of the usefulness of the NPV figures, I must thank you for producing an excellent framework to account for operating costs and residual value, which I used in a modification of your model to convert results to TCO. Relatively high scheduled maintenance and more frequent brake jobs on ICE models greatly narrows the initial outlay gap such that the difference between MS and Lexus ES300h ends up at 5 yr about $12k and at 8yr about $18k (greater depreciation amount even at same depreciation rate makes difference grow each year) The non-hybrid ES 350 differences were only about $8k and $12k. So for an average $2,250 or less per year I can drive a fantastic car instead of a very nice car and make less impact on the environment as well.
When I figured in cost and savings of self-installing a solar array on my house big enough to offset the Tesla's consumption and most of our present electrical usage, and realizing that upon sale of the house (a likely prospect for us in the next several years) we would at least recover the cost of the solar array (probably plus $5k, but I did not add that in), then the Tesla TCOO becomes only about $5k more than the ES300h and $4k less than the ES350 at 8 years. As a bonus, by driving on sun energy, we would conserve 300 to 500 gallons per year of non-renewable energy resources and emit 6,500 to 11,000 lb less CO2 per year.
chriSharek
Member
This is a great article. I'm a Volt owner currently and my next car will be a MS. What does NPV stand for in your spreadsheet?
it's not only cheaper than a honda odyssey, it's free!! How To Drive A Tesla Model S Electric Car Free For 18 Months
Cyclone
Cyclonic Member ((.oO))
18 month old S85 with 50k+ miles will likely sell for less than $77k and thus, LeonardV's 18 months will no longer be free -- but still totally worth it!
I came across your cost of ownership article and thought it was great. If you are comparing an electric car with an ICE, you should consider adding in value of time to your cost somewhere. If you own a Tesla, time is probably worth a lot to you because of your profession. As we get older, our limited time is worth even more.
I have a P85+ with 17000 miles. I used to drive a gas guzzler Jeep that I'd fill its near empty 24-gallon tank about every 250 miles. Each visit to the gas station must have taken me at least 10 minutes...pressing NO to rewards card, NO to car wash, YES for receipt, swiping credit card, filling up, and waiting for receipt to print.
So, I estimate the time to fill my Jeep costs: 17000 / 250 = 68 fill-ups * 10 minutes = 680 minutes = 11.3 hours. That's a lot of time I've saved with my Tesla, not to mention wasting an hour getting in line for an oil change every 5000 miles; that's 3 hours lost right there. Now supercharging might eat up some time for recharging during road trips. I don't supercharge during my commute. Anyway, this is just a thought. How much time is taken filling up in a Honda Odyssey? How much is your time worth to you?
Here is an interesting article about the cost of filling up:
THE TRUTH ABOUT GAS: Here's How Much Of Your Life Every Year Just Goes To Filling Your Tank - Business Insider
I have a P85+ with 17000 miles. I used to drive a gas guzzler Jeep that I'd fill its near empty 24-gallon tank about every 250 miles. Each visit to the gas station must have taken me at least 10 minutes...pressing NO to rewards card, NO to car wash, YES for receipt, swiping credit card, filling up, and waiting for receipt to print.
So, I estimate the time to fill my Jeep costs: 17000 / 250 = 68 fill-ups * 10 minutes = 680 minutes = 11.3 hours. That's a lot of time I've saved with my Tesla, not to mention wasting an hour getting in line for an oil change every 5000 miles; that's 3 hours lost right there. Now supercharging might eat up some time for recharging during road trips. I don't supercharge during my commute. Anyway, this is just a thought. How much time is taken filling up in a Honda Odyssey? How much is your time worth to you?
Here is an interesting article about the cost of filling up:
THE TRUTH ABOUT GAS: Here's How Much Of Your Life Every Year Just Goes To Filling Your Tank - Business Insider
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BrokerDon
Active Member
Exactly what we did too. SCE TOU-D-B and recharge nightly during Super-off peak (10pm-8am) = 11¢ per kWh.
We also enrolled in SCE Summer Discount Plan, minimized our energy usage, and installed Ecobee thermostats on our 2 central HVAC units. Our SCE power bill runs between $75 to $200 per month for our 3,300 sq. ft. home in coastal Orange County (Newport Coast). including recharging our 2015 MS P85D. We’ve tried to get solar to make financial $en$e but our fragile Spanish tile roof and need to replace our completely full 200A main service panel make our ROI > 15 years... not exciting for a 65 year old guy.
