Beyond the price tag: The importance of total cost of ownership for councils when making EV purchases

As councils continue to prioritise reducing carbon emissions and transitioning towards sustainable practices, the demand for electric vehicles (EVs) continues to rise. Councils are increasingly looking towards transitioning their fleets to EVs. This includes outdoor cleansing and landscaping equipment, where councils discover they can achieve many quick carbon wins by switching to electric.

However, because the initial purchase price of an EV can be higher than its petrol or diesel equivalents, councils are sometimes deterred from making the switch as they may not have the budget for a big capex purchase. This is where considering the total cost of ownership (TCO) comes into play.

What is ‘total cost of ownership’?

TCO refers to the total cost associated with owning and operating a vehicle over its entire life cycle, including purchase, maintenance, fuel, replacement, and disposal costs. It’s an essential factor to consider when making capital purchases, as it allows for a more comprehensive view of the costs associated with the purchase. Some refer to TCO as the whole-of-life cost, life-cycle cost (LCC), or ‘cradle-to-the-grave’ cost.

Why should councils and contractors consider TCO?

For EV purchases, TCO can help councils and contractors make better, more informed decisions about their investment.

While an EV may have a higher initial purchase price than its equivalent combustion-fuelled equipment, it will have lower fuel and maintenance costs, making it a more cost-effective option in the long run. Throw zero emissions into the equation and councils and contractors will win on more than one front. Fuel and traditionally lower-cost combustion-fuelled equipment are both increasing in price. They are likely to have higher maintenance and repair costs, making this choice more expensive in the long term.

By calculating the TCO, councils can determine which option is best for their needs and budget. This is especially important councils must consider the best-value option before making a purchasing decision.

What factors contribute to the TCO of an EV?

Factors include:

• the initial purchase price
• maintenance and repair costs
• charging infrastructure costs
• operating or running costs (e.g. energy consumption)
• cost and frequency of replacing consumable parts (e.g. blades)
• replacement costs
• disposal or recycling costs.

These factors can vary widely between EV models and manufacturers, making it crucial to consider TCO when making EV purchase decisions. The maintenance and parts costs of non-EV equipment should not be directly replicated into the EV equipment calculations because they can differ significantly.

While an electric ride-on mower may have a higher upfront cost than its petrol-powered equivalent, its lower operating and maintenance costs over its lifetime typically results in significant savings for the council. The cost of replacing consumable parts, such as the blades, may be lower for the electric vehicle, further contributing to the lower TCO. With EVs, councils or contractors won’t need to worry about the time and dollar cost of replacing belts and oil, which also leads to machine downtime.

The warranty is another crucial factor to consider before making an EV purchase decision. For instance, if a mower comes with a 5-year battery and machine warranty, like EcoTeq’s Rival does, it could lead to cost savings in the long run.

The following is a breakdown of typical consumption and maintenance costs for diesel-powered vehicles and their EV equivalent.

How to calculate TCO?

There are three commonly used methods for calculating TCO:

1. Straight-line depreciation method: This method calculates TCO by spreading the cost of the asset evenly over its useful life. It assumes that the asset depreciates at a uniform rate throughout its life cycle.
2. Units-of-production method: This method calculates TCO based on the number of units produced or used by the asset. It considers the actual usage of the asset and calculates the cost of ownership based on the number of units produced or used. This method is often used for assets used in manufacturing or production, such as machinery or manufacturing equipment.
3. Service-hours method: This method calculates TCO based on the number of service hours an asset provides. It considers the number of hours an asset is used to provide a service, such as a vehicle or a machine used for manufacturing. The cost of ownership is then calculated based on the number of service hours provided.

These three methods are used most often because they provide a comprehensive view of the costs associated with owning an asset over its entire life cycle. By considering factors such as depreciation, usage, and service hours, these methods can help councils and contractors make sound decisions about investing in and using assets.

How can councils and contractors use TCO for electric outdoor maintenance capital purchases?

To use TCO for electric outdoor maintenance capital purchases, follow these steps:

1. Identify and track TCO for different options: First, identify and track the TCO of different electric outdoor maintenance equipment options. This includes the initial purchase price, maintenance costs, fuel costs, and expected lifespan of the equipment. Consider the costs associated with charging or battery replacement.
2. Compare TCO for different options: Once the TCO for each option has been identified, compare the TCO for different equipment options. This will help in selecting the most cost-effective option that meets all requirements.
3. Incorporate TCO into budget and financial planning: This will ensure that equipment is affordable to purchase and maintain over its expected lifespan.

Ensure like-for-like equipment is compared in terms of quality and performance. For example, there is no comparison between a commercial electric mower and a domestic ride-on mower, even if they have the same deck size.

Features of EcoTeq’s outdoor cleansing and landscaping equipment  performance

Here are some details about EcoTeq’s range that can help calculate the TCO:

• Commercial models can run continuously for 8 hours or longer on a single charge. This means that an operator can complete a full shift without having to stop to recharge.
• EcoTeq offers optional upgrades for even longer battery life or faster recharges.
• Mowers can come with an optional solar canopy for longer battery life.
• The EcoSweep has an optional interchangeable battery pack to allow operators to extend operational time without recharging.

When considering the disposal costs, note that our lithium batteries typically outlast the equipment. They can be upcycled, refurbished or resold to have a second useful life.

By considering TCO and incorporating sustainability initiatives into purchasing decisions, councils can optimise their budgets while reducing their environmental impact.

Why councils should consider TCO for capital purchase decision making

TCO is a critical factor that local councils and contractors need to consider when making EV purchases. TCO provides a holistic view of the costs associated with owning and operating a vehicle or machine, beyond its purchase price. It helps assess the long-term financial and environmental benefits of transitioning to electric.

As the transition to sustainable practices continues, TCO will become an increasingly essential consideration in the decision-making process, helping to accelerate the transition to a greener, more sustainable future.

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