Driving a Tesla: Consumer economics edition

Electric car go vroom

Photo by Tesla Fans Schweiz on Unsplash

Several weeks ago I was in California, and while booking my rental car I noticed something that seemed impossible. I could book a regular sedan for $210, or a Tesla Model 3 for $250. Now normally I go with the cheapest option for rental cars, but this was hard to resist. I've only been in a Tesla once (the president of my university has a Model S), so I wasn't going to pass up driving one for a weekend. I'm sure many of my takes have been made by others, but I want to contribute my two cents on what it's like to drive a Tesla (with an economic slant of course).

First, it's fast. Unbelievably fast. Tesla puts the Model 3 0-60mph at 3.1 seconds. Granted, that is with all the bells and whistles but is absurdly quick for a reasonably priced sedan. Counterintuitively, I think this acceleration time has given Tesla a lot of grief from the car community. Back in the day, if you wanted to have a very fast car, you had to either spend a lot of time customizing it, a lot of money buying a premium vehicle, or both. For those into cars, Tesla presented a new challenge to this long-held exclusivity. Now for $50,000 a driver can buy a new car that would leave much pricier models in the dust. 

Second, it's quiet. It's strange to floor the gas pedal, be glued to the back of the seat, and not hear the roar of an engine. The motor inside the Tesla is not silent but puts out a totally different noise than a car with an internal combustion engine. Most of the noise one hears comes from the wind hitting the car, not the car itself. 

So economically, is a Tesla worth it? For an individual user, that's going to come down to a few variables. 

First, what are gas and electricity prices in your area? I paid about $25 to go 220 miles, which agrees with this website that states 250 miles is equivalent to $20-25 at a Tesla charging station, but that California would be more expensive. Gas prices are roughly $5.00/gallon in California currently, so that means driving my Tesla was equivalent to a car that gets 44 miles per gallon (mpg). So driving the Tesla was roughly equivalent to driving a new hybrid car. 

What about those who live in a more typical state? Well assuming that $23 is enough to travel 250 miles on a charge, and using the current national gas price average of $3.70 a gallon, then a Tesla is equivalent to driving a car that gets 68 mpg, or better than a hybrid. Put differently, driving 100 miles in a car that gets a 2021-new-car average of 35 mpg would cost $10.57, while driving a Tesla 100 miles would cost $9.20, a difference of 15%. So there are moderate savings to be had. 

One interesting thing I noticed is that the price of charging a Tesla varies significantly by time of day; charging at 6pm cost three times as much as at 11pm. So additional savings are available to those that can plan around peak times. Of course, some Tesla owners can charge their cars at home, which saves about 33% off the Tesla charger rate. If that's the case, then the savings on gas will be more significant. Then there are even apartment complexes that offer free electric car charging.

As any economist knows, time is also money. This is one of the clear downsides of renting a Tesla. Just like a typical rental car needs to be returned filled with gas, my Tesla needed to be returned with an 80% charge. I think 80% was chosen because charging the Tesla above 80% takes significantly longer. When I picked up the car it was at about 80%. This is how I wound up outside of a closed Best Buy (they still exist?) at 1am for 35 minutes waiting for the Tesla to charge. One nice feature, however, is that while the Tesla was charging I input the address of the airport, and the console told me what percent charge the car would have upon arrival in real time. Thus, when the car said I could get to the airport with an 82% charge, I unplugged and headed out. 

Most Tesla users aren't driving to an airport with mandatory minimum charge, but the time cost is still real. Driving a Tesla means planning charge stops. I'm sure after owning an electric car for a while users adapt and plan ahead. Smart phones have definitely made this more enjoyable. But there is a learning curve, and regardless, traditional car owners don't have to plan ahead - they can just fill up their cars in a manner of minutes. 

Finally, from an environmental perspective, it is important to note that a Tesla is not really a "zero emission" vehicle. Similar to the electric snowmobiles I discussed here, driving an electric vehicle just means the emissions are elsewhere. So an electric car is only zero emissions in the sense that no emissions come out of the vehicle itself.  

How environmentally friendly an electric car is depends on how environmentally friendly the electricity in that area is. In 2013, driving a hybrid was more environmentally friendly than driving an electric car in 40 states. Today, however, the electricity grid has moved away from coal, so an electric car is now better than a hybrid in most states. The grid will continue to move away from coal in the coming years, so electric should be firmly the way to go. 

And trust me, the acceleration is awesome.