Tesla Gas Savings: How to Extend Life of Tesla?
Bought a new Tesla? It probably cost you more than the big bold number on the website, thanks to a “gas savings” discount of up to $5,500 that Tesla applies to the actual MSRP of the car before showing you the price.
This hypothetical savings, which should flow into your pocketbook over the entire life of the vehicle, comes from filling your car with cheaper electricity from your home or local supercharger rather than with expensive gasoline at the pump. That means you must wait to feel the effect on your wallet, and makes all Tesla models a greater financial burden than advertised.
However, while the US still allows this marketing tactic to continue today, regulators in Germany told Tesla that it must stop the practice in 2019, citing it as “misleading” the consumer. Are they right? Is this return on investment likely for most Americans, or should you be wary of promised savings that you might never actually see down the road?
We decided to take a closer look at Tesla’s claims state by state, and it turns out you could save a bit more, or a lot more, depending on where you live.
Looking at Tesla’s marketing
Tesla only estimates a single gas savings figure for each model on their website as of today: $4,300 for the Model 3 and Model Y, $5,300 for the Model X, and $5,500 for the Model S. They arrive at these numbers by assuming you would drive the car 10,000 miles per year for six years, and comparing the costs required to charge the battery over this time period with filling up a comparable BMW on premium gasoline.
Tesla’s estimated savings are also much higher on the Model S and Model X, despite the Model 3 and Model Y having significantly higher fuel efficiency in terms of miles/kWh. This is likely because the higher-end models are again being offered with free unlimited supercharging, despite the perk being downgraded and canceled before, and Musk stating previously that it was “not really sustainable at volume production.” How much you take advantage of that free electricity is entirely up to your driving and charging habits, so there is already a little reason to be cautious on the electric side of the equation.
Let’s take a look at the rest of the variables, on both the gas and electric sides, to get a better picture of the savings you can count on.
Comparing Electric and Gas-powered Cars
It is difficult to perfectly compare internal combustion engines and electric motors. There are drastic performance differences inherent to these two technologies. However, for this comparison, a BMW was selected as a comparable gas-powered manufacturer.
BMW and Tesla are relatively similar in terms of luxury and price, and compete for much of the same cross-section of middle to upper class American consumers. Many driveways have seen both emblems on display, whether it is one after the other, or both at the same time. You can take a glance below to see the model information we use in this article and in our algorithm, if interested.
Contrasting Fuel Prices
Now that we know how many miles each car gets on a single unit of its respective fuel, we need to know how much a kilowatt-hour of electricity and a gallon of gas cost you where you live. This is where Tesla’s single savings number for all of America is actually quite deceiving, as electricity and gasoline vary widely in price depending on where you call home.
According to AAA, Arkansas has the cheapest premium gas in the nation at around $3.40 per gallon, while Hawaii pays almost one and a half times that amount. The average cost is $3.89, which is low and continuing to decline when compared to historical national averages due to the ongoing oil price war between OPEC and Russia. If gasoline prices rebound, our savings estimates would see a considerable bump in the future.
On the other side, Hawaii also pays the most for residential electricity at around 43 cents per kWh, while several states share the honor of cheapest outlets at between 10 to 12 cents per kWh. That is less than a third the cost in Hawaii, and 35% less than the average of 14 cents per kWh.
The most important thing is how these costs measure up state by state. If you live where gas is expensive and electricity is cheap, the economics of fueling an electric vehicle become a lot more favorable than even Tesla has stated. Flip that around, and you save significantly less than their marketing might have you banking on.
Converting to a “By-the-gallon” Discount
To compare apples to apples, we can convert the cost of electricity for your Tesla into an equivalent cost per gallon, in a BMW. Essentially, this would be like filling up your Tesla at the pump, right across from the competition, except there is a separate, cheaper price for gas just for you.
To do this, we compare the efficiencies of each car. Divide miles/gallon by miles/kWh, and we get kWh/gallon. Multiply by the price of home electricity in your state, in $/kWh, and we have arrived at the imaginary price per gallon you would pay to fuel your electric car in your driveway or garage.
If we subtract the price of premium gas from this “price per gallon of electricity” we just constructed, we can see exactly where in the country the switch from gas to electric fuel makes the most (and the least) sense, regardless of driving habits.
The state of Washington is the most economical place in the nation to power Tesla adoption, independent of range tendencies, with Oregon close behind. Living there can save you nearly $2.50 a gallon on fuel regardless of model if you currently drive an equivalent BMW. While all states save on electricity over gasoline, Rhode Island has the least incentive to switch at only a $1.00 per gallon discount on some Tesla models, far below the numbers in the Pacific Northwest.
Matching Tesla’s Numbers
There is more to total fuel savings than just the price of a single gallon. How much you drive and how many gallons you buy every year factors heavily as well.
Wyoming, with its heavily rural population, buys the most gas per capita of any state, at 609 gallons per person, per year. New York is the exact opposite, as its highly urban population purchases less than half that at 292 gallons per person, per year. With the average state in the middle at 453 gallons per person per year, the point here is that driving more in a widespread state amplifies the fuel savings per gallon, while driving very little in a dense state means you are less likely to hit the number Tesla prescribes for the nation.
By multiplying our savings per gallon by gallons per year, for each state, we arrive at the annual fuel discount you can expect when driving a Tesla. Using Tesla’s own 6-year life span specified in their marketing material and an inflation rate of 1.9%, we can extrapolate these savings to compare directly with the numbers on Tesla’s website.
Providing a single estimate for fuel savings across the nation misleads the public in both directions. It drastically undersells each model’s impact on your wallet in some states, and is quite overreaching in others.
At the extremes, driving a Model S in Rhode Island will save you almost $3,700 less than Tesla promised, while operating a Model Y in Wyoming will put an extra $2,100 in your pocket, on top of what you were told to expect. That is a -70% to +50% swing, depending on where you call home. The average across all states is actually quite close to Tesla’s number for the Model 3 and Model Y, but lags behind by about $1,000 for the two higher end models.
However, it is important to stop here and note that if you charge for free, perhaps at work or a supercharger, these estimates could shift significantly towards higher savings. How much exactly will depend on what is available to you, and where you choose to charge. The Model S and Model X are currently sold with free lifetime supercharging included, which puts another 14 dollars on average back in your wallet each time you completely fill up at one. Gasoline and electricity prices also vary with time and location in each state, meaning these numbers are still just estimates. But the point remains; your financial reward for using a greener fuel is much more nuanced than Tesla might have you think.
If you already own a Tesla, and are interested in exactly how much you save and spend on every charge, you can use the free Optiwatt application to do the personalized math for you. Optiwatt monitors your at-home Tesla charging costs and gas savings using your exact utility rates and local gas prices, so the guesstimating is entirely removed.
Charge Your Tesla the Smart Way!
Optiwatt automatically schedules your Tesla to charge when electricity rates are cheapest. The best part? Optiwatt is free to use, forever.
How to Extend Life of Tesla?
Despite Tesla’s summation of the many diverse states in the USA into a single savings number, we next have to ask: why use a life of six years? Today, the average age of a car on the road in America is 11 years according to Consumer Reports, and electric drivetrains are significantly less prone to the wear and tear that eventually puts gasoline powered cars into retirement.9
Tesla current-generation batteries can be expected to last up to 500,000 miles, enough for 37 years of average American driving, and a million miles looks like it is visible on the horizon already.10 A paper published in The Journal of the Electrochemical Society by researchers at Dalhousie University, which has an exclusive agreement with Tesla, describes a battery that can accomplish this feat today, containing exact cell details for benchmarking the industry as it grows.11
If you do manage to put off upgrading and drive your Tesla for the average of 11 years, the reward can be absolutely massive. Peak fuel savings reaches more than $11,000, bringing the Model Y that achieved it down in price by 21%, and making Tesla’s estimate of $4,300 in savings seem like just a few drops in the proverbial bucket. Across all models and states, American’s can expect to pocket $2,500 more than the savings numbers most would assume Tesla reached for.
Heading for a Green ($$$) Revolution
To end this analytical piece with a highly theoretical conclusion, let’s zoom out to a state level, and look at the potential fuel savings for divesting our transportation infrastructure completely from fossil fuels. If every person in each state bought only electricity instead of gasoline, at current pricing, the annual savings are absolutely mind boggling.
California would save a staggering $28.4 billion every single year, more than its entire budget surplus at the moment, while Texas would save $21.1 billion.12 Other states save smaller but still gargantuan sums, totaling $234 billion annually for the nation, or enough to fund the federal food stamp program 3.5 times over.13
In this futuristic scenario, entire industries would rise and collapse to support the shift in energy demand, no doubt drastically affecting the underlying pricing of both gasoline and electricity.
However, even with price shifts, it is important to note that there is a gigantic profit incentive to the green revolution, not just responsibility for environmental stewardship. Capitalism alone should be driving us towards an electric future, and be sped up by our concern for the natural world, rather than held back by lobbying from archaic petroleum giants. Electricity is just a cheaper fuel for movement than gasoline, plain and simple.
Putting a Bow on It
While Tesla’s inclusion of a gas savings discount in their marketing can lead to a bit of price shock at check-out, we ultimately find the number to be reasonable or low, depending on the time period over which you plan to drive. For the six years that Tesla uses in their estimations, our calculation of average fuel savings for the Model 3 and Model Y match Tesla’s $4,300 almost exactly, while the Model S and Model X struggle to reach Tesla’s number of ~$5,500 in most states unless you take full advantage of the free supercharging currently offered with the car. On the other hand, over the 11 year average life of an American car on the road, your savings will average $2,500 more than prescribed across all four models, and up to $11,000 at maximum. Keep in mind that each state is different, but the northeast is much more likely to undershoot on gas savings than the south and west in either scenario.
If you already own a Tesla, Optiwatt can help you track both your financial and environmental motivators, summarizing your personalized costs, savings, and environmental impact all on the same dashboard. Check us out, and find out for yourself where you stack up against Tesla’s advertised return on investment!