To EV or not to EV?
As electric vehicles (EV) become increasingly visible on Philippine roads, many consumers are asking whether it still makes financial sense to buy a traditional internal combustion engine vehicle (ICEV), a hybrid electric vehicle (HEV), a plug-in hybrid electric vehicle (PHEV), or a battery electric vehicle (BEV).
The answer depends on what factors you value. Environmental advocates emphasize lower emissions. BEV enthusiasts point to lower operating costs. HEV owners appreciate improved fuel economy without worrying about charging infrastructure. ICEV owners often highlight lower purchase prices and familiar technology.
To examine the issue objectively, let us temporarily set aside personal preferences and look strictly at the numbers using net present value (NPV) analysis.
For this analysis, we assume four brand-new vehicles with similar size, comfort, safety features and electronic equipment. We assume a 10-year ownership period, annual mileage of 15,000 kilometers, gasoline priced at P78 per liter today growing at 4-percent per annum (pa) and electricity priced at P15 per kilowatt-hour.
Maintenance costs, registration expenses, energy costs and potential battery replacement costs are included.
The analysis also assumes that the vehicles are purchased brand-new. It does not consider whether an existing ICEV should be replaced. Using representative market prices, we assume the following purchase costs:
- ICEV: P1.2 million
- HEV: P1.6 million
- PHEV: P1.8 million
- BEV: P2 million
Under these assumptions, the estimated 10-year NPV cost of ownership is approximately:
- ICEV: P2.08 million
- HEV: P2.16 million
- PHEV: P2.37 million
- BEV: P2.56 million
ICEV remains the least expensive option from a purely financial perspective. ICEV incurs higher fuel expenses but starts with the lowest purchase price. HEV substantially reduces fuel consumption but requires a higher initial investment. PHEV can perform much of its daily driving using electricity while retaining the flexibility of a gasoline engine, but this flexibility comes at a cost. BEV minimizes energy and maintenance expenses but carry the highest purchase price.
But before concluding that ICEVs are the clear winner, several important caveats should be considered.
First, mileage matters. The more you drive, the more valuable fuel savings become. Someone driving 30,000 kilometers annually could experience a very different outcome from someone driving only 10,000 kilometers annually.
Second, fuel prices also matter. This analysis assumes that gasoline prices increase by 4 percent pa. If fuel prices rise more rapidly, HEVs, PHEVs and BEVs become increasingly attractive relative to ICEVs.
Third, government incentives matter. Electric vehicles currently enjoy exemptions from number-coding restrictions. For professionals, entrepreneurs and salespeople whose schedules are constrained by coding regulations, that benefit may have significant economic value that is not reflected in the calculations.
Fourth, charging costs vary widely. Some BEV and PHEV owners may have access to solar panels or lower-cost electricity. Others may rely heavily on commercial charging stations where costs are substantially higher than residential rates. The economics can, therefore, differ significantly from one household to another.
Fifth, technology continues to evolve. Battery costs have generally declined over time. Charging infrastructure is expanding. Vehicle manufacturers continue to improve range and efficiency. The cost differences observed today may not persist indefinitely.
Also noteworthy is that this analysis excludes financing costs, resale values, insurance premium differences, parking and charging infrastructure costs, and possible future changes in government incentives, as these can materially affect the results.
So, to EV or not to EV?
If your objective is simply to minimize 10-year ownership cost under today’s assumptions, ICEV still wins albeit barely. And if you drive extensively, place value on coding exemptions, expect fuel prices to rise sharply, have access to inexpensive charging, or simply prefer the driving experience of electrified vehicles, then the answer may be far less straightforward.
As with most financial decisions, the best choice is not necessarily the cheapest one. It is the one that delivers the greatest value based on your own circumstances, priorities and expectations about the future.
As we jokingly say at seminars we conduct, “Its depend [sic].”
Send questions via “Ask a Friend, Ask Efren” free service at personalfinance.ph, SMS, Viber, Twitter, LinkedIn, WhatsApp, Instagram, Telegram and Facebook. Efren Ll. Cruz is a Registered Financial Planner and Director of RFP Philippines, seasoned investment adviser, bestselling author of personal finance books in the Philippines and a YAMAN Coach™. To subscribe to the My PF App™, email masterclass@personalfinance.ph. To learn more about personal financial planning, attend the 117th RFP Program this August 2026. To inquire, e-mail info@rfp.ph or text at 09176248110.
