Should you buy an NEV? Probably Not.

The NEV may be a green alternative, but perhaps not an economical one.

Global Electric Motors (GEM) division of Chrysler Corporation, sells "Neighborhood Electric Vehicles" which can be used in places where authorized by law and the speed limit is below 35 mph.  Are these a good deal or not?

We live on an island, seven miles long, and there are perhaps 50 of these vehicles on the island.  Most are rentals, but there are perhaps a dozen privately owned ones as well.  Other folks use golf carts, which, if registered, can be driven on the road.  The number of privately owned golf carts probably exceeds the number of privately owned GEM NEVs.

While an NEV might be a "green" alternative, is it an economical one for the average consumer?  Perhaps not.  The big tax rebates for electric cars no longer apply to NEVs.  You get up to $2500 tax credit (up to 10% of the vehicle price) for 2010.  While this is an incentive to buy, as I have noted time and again, using the IRS code as an investment guide is never a good idea.

The base price on a new GEM is about $7495, plus a hefty $940 shipping and set-up fee (!).  The tax credit ($850) would wipe out most of the setup fee, but not much else.  So you are looking at about seven grand to buy one of these, at the very least.  Add any options, such as doors ($2000 for the set!) and you can easily "option up" one of these vehicles to $10,000 or higher - as high as nearly 20 grand!

Used versions are not much of a bargain, trading in the $3000 to $5500 range on eBay and elsewhere (depending on age and battery status).  If they need new batteries, expect to spend $1000 to $1500 to replace them (!!).  Batteries last about five years.  And there is no tax credit for buying a used one.  A local dealer is offering 3-5 year old models for sale for $6000 to $8000 apiece, which is more than the retail price on a new one ($7495).  I am not sure why someone would pay more for a used vehicle needing over $1000 in repairs, than they would for a brand new one.

There does not seem to be much in the way of bargains on these, in terms of pricing - and no book values to compare (KBB, NADAguides, or Edmunds.com).  So you are alone in the wilderness, if you want to buy one.  Never a good place to be! Most dealers appear to be charging list for these, and since there are few dealers, there is little incentive to haggle.  You want a deal on a Chevy?  They are haggling.

Insurance is another conundrum.  Finding a company that will insure them is not easy - and they do require insurance, license, and title, to be driven on the road.  State Farm quotes $17 a month for basic liability 100/300/100, which is $2 more a month than what GEICO charges for my 1999 M Roadster (capable of higher speeds than the GEM electric!).  Nationwide also appears to insure them.  GEICO does not.

Note that when you call your agent, be sure to mention you are registering a CAR, not a golf cart, as you need regular car insurance for these vehicles, not golf cart insurance.

So the purchase cost and insurance cost are likely to be higher than say, a used Toyota Corolla or even a brand new econo box, like a Chevy Aveo.  And the Corolla or Aveo can be driven on the highway, and thus is not limited to only neighborhood use.

In many areas where you can drive a GEM, you can buy a golf cart that has been suitably modified for on-road use (higher speed, etc.) for about $3500 new.  This is half the price of the GEM and a far better deal.

We looked at one of these, as they can be driven on our island, and the M Roadster is not very practical for going to the beach - no place for the beach chairs, the dog, or our cooler.  The problem is, the GEM isn't much better, unless you get the eS or eL models, which are two seaters with utility beds.  And the cost, as I have figured, is pretty substantial - enough to buy a used Jeep or pickup truck.

While there is a savings in fuel costs, the amount saved in reality, is minimal, as the mileage covered by an NEV is small.  Most have only a few thousand miles on the odometer, even after many years.  This equates only a few hundred dollars in gas costs, even for a gas hog car.

And repair costs is another conundrum.  Even though most used GEMs have little more than a few thousands miles on them, advertisements for them list a number of parts replaced, such as control board, and the like, as well as the ubiquitous batteries.

Most used GEMs I am seeing for sale have only 2,000 to 5,000 miles on them, and have either had their batteries replaced or need replacement.  For some reason, batteries for these vehicles are staggeringly expensive (as compared to standard 6V golf cart batteries) perhaps because they rely on a unique 8V gel cell instead.

If you do the math on this, the battery cost alone works out to 20 cents a mile, presuming in five years you drive your GEM 5,000 miles (which seems high, based on resale ads) and pay $1,000 for batteries (which would be low, based on what various sellers have told me).  This is about the same as the gas cost for a car that gets 20 mpg over the same time period, assuming an average gas cost of $4 a gallon.

Or in other words, the battery cost equals the fuel cost of my BMW X5 - which is cheaper to insure by $2 a month as well.

Throw in some esoteric repair parts, and well, you've got one expensive vehicle.  And speaking of repairs, you'd better be handy with tools.  As someone with a background in automotive engineering and electrical engineering, this doesn't scare me.  And there are service manuals and other parts available online on eBay and other places.  But if you need to hire someone to fix the vehicle, well, the only place to get it repaired is the dealer, and there very few dealers for these type of vehicles.

So if you want it repaired, you have to go back to the dealer who sold it to you.  Few, if any, 3rd parties will fix them.  And chances are, this means flat-bedding the vehicle to take it back to the dealer for fixing, which is a real hassle.

And speaking of dealers, as noted, there are few of them, and if you send an inquiry to an out-of-state dealer, it is hijacked by the home office and sent to your local one.  They don't want you cross-shopping these vehicles on price, it seems, and they offer few discounts on price.  It is a niche vehicle, so they offer niche pricing.  In other words, they rely more on customers desperately coming to them to buy one, than they do rely on traditional salesmanship.

And if you are desperate to own anything, you have given up what little control you have in the bargaining process.  People who have bought these in areas where there are no dealers nearby - desperate to have one - have ended up very unhappy as a result.

There are extended service plans available, to extend the warranty beyond the initial 12 months.  12 months?  Even BMW has a four year warranty, that is transferable!  Most other makers go to 5 years.  VW and others offer 10 years on drivetrain, including transmissions!  The warranty on these things is akin to that offered on a 1965 Chevy.  In other words it sucks.  And again, you have to flatbed the thing to the nearest dealer, unless you are within NEV distance of one.

Again, if you want to extend the warranty, it s about $750 for one year, and $1000 for two years - beyond the initial 12 months.  So tack on another staggering 20 cents a mile (!!) for that - which between battery cost and the extended warranty would equal the gas consumption of a 10 mpg Hummer!

So what's not to like?  They cost 2-3 times as much per mile to own as a regular car, they are difficult to find insurance for, they go 10 mph under the speed limit (which annoys all the other drivers), have no doors, no heat, no A/C, no stereo, no nothing, and of course can't be driven more than a few miles from your house - due to battery range or because of local laws (speed limits).

Also, as a practical vehicle, the GEM leave a lot to be desired.  It seats 2, 4, or 6, depending on what model you buy (the 6-seater is a bit ungainly).  But they come standard with a tiny fiberglass trunk that can barely hold a six-pack.  Want to take your dog to the beach with your beach chairs?  You'd have to buy the "utility" model with a flat bed (available only in 2-seat model) or tow a trailer or something.

We looked at these seriously, as we thought they might be more practical than the M Roadster (which also has no place to store beach chairs or the dog).  But after thinking about it, we realized that it would just be a less practical version of the M Roadster - still no place to store anything (unless we modified it, extensively) and not much fun to drive.

If you are serious about going electric, a Nissan Leaf might be a better choice, at $25,000 after tax rebates.  This is only about $5000 more than a fully loaded GEM NEV (with doors, all accessories, upgraded batteries, extended warranty, etc.) but is capable of highway speeds and also three times the range.  But even then, the cost and operating costs of these vehicles is still likely to be higher than that of a comparable sized economy car (such as a Chevy Aveo, which can be had for under $12,000.  $13 grand buys a LOT of gas!).




The NEV is an interesting concept, but I am not sure it is an economical one, at least at these prices.  I'll continue studying the matter, but I doubt I will end up buying one anytime soon.  This is disappointing, as I have an Automotive Engineering background (General Motors Institute) and also am an Electrical Engineer, and thus I am a big enthusiast of alternative-fuel vehicles, and would like to see non-IC solutions work.  I am all for the electric car, but when it came down to pulling out my own checkbook to buy one, well, I did the math, and the numbers didn't add up!

In order to work, they need to work in the marketplace, and at the present time, it would seem, that even with stiff tax advantages, these vehicles are of interest to enthusiasts only  - who are willing to pay extra to have an electric car.

Modified golf carts are probably a much less expensive alternative to NEVs, and many are certified as NEVs and can get some form of tax credit - although the tax credit (10%) for a $3,000 golf cart is not all that great.

And $3,000 buys a LOT of gas!

Perhaps we'll trade the M Roadster for a used Jeep.  Or perhaps just keep it.  It is, after all, a really nice car....

But what about saving the planet?  While the GEM might not use gas, it does use electricity, and modern IC engine cars produce hardly anything, in terms of pollutants.  If you live in an area where coal-fired plants produce your electricity, you may end up causing more greenhouse gases and pollution than with an IC engine - or at the very least, not decrease the amount of pollution very much.

And then there is the question as to whether it is "environmentally friendly" to create a vehicle that its own manufacturer suggests will go only 1200 miles a year.   There are environmental impact costs (pollution, use of resources, etc.) and energy costs (electricity, oil used in making plastics, etc.) in manufacturing processes, not to mention the issues with lead in all those lead-acid batteries.  If the vehicle delivers less than 1/10th the service mileage, that is a lot of environmental impact in terms of energy and resources, to produce little in the way of transportation.

And since these are likely to be "second vehicles" for most owners, that means the NEV won't be eliminating very many miles traveled by traditional IC engine cars, for most consumers.  For going off the island to shop or travel, we would still need an IC engine car, so at most, we might "save" a couple thousand miles a year of IC engine travel.

Is that really going to make a difference in saving the planet, or is it just a fashion statement?  I am inclined to think the latter, after doing the math on this.


The GEM site has an "affordability comparison chart" that compares the purported cost of the GEM and an gasoline engine car.  It is a little self-serving and doesn't take into account a number of  factors.

Owning a GEM Vehicle*
$7,500	Vehicle Cost
$900.00	Insurance
$90.00	Electricity
$8,490.00	Subtotal
($4,000)	Residual
$4,490.00	Total
*Estimated cost of ownership based on a GEM e2 base model vehicle over a three-year period, driving 3,600 miles. Average cost based on independent research.

Owning a Gasoline-Powered Vehicle*
$20,000.00	Vehicle Cost
$3,000.00	Insurance
$450.00	Fuel
$120.00	Maintenance**
$23,570.00	Subtotal
($10,000.00)	Residual
$13,570.00	Total
*Estimated cost of ownership over a three-year period, driving 3,600 miles. Average cost based on independent research. **Average cost based on manufacturer's recommended maintenance schedule.

This is an interesting comparison, as they are comparing a fairly loaded Camry ($20,000) to a GEM, when you can buy a base Chevy Aveo, for about $12,000, which is more akin in size and shape to the GEM.

Note also, that they don't show the hefty $940 delivery and set-up fee on the price comparison.

The resale value is where they are being particularly clever.  While the resale value on the GEM appears legitimate (from resale ads I have seen) the resale on the IC car is artifically low.  Most IC cars depreciate 50% in value over FIVE years, not three.  A $20,000 Camry will be worth $12,000 to $15,000 after three years, not a mere $10,000 - particularly if it was driven only 3500 miles! (If you have a three-year-old Camry with 3600 miles on it, or any $20,000-new car, please call me, I will pay you $10,000 for it, sight unseen!).

Also, in terms of COST PER MILE, the GEM falls flat at nearly a dollar a mile.  An IC-engine car, on the other hand, can travel ten times as far, with less depreciation than their "comparative example" shows.  Even assuming a $20,000 Camry depreciates to $10,000 after three years, if you drive it 12,000 miles a year (3,000 miles below national average) the cost of depreciation is 27 cents a mile - far less than the GEM.  So the cost, in terms of miles of transportation delivered, for the GEM is far higher.

Or put another way, you could just drive your regular car the 1200 miles extra a year, use very little in terms of extra gas, add little in terms of extra maintenance, and add little in terms of additional depreciation.  In terms of cost per mile, just driving your regular jalopy where you'd ordinarily drive the GEM is far less costly.

Note that fuel savings are pretty minimal, and the comparison doesn't factor in eventual battery replacement costs, which could easily be equal to or exceed the fuel cost.  And note that they are assuming you don't drive the vehicle very much - 1200 miles a year!  That is a lot of money to spend on a vehicle that may travel as far as your bicycle on any given year.  From the classified ads and eBay listings for used GEMs, however, 1200 miles a year is, if anything, an optimistic usage.  Most have that or less, in terms of mileage, after 3-5 years of use.


Also, if you add in some basic features most cars have standard (doors, etc.) the price of the GEM climbs appreciably.   And note also they are comparing the cost of their stripped 2-seater with four-seater cars.  If you opt for a four-seat model ($10,000) add doors to it ($3000) the cost starts climbing well into the teens.  And of course, there are options the GEM does not and probably never will offer, such as air conditioning, which are readily available, even in the cheapest of regular cars.


Then try to throw in a comparable warranty.  Of course, you can't, as they don't go to five years like most automakers.  Adding two years to the base warranty costs another $1055, and still leaves you 2 years shy of the warranty on most new regular cars.  And now your $7500 GEM is costing as much, if not more, than a Chevy Aveo.

The insurance thing is interesting, as State Farm quoted me more to insure the GEM than they would to insure a fairly potent sports car, $17 a month versus $15 a month at GEICO.   So I am not sure where they get their insurance numbers.  Collision insurance, of course, is far more costly, so perhaps there is savings there.  For a $10,000 vehicle, as I have noted before, I would opt not to get collision or comp, myself.

As for maintenance, the GEM people put down a big goose egg, with a Cheshire Cat smile.  With a one year warranty, the owner would have to pay for any repairs for the second two years, out of pocket.  Resale listings suggest that these vehicles do require replacement parts on occasion (circuit boards, drive shafts, etc.), and even with the extended warranty, require a $50 co-pay (!!) for the owner, not to mention the cost of flat-bedding the vehicle to the dealer.  Given the disparate mileage driven by IC-engine cars and NEVs, the repair costs appear to be much higher for these vehicles.  Even one circuit board in three years (a paltry 3600 miles here, folks!) would likely exceed the repair cost of a "regular" car.

And again, with a regular car, you can at least "shop around" for repair services, once out of warranty, as there is an extant repair infrastructure.  With an NEV, you either have to repair it yourself, or go with whatever the dealer says it costs.  And we all know how pricing works when there is no competition!

So their cost comparison chart is pretty specious.

Here on the island, most people who have bought these vehicles (or modified golf carts) use them in addition to not in place of, their traditional automobiles.  So instead of replacing the cost of one car, they are adding to their fleet, increasing insurance costs as well as the overall vehicle cost.

The real cost comparison is between the cost of the NEV and the 1200 miles or so a year that you are not driving on your regular car.  While AAA and other automotive groups report that new cars can cost as much as a dollar a mile to run, the incremental cost of using the car 1200 extra miles a year is not much.

From experience in selling several low miles cars (e.g., 13-year-old BMWs with only 70K on the clock) the delta for having a "low miles" car amounts to only a few hundred to a couple thousand dollars, over time.  And that is for very low miles.  Shaving 1200 miles a year off a car would negligably affect its resale value, particularly, if, like me (and other island residents) you are a retiree and drive less than 10,000 miles a year, anyway.

So depreciation cost, per mile, for those additional miles, is negligable.  Fuel cost, for 1200 miles a year, is only a few hundred dollars, per the GEM website.  The delta for insurance is basically zero as well.  Additional repair and maintenance cost for 1200 additional miles on your car are also de minimis.

So if you just drove your regular car in place of an NEV, you might incur a few cents a mile in extra fuel charges, and that's about it.  But the NEV, in depreciation alone, will run about a dollar a mile in depreciation - and that is using GEM's own figures!

So in other words, I can spend $300 a year driving my dog to the beach in my BMW X5, or I can spend $1200 a year just in depreciation expenses, doing it in a GEM electric (after building some sort of container or platform that my dog could ride in, as the stock vehicle is ill-suited to transporting greyhounds.

So not only does this not save me money, it basically is quadrupling my driving expenses.  You know, it pays to think these things over and never impulse purchase an item!

The conclusion I reach is this:  If you want the effect of owning a GEM, for a far lower cost, just buy a Chevy Aveo and take the doors off.  It would save you more money in the long run, and the net impact on the environment would be about the same, if not less.  And if you leave the doors on, you can drive it on any highway in the country.  Perhaps not comfortably, but far more so than an NEV.

Or better yet, just drive what you already own - and save 4x the cost per mile.

So..... thanks but no thanks!  There is no money to be saved here, and the vehicle, while fun to drive for a while, will not really be practical for my daily life.   Less practical than a 240 HP two-seat roadster with a trunk large enough to only hold my wallet!

But you know, if I put the bike rack on the back of the roadster, it will hold my beach chairs....

UPDATE:  12/12/2010

I have been thinking about this a lot, and also electric vehicles in general (see my next posting, Who is Going to Kill the Electric Car This Time?).

For the $3900 I could buy a used GEM NEV for, I could buy about 1,000 gallons of gas, which, in my 2002 BMW X5, would take me about 20,000 miles (averaging 20 mpg, which is easy to do here on the island going 35 mph in 5th gear).  That is a very long way to drive - particularly around our little island.

And judging from the NEVs I have seen for sale (as well as the expected annual driving from GEM's own analysis) this is far more miles than anyone could expect to get out of a GEM.

Even the batteries, at about $1200 a set,  work out to about equivalent to the cost of 300 gallons of gas, which equals about 6,000 miles of travel, or about what GEM says the vehicle will go in about four years.  In other words, the "savings" in fuel are eaten up by battery cost - and this does not even address the insurance ($120 a year), registration, depreciation, and repair cost.

The marginal cost of operating an existing IC vehicle an additional 1500 miles a year is negligible.  So not only do I not "save" money by buying an NEV, I end up spending a whole lot more, as this essentially adds the expense of an additional, limited use vehicle to my fleet, while not decreasing the operating expenses of the other vehicles appreciably.

Of course, as a "second car" it might make some sense, but I still am not sure it ends up being cheaper to own than say, a secondhand Corolla.  If all you are going to do is drive 1500 miles a year with your second car, you could easily afford to buy a used Toyota Corolla or other economy car, with fairly high miles on the clock, for about $5000 or so.  The operating costs would be far less than the depreciation and battery cost of the GEM.  And the insurance would actually be less, at least through my insurance company (GEICO).

But what about "real" electric cars, like the Nissan Leaf?  The last time around, when car companies were mandated to make electric cars, they died off fairly quickly, with their primitive flooded-cell lead acid batteries.  But will Lithium Ion batteries make a difference?  And with gas dropping back down in price, are they cost effective?

Stay tuned.  The electric car is an interesting concept, but it has to pass the cost/benefit test, without tax incentives, to survive.  It may be these are the cars of the future, but I suspect they are still a few years off for most of us - until charging stations and range issues are addressed, anyway.

Otherwise, as a "second car" for commuting, they are very expensive toys and little else - not cost-effective vehicles on their own merits - just yet.

UPDATE:  December 15, 2010:

I have been watching these vehicles on eBay and other sites and it seems that they are the kind of item that is sold on WANTS more than NEEDS.  Secondhand units sell for about $3000 to $4000, depending on age and whether they have new batteries.  Batteries seem to last five years, tops, which is not very long, considering the miles traveled.  And most of these NEVs have very few miles on them - usually a few thousand tops, many often under 1,000.  And many report a laundry list of repairs and upgrades, including chargers and controllers, in addition to batteries.

There are a host of companies that modify golf carts to sell as NEVs and some of these are quite sharp looking - but again are being sold on the basis of WANTS more than NEEDS.  In other words, "Wouldn't it be cool to drive around in this customized golf cart with velour upholstery, chrome rims, custom paint job and a big stereo?"  Yes it might be cool, but about as interesting as owning a Penis Boat.  In other words, it is another "Hey everybody, look at me!  Look what I bought!" which is interesting for about 10 minutes, until you realize that buying things takes no talent whatsoever.

Before the tax credit was changed to 10% or $2500 max for NEVs, a few golf-cart modifiers were selling modified golf carts as "free NEVs" - they could modify and sell them for less than the cost of the tax rebate.  The owners basically got a free golf cart, courtesy of Uncle Sam.  Many folks bought them and then resold them, which is one reason why you are seeing a LOT of these jacked up golf carts for sale fairly cheaply on eBay and elsewhere.  This does not bode well for GEM, nor does the Nissan Leaf and the plug-in Hybrids.  Trying to sell $20,000 NEVs in this environment is going to be difficult, to say the least.

We laugh at a lot of RV'ers, particularly rednecks, who will trailer golf-carts to campgrounds when they go camping. Some take two or three, so the whole family can drive around the campground, annoyingly, in golf carts.  I am not sure this is camping or what the point of it is.  I mean, once you've driven a golf car, the allure drops away pretty quickly.  I don't even like driving them on the golf course!  (If golf is a good walk, ruined, then taking an electric car is not even a good walk, period).

I did receive one robo-SPAM comment in response to my "Who's Going to Kill the Electric Car This Time?" posting - from a GEM NEV dealer in Florida.  He had a nice website and all, but I'm really sorry, spending $15,000 to $20,000 on an NEV makes little or no sense, financially, when you are not likely to drive them more than a few thousand miles over their lifetime.

The cost per mile, in depreciation alone, makes the dollar-a-mile depreciation on my 1999 M Roadster look small in comparison.

I am a big fan of the concept of electric cars, but to succeed in the marketplace, these vehicles have to make sense, economically.  And even with tax incentives, they don't.  They are nice toys, like motorcycles, but not practical transportation.

UPDATE:  March 21, 2011:

This link has some interesting information on what to look for in a used GEM.  But frankly, most of what is in there just scares me off further.  So many mods, and design changes, and whatnot.  But now you understand why no one is bidding on that canary yellow 1999 model on eBay....

This blog has lots of information as well - with this entry being good reading before you commit to buying an NEV.

Bottom line?  These are toys, like motorcycles or Jet Skis.  You buy one because you WANT one, not because it serves a NEED.  Don't try to delude yourself into thinking that you are "saving money" with an NEV and are rather just having a "look at me!" hobby car.

And of course, one reason people buy these is for the "look at me!" factor - the status of being perceived as politically correct.  But at 1500 miles a year, these are expensive vehicles and are hardly saving the planet.