Isn't an EV too expensive to buy? Can the price difference ever be paid back?

“EVs are expensive” is, at this point, a fair observation. Next to a petrol car of the same class, an electric car usually costs anywhere from a few hundred thousand yen to over a million yen more, and most of that gap is the cost of the battery. But the price on the window is not the whole question. A car is a durable good whose fuel, maintenance and tax you keep paying for a decade, so what matters is the total cost of ownership (TCO).

The short answer: (1) the gap in purchase price is narrowing year by year as battery prices fall, (2) running and maintenance costs are far lower for an EV, so for most patterns of use the gap is recovered in three to seven years, (3) in Japan a purchase subsidy worth up to ¥1.3 million, plus tax breaks, closes much of the gap directly, and (4) whether it pays depends on how you drive and where you charge. Let’s take those in turn.

Why EVs cost more: the battery as a block of cost

The main reason for the price is the lithium-ion battery. An EV with 400–500 km of range carries 60–80 kWh of cells, and that pack alone often accounts for 30–40% of the cost of the car. Which is to say: cheaper batteries mean cheaper EVs, and the relationship is that direct.

Battery prices have fallen dramatically. BloombergNEF puts the global average price of a lithium-ion pack about 90% below its 2010 level, at US$108/kWh (about ¥16,000/kWh) as of 2025 [1]. A learning curve is at work — costs fall roughly 17% for every doubling of deployment — so the spread of EVs is itself what pushes the price down [2].

China leads this: BYD and others already sell EVs priced like petrol cars. BloombergNEF’s analysis has new-car price parity — the same showroom price as a petrol car, without subsidies — arriving for some segments in 2025 [3]. A gap remains in the Japanese market, but the accurate way to read the trend is that the wall of purchase price is getting lower every year.

Running costs: fuel is about half that of a petrol car

After the purchase, the cost that bites hardest is fuel, and here the EV is clearly ahead.

In Japanese numbers: at ¥31/kWh and an efficiency of 6–8 km per kWh, driving 1,000 km a month costs around ¥4,500 in electricity. A petrol car doing 15 km/L at ¥170/L costs about ¥11,300 for the same 1,000 km [4]. That is a difference of more than ¥6,000 a month, or about ¥70,000 a year.

Over 10,000 km a year, the petrol car’s running cost of about ¥103,000 compares with roughly ¥52,000 for the EV — about half — which adds up to some ¥520,000 over ten years in fuel alone [4]. With solar panels at home and daytime charging, or a cheap overnight tariff, the gap widens further. Rely mostly on public fast chargers and the unit price rises and the gap narrows. That is where the “depends how you use it” caveat below comes from.

Maintenance and tax: fewer parts, structurally cheaper

An EV has no engine, gearbox or exhaust system, and far fewer parts than a petrol car, which makes maintenance structurally cheaper. There is no engine oil or oil filter to change, and regenerative braking means the pads wear slowly and are replaced less often.

Adding the various running costs together, one estimate puts an EV ¥80,000–110,000 cheaper per year than a petrol car, close to ¥300,000 over three years [5]. On top of that, Japan’s eco-car tax reduction and green tax treatment cut the weight tax and the vehicle tax for EVs, lowering the cost of ownership again.

Fuel, maintenance and tax together are what pay back the price difference over the years. Analyses abroad generally find that an EV’s TCO overtakes a petrol car’s in roughly three to seven years, and that the more you drive after that, the better off you are [3].

Japan’s subsidy: up to ¥1.3 million against the price gap

In Japan the subsidy attacks the price difference directly. The Ministry of Economy, Trade and Industry’s CEV subsidy (for clean energy vehicles) raised its ceiling for standard passenger EVs registered from January 2026 from ¥900,000 to ¥1.3 million (up to ¥850,000 for a PHEV) [6]. About ¥110 billion is set aside for it in the fiscal 2026 budget [6].

The ¥1.3 million is a ceiling, though, not a flat amount: what is actually paid is set case by case on a score for the vehicle and its manufacturer. Many municipalities add subsidies of their own, and national and local support together increasingly offset a good share of the price gap with a petrol car [6].

The weak points, honestly: resale value, use, home charging

The EV side has weaknesses worth stating plainly. First, resale value. Used EVs have been marked down on a vague fear of battery degradation, and the CEV subsidy applies only to new cars. For anyone who changes cars every few years, weak residuals can undo the TCO case. That said, as real degradation data accumulates and turns out milder than feared, residuals have room to improve.

Second, how you use the car. Everything above assumes you can charge cheaply at home. In a flat or a rental where home charging is hard, and public fast charging is the fallback, the unit price rises and the fuel saving shrinks. The same logic applies to low mileage: the less you drive, the longer the price gap takes to recover.

Third, the cash up front. Subsidies usually arrive after the purchase, so you pay the higher price first. Leasing or a balloon loan can smooth that, but it is worth being aware of as a hit to the household budget.

Where this is heading: the price gap as a matter of time

Over the medium term the gap keeps closing. Battery prices are still falling, and cobalt-free LFP cells and cheaper sodium-ion cells will push them lower. As EV adoption accelerates along its S-curve, scale and learning drive the cost down further [2].

An EV also does more than move you: with V2H (vehicle to home) it becomes backup power for the house and a way to cut the electricity bill. As RMI’s analysis shows, the world is in the middle of a structural shift towards the end of the ICE age, and price parity is becoming a question of when rather than whether [3].

So the answer to “are EVs expensive?” comes out like this. The price on the window is still higher today. But measured as a total — fuel, maintenance, subsidies included — an EV is already at a level that pays back for a driver who can charge at home and covers a reasonable distance, and that break-even point arrives earlier every year.

Summary

The price premium is mostly the battery. Pack prices are about 90% below 2010 and reached US$108/kWh in 2025, so the gap is closing.
Fuel costs about half as much: roughly ¥50,000 a year at 10,000 km, about ¥520,000 over ten years. Maintenance runs ¥80,000–110,000 a year cheaper.
On total cost of ownership, the price gap is recovered in three to seven years where home charging is available.
Japan’s CEV subsidy rose to a ceiling of ¥1.3 million for standard passenger EVs from 2026, compressing the gap directly.
But resale value, home charging and mileage decide whether it pays. The “depends how you use it” caveat is real.
With falling battery prices and S-curve adoption, parity on the sticker price itself is a matter of time.

“EVs are too expensive” is a judgement made on the purchase price alone. Change the yardstick to the total over the years you own the car, and an EV is already the choice that pays for a lot of drivers.

References and data sources

[1]: BloombergNEF. (2025, December 9). Lithium-ion battery pack prices fall to $108 per kilowatt-hour, despite rising metal prices. https://about.bnef.com/insights/clean-transport/lithium-ion-battery-pack-prices-fall-to-108-per-kilowatt-hour-despite-rising-metal-prices-bloombergnef/

[2]: Furuya, S. (2026). Electric vehicles are changing the world: S-curve growth and the end of the petrol era [Podcast, in Japanese]. Energy Intelligence and Foresight. https://listen.style/p/energyinfo/mrn0pegg (BNEF data: pack prices 88% below 2010, a 17% learning rate)

[3]: BloombergNEF. (2025). Electric cars reach price parity in 2025. https://about.bnef.com/blog/electric-cars-reach-price-parity-2025/ / RMI. (2023). X-Change: Cars — The End of the ICE Age. https://rmi.org/insight/x-change-cars/

[4]: Jonetsu Denryoku. (2025). Is electricity really cheaper? Comparing the cost of running an EV and a petrol car over 10,000 km [in Japanese]. https://jo-epco.co.jp/ev-gasoline-cost-comparison/ / ENEOS Power. What does it cost to charge an EV? [in Japanese] https://www.eneos-power.co.jp/article/basics-electricity/ev-electricity-costs/

[5]: OMRON Social Solutions. EV or petrol car: comparing purchase price and ten years of total cost [in Japanese]. https://socialsolution.omron.com/jp/ja/products_service/energy/v2h-life/article_14.html

[6]: Ministry of Economy, Trade and Industry. (2025). Subsidy for the introduction of clean energy vehicles, FY2025 supplementary budget [in Japanese]. https://www.meti.go.jp/policy/mono_info_service/mono/automobile/cev/r7h_cev.html / ENECHANGE. (2026). CEV subsidy 2026: up to ¥1.3 million for an EV, eligible models, how to apply [in Japanese]. https://ev-charge-enechange.jp/articles/070/