Electric Cars are Coming, but a Challenging Road Lies Ahead

We’re reliving the electric vehicle experience of the 1990s but with some new twists. Back then, the electric car was being ‘encouraged’ to market by California’s Zero Emission Vehicle (ZEV) mandate. Today, the dynamic has changed but the momentum is similar. The difference is that it’s Washington lending the momentum, and rather than mandates, it’s massive federal grants and loans that are driving electric cars to market.

There’s no question that battery electric vehicles bring many advantages including zero localized emissions, high levels of efficiency, and overall low environmental impact. Electric cars can be charged with electricity created from a variety of renewable and non-renewable energy sources, which offers definite energy diversity advantages. But electric cars are not the only answer to the evolution of transportation.

Is anyone asking what’s become of the other technologies and fuels that have been cultivated as alternatives to internal combustion and petroleum motor fuels over the past two decades? Certainly, natural gas has not faded away. Ethanol has not evaporated into thin air. Biodiesel is not a thing of the past. While hydrogen has taken a hit since it lost favor with the Department of Energy, it’s still in the game. Even propane, never high-profile amid transportation fuel interests jockeying for position, is gaining some traction. And let’s not forget about clean diesel and advanced gasoline internal combustion.

Nobody’s really talking about them, at least in most circles. The media is focused on electric vehicles, most likely because that’s also the focus in Washington. That, in turn, influences the national discussion on many levels, from legislators to influencers to everyday consumers. The growing focus on electrics is a positive thing since electric cars should play a key role in our future. It’s just that if anyone’s expecting a massive number of battery electric cars to displace conventional internal combustion engine vehicles in the short term, they’re in for an awakening.

The advent of the electric car is important, but like any all-new vehicle featuring unfamiliar technology, initial numbers will likely be comparatively small. The U.S. introduction of Honda’s Insight hybrid in late 1999 presents a good example. Because of a relatively conservative build number, most dealers across the nation were allocated a relatively small number of hybrids to sell. In another example, in its first year Nissan only offered a scant 500 examples of its groundbreaking 2000 Sentra CA (‘Clean Air’), the first car to achieve near-zero emissions on gasoline.

This is often the case with new vehicle models featuring all-new technologies, especially when these vehicles aim at greater environmental performance and additional cost is involved that may not be recouped. This dynamic will change as greater numbers of electric models become available and the market acclimates to their new technologies. Until that occurs, we’re likely to see legacy and upstart automakers alike playing this game conservatively as they ease into a new chapter of electric transportation. Without knowing for certain the number of buyers who will step up to buy vehicles that operate in new and unfamiliar ways, and in all likelihood will be substantially more expensive than conventional counterparts, production numbers will be more conservative than many would like.

While it’s possible that some new battery electric vehicles – especially those from major automakers -- may be produced in the tens of thousands of units rather than merely in the hundreds or maybe thousands in their early years, it would be presumptive to think that any of these would be manufactured or sold in numbers that would rival popular existing models.

There’s no doubt that plenty of excitement is in store for the auto market as all-new types of vehicles and drivetrains come to the showroom. When it comes to electric cars, let’s just hope that their production, battery, and retail costs come down over time. While there’s talk of separating battery cost from an electric vehicle’s retail price by leasing batteries to car buyers, this is as yet an unproved concept … so we’ll have to see. In the meantime, battery cost remains the most formidable challenge for electric cars and is largely responsible for their high cost.

And what about that high cost? If you’re counting on $7,500 American Recovery and Reinvestment Act federal tax credits to offset a battery electric vehicle’s purchase price well into the future, you might want to consider this: Already, the CARS (Car Allowance Rebate System, aka ‘Cash for Clunkers’) program has run its course after just four weeks, blowing through an initial $1 billion in funding and an additional $2 billion cash infusion. Government tax incentives for 400,000 electric cars at $7,500 each would represent the same amount of money. With the U.S. deficit now projected to reach $9 trillion over the next 10 years, you can bet there will be increasing pressure to reign in massive deficit spending across the board.

As all this is unfolding, it’s also important to understand that even as momentum is increasing for electric vehicle development and manufacturing, the real likelihood is that higher fuel economy gasoline, clean diesel, and hybrid vehicles of varying types will comprise the majority of the U.S. market’s estimated 11 million annual vehicle sales for some years to come.