The Truth about High Cost EVs and their Market Potential

Recent outreach from an electric vehicle advocacy group sought to dispel 10 popular myths about electric vehicles. As long-time supporters of electric cars, we’re on board with all of them with the exception of one, which logic just can’t allow to go unchallenged.

This one addressed the ‘myth’ that plug-ins are too expensive for market penetration. It’s an onion of a myth, really, and peeling back just the surface layer with easy answers is not an honest approach. So let’s take this a layer at a time.

The ‘facts’ offered to dispel the myth are thus: New technologies are typically costly, and we’re reminded to recall when cell phones and DVDs were first introduced. We’re told that ‘the purchase and lifetime operating cost of an EV is on par with, or less than, a gas powered equivalent because EVs require little maintenance or repair, no oil changes, no tune-ups, and no smog checks.’ And, of course, the government stimulus package includes a $2,500 to $7,500 tax credit for EVs and PHEVs, with some states like California and Texas also considering incentives up to $5,000.

We do remember when cell phones were bigger than a brick and about as easy to carry. The very first ones cost about four grand. Most people didn’t buy one until they were a lot, lot less. DVD players were also costly when introduced with their price of entry in the $700 range. The point is that they started out expensive and over time evolved into affordable mass market products.

It’s prudent to point out that neither has anything to do with cars, which are more creatures of necessity for modern life than mere enabling technologies for communications or entertainment. And cars, unlike consumer electronics, are expensive by nature and represent the second largest purchase most of us will ever make.

It’s true that conventional operating costs will be less. With fewer moving parts and an energy-efficient drivetrain that makes the most of electric power, that’s a no-brainer. However, this assumption ignores the most high-profile maintenance item of a battery powered car – the eventual replacement of an electric car’s battery pack, which is likely to land in the same financial ballpark as replacing a transmission or engine. Plus, there’s the cost of installing a 220-volt home charger.

Identifying the availability of thousands of dollars in tax incentives as proof that battery powered cars are no more expensive than their conventional counterparts is disingenuous. They are more expensive. It’s just that at this point in time, the federal government is subsidizing the cost to make them more approachable in the early years of commercialization. There will come a time when sizable incentives are no longer offered, and when this time comes we’d better hope that battery costs have come down … way down. Otherwise the lack of this incentive will be glaring and obvious on the bottom line.

To achieve real market penetration at mass market numbers, what electric drive vehicles must ultimately do is sell on their merits, appealing to buyers with desired features and functionality at a price they can afford. Nissan intends to do this by leasing the battery separately from the car. GM did this before by subsidizing the lease cost of its EV1 electric car. Innovation and creativity – not smoke and mirrors – will be required.