NCPA - National Center for Policy Analysis

Electric Cars: Still a Work in Progress

January 29, 2013

Electric vehicles (EVs) have been heralded as the newest revolution in the automobile industry that is both environmentally conscious and affordable.  But so far a host of problems has plagued the new technology, says the Fiscal Times.

  • Many batteries struggle to hold their charge in the winter or charge quickly enough on a 120 volt charger.
  • The Obama administration wants 1 million plug-in electric vehicles on the road by 2015 despite anemic sales performance to date.
  • Only 9,819 Nissan Leafs and 23,461 Chevrolet Volts were sold in 2012.
  • The market as a whole accounted for merely 0.1 percent of the 15-million-car-per-year American market, up only 0.001 percent from 2011.

To bolster poor sales performance, Nissan is cutting the price for its Leaf S Trim model by $6,000 and moving production to Tennessee to reduce costs.  Market research company LMC Automotive notes that a $20 per month reduction in the Chevy Volt's lease rate likely triggered its sales surge this year.

  • LMC predicts that in 10 years, only 1.5 percent to 2 percent of the market will be electric vehicles.
  • In order to encourage the market to grow, the government offers a $7,500 tax credit to anyone who purchases an electric vehicle.
  • Major setbacks to the growth of EVs include the fluctuating price of oil, whether new technology is developed that improves battery performance, how quickly a charging infrastructure develops and how EVs are perceived by the public.

An Indiana University study found that many adult drivers in 21 large U.S. cities feel the price outweighs the benefits, and that electric vehicles have short driving ranges and must be charged frequently.  The study found that drivers in some cities, like San Jose, Chicago and Boston, were more willing to invest in an EV while drivers in cities like Nashville and Detroit had little interest.

Despite concerns that the market will never grow significantly, manufacturers like Tesla are hopeful about the future. Tesla will hit the market with its Model S, the first mass-produced luxury EV, with a price tag of $52,400 after the $7,500 tax credit. Tesla has more than 13,000 reservations for the Model S and customers will begin taking delivery soon.

Source: Julie Halpert, "Why Americans Still Don't Drive Electric Cars," Fiscal Times, January 22, 2013.


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