Having discovered that there is no viable market for electric cars, global car manufacturers face big losses on their investments. Small plug-in vehicles like the Renault Twizzy may be of some utility in big cities, but barring some breakthrough that overcomes the cost and weight of batteries, fully electric vehicles will remain a niche product for decades to come. The automotive industry is learning the hard way that electric cars are just too darned expensive, and their range too inadequate, to appeal to a mass market.
Electric vehicles just can’t compete with combustion engines, which deliver the most energy for the least amount of weight and cost. While gasoline-fueled internal combustion engines and transmissions make up about 10% of the cost of a $30,000 car, lithium-ion batteries (that will need to be replaced during the lifespan of the car) cost $12,000 to $15,000 for the electric Ford Focus, a car which at $39,200, is $15,000 more than a petroleum-fueled Focus.
The added cost of the fuel-efficient technologies is so high that it would take the average driver many years — or even decades — to save money over comparable new models with conventional internal-combustion engines, according to a recent survey by TrueCar published by the New York Times, which assumes $4/gallon for petrol. A buyer who chose the Leaf instead of a Nissan Versa would need to drive it for almost nine years at today’s gas prices before the fuel savings outweighed the nearly $10,000 difference in price. The Volt, which cost nearly $40,000 before a $7,500 federal tax credit, could take up to 27 years to pay off versus a Chevrolet Cruze.
Not surprisingly, car buyers have been voting with their feet. Sales of plug-in cars like the Chevrolet Volt and the Nissan Leaf have been so pathetic that General Motors has had to halt production – perhaps permanently. Even the market share of hybrids has remained flat at 2.5-3%.
Realising that electric vehicles are destines to remain an unaffordable luxury for the man in the street, US automotive industry executives with responsibility for technology and regulatory strategies say their companies are now focusing on steady improvement of the efficiency of cars fueled by gasoline and diesel as they aim to comply with the administration’s proposal to require that auto makers’ new car and truck fleets average 54.5 miles per gallon by 2025, roughly double the average mileage of the fleet sold in 2010.
Perhaps they realize that the subsidies the industry has benefited from briefly, will come to an end. Bailing out the US car industry was controversial enough in the first instance. Will Obama, or his successor be prepared to throw good money after bad? For even after $2.4 billion in economic stimulus that the Obama administration spent into 48 projects related to electric vehicles or battery production – including Tesla Motors and Fisker Automotive – this is an industry which requires indefinite subsidies to survive.
Without taxpayer funded bailouts, GM and Chrysler would never have poured billions into developing electric cars, and Ford would not have without access to low cost Federal loans. But now that electric vehicles have been proved a commercial failure, Washington and Detroit are likely to be at loggerheads over fuel economy and environmental regulation. Expecting the taxpayer to subsidise electric vehicles to continue to subsidize electric vehicles to the tune of thousands of dollars per car is too charged, politically. Governments everywhere might as well just give away compact fuel efficient gasoline driven cars to anyone who wants one.