Why electric cars won't gain mass adoption -- yet

Gasoline-fueled cars still trump the electric cars in price, speed, maintenance costs, range and refueling options.

By Trefis Feb 1, 2012 9:23AM
Image: Electrical plug (© Jupiterimages/Getty Images/Getty Images)The arguments for electric cars are many and hard to argue with. They can provide a new alternative for transportation while helping reduce the world's dependence on oil -- the commodity that threatens to suffocate global growth as prices march higher.

The world's dependence on oil will need to wane sometime in the future and electric cars would help this transition. And yet, very few know that they were one of the more preferred cars before the advent of the internal combustion engine and gradually lost the battle of becoming the preferred choice for customers.

In the 1890s and early 19th century, many electric car competitions were held where they competed to clock the fastest speed. In 1899, an electric car designed by Camille Jenatzy, clocked a record speed of 65.79 mph.

The first sustained effort to provide a recharging infrastructure for these electric cars was made in 1896 by Hartford Electric Light Company. It covered over 6 million miles. The first commercial application of electric cars was made in 1897 when a fleet of electric New York taxis came into existence. However, in spite of this, the electric car did not enter public consciousness until the energy crisis of the 70s and 80s when it was suggested as an alternative to counter the monopoly of oil.

Understanding why these cars went out of vogue is critical to understanding why their sales are not picking up right now. The gasoline cars that emerged were cheaper, had an almost infinite range (since they could be refueled anywhere) and required negligible maintenance cost compared to electric cars. Since at that time oil was in abundance, it was a no-brainer to switch to gasoline cars. Although the cost of driving the electric car was actually lower, it was a benefit that was realized over time and the consumers went for the more immediate savings to be found with the gasoline car. Besides, it also saved the consumer from all the hassles of recharging and always keeping stock of the range traveled.

The situation remains pretty much the same today, except that oil has become expensive and industry advocates are starting to lobby harder the point that the long term savings of running an electric car might triumph the price differential. There are also concerns about pollution and an energy crisis.

In spite of these developments, the price differential between gasoline and electric cars of over $10,000 remains enough for average consumers to prefer the gasoline car, especially since he thinks that they would be replacing it in the next 2-3 years. All other factors such as speed, maintenance costs, range and refueling exist as they did earlier with practically no improvement.

The problem is that pollution and the energy crisis appeal to the conscience of consumers, which isn't enough, in the same manner the UN finds when asking developed countries to cut carbon emissions. Consumers are going to assume that while they are sacrificing comfort for the sake of others, other people are enjoying all the comforts and also nullifying their efforts. The fight between day-to-day comfort and conscience will most of the time be won by comfort.

Factors promoting gasoline cars -- price, speed, maintenance costs, range, refueling -- are the ones car drivers care about.

Factors promoting electric cars -- lower running costs, energy efficiency, lower pollution levels -- are ones users' conscience cares about.

We think electric cars won't be successful unless breakthrough technology is able to make itself attractive on the parameters that the users care about -- price, speed, maintenance cost, range and refueling. In other words, appealing to the conscience of the consumer won't have a meaningful impact unless a dramatic crisis forced this change.

We currently have a Trefis price estimate of $40.74 for Tesla Motors (TSLA) stock around 49% above the current market price.

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Feb 1, 2012 12:36PM
Maintenance - It's important to note, when comparing full electric cars vs. internal combustion, that the maintenance cost difference is dramatic.  There are less than 10 moving parts in an EV while the ICE has hundreds.  So there is no need for oil changes, calibrations, timing, transmission fluids, etc.  The brakes on Toyota Prius' last well over 100,000 miles due to the heavy use of regenerative braking which is also in EV's.

Speed is also a non-issue with EV's when comparing to ICE's.  I own a Nissan LEAF and live in the Los Angeles area.  The average highway speed is 60-80MPH and my EV has power to pass when necessary.

Refueling - I drive an average of 2,000 miles per month and still primarily charge at home.  An EV has a full-charge every morning, no stop at a fueling station required.  So I'd have to say that, for the typical driver, EV's beat ICE's when it comes to refueling.  For longer trips, DC fast charging is required, but even those will be needed in much smaller numbers when compared to gas stations since the main EV fueling station is at the owner's home.

Sales of EV's not immediately being equal to Ford F150's is more due to limited production and distribution and misinformation or lack of information.  Most people just don't know what an EV is or what it can do.

Feb 1, 2012 12:04PM
It's all about the price.    40,000 for a Volt just is to much.   But like all technology it will come down over time just like computers, big screen TVs, blue ray.
Feb 2, 2012 6:10AM
One thing you forgot.  Millions of Americans are true patriots, patriots who will buy electric cars and just put up with their shortcomings.  It is not based upon profit projections, or envy, it is based on altruism, a belief in the future needing our action in the here and now while there is still time.  

People want freedom.  An electric car will provide me with that freedom, and I am going to have it or I will go without.  My next car will be electric.  My next car will be electric.  My next car will be electric.
Feb 1, 2012 10:23PM
I agree with Brian on the point of maintenance. EVs are dramatically less expensive to maintain. I owned a Toyota RAV4 EV for 8.5 years and drove it 91,000 miles before selling it last year after getting my LEAF. In that whole time, the only real maintenance needed was to replace a couple of shocks. The last 5 years I owned it I never once took it in for service. It was working just like new when I sold it and will probably do so for years to come.

As for speed, the author must not have ever driven a Volt of LEAF, and he certainly hasn't driven a Tesla Roadster. These cars are very quick with a top end speed more than adequate for anyone.

Lastly, it's not fair to compare total costs for these cars as long as the external cost of oil are not internalized in its price. We spend $80 billion per year for our military to protect access to the world's oil. Our 5th Fleet is in the Persian Gulf right now to intimidate the Iranians who threaten to close the Straight of Hormuz, a move that will skyrocket oil prices should it happen. That $80 billion works out to 55 cents per gallon that buyers of gas do not pay. The Iraq war has cost us over a trillion dollars and counting, thousands of dead soldiers and tens of thousands of wounded soldiers who we will be caring for the rest of their lives. It's estimated that that will cost another trillion or more. Again, none of this is paid buy you at the pump.

There's lots more when you consider the environmental and health damage due to oil, and none of it is paid at the pump. 

Once you internalize these costs in the price of gas, then we'll see which technology the people choose.
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