What Future for Electric Cars?

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For many years, I’ve been skeptical of a vehicle future dominated by all-electric vehicles. Not that zero-emission cars wouldn’t be great (assuming a low- or zero-emission electricity supply). It’s just that most of the media and consulting firm hype seemed so over the top, ignoring real problems such as low range, slow charging, absence of supporting infrastructure (such as EV charging stations), very low market penetration, and other factors. On the other hand, there was Tesla, producing elegant, advanced-technology EVs that can actually go 300 or more miles on a full charge, but whose prospects of scaling up to mass-market volume and pricing are still in question.

This array of challenges has led governments—in China, much of Europe, and the United States—to try to force the market to develop. Policies include significant subsidies to those who purchase EVs (usually tax rebates), subsidized charging stations, and proposed bans on producing and selling vehicles with conventional petroleum engines (but allowing hybrids) after some future year such as 2040. This year the California Assembly passed a bill that would have quadrupled the state EV rebate, from $2,500 to $10,000, at an annual taxpayer cost of $3 billion per year—but it died in the Senate.

Despite all these subsidies and regulations, EVs in the USA constitute only 1% of the personal vehicle fleet, and annual sales are 0.2% of total sales. Worldwide, EVs are also only about 1% of the fleet, despite an all-out effort in China (where 75% of EVs are bought not by individuals but by government agencies and state-owned enterprises). General Motors sells fewer than 50,000 EVs per year worldwide.

Recently there have been some policy changes in the opposite direction. The House tax reform bill would eliminate federal tax rebates for EVs, and seven states have rescinded their state rebates. Nineteen states have enacted annual highway-use fees for EVs that use no motor fuel and hence pay nothing for road use. They average $75-150/year, which compares to an average of about $220 per year paid by petroleum-fueled cars (federal + state fuel tax at 2.2 cents/mile times about 10,000 miles/year). And a sobering new study from Morgan Stanley estimates that it would cost $2.7 trillion worldwide to provide the infrastructure necessary to support 526 million EVs worldwide by 2040.

On the other hand, if EVs can be perfected as affordable, mass-produced vehicles, they would have a number of advantages. If you’ve driven or ridden in a Tesla, as I did earlier this year, you can’t help but be impressed by its performance—amazing acceleration, very high torque, quiet, and far fewer parts and hence likely much lower maintenance costs. And that’s in addition to the zero emission benefits, especially valuable in urban areas (and to the planet, assuming the electricity is not from coal). So I’d like to become a believer in an EV future. Are there signs that this is becoming less of a pipedream?

First, there is a mountain of money going into battery research and development, and I’ve seen a number of graphs showing ongoing decreases in battery unit cost ($/kwh) and a corresponding uptrend in battery energy density (watt-hrs/liter) from sources such as the U.S. Department of Energy. Second, just about every global car company keeps announcing plans for new EV models. Third, as a possible EV alternative, Honda and Toyota are putting a lot of investment into EVs that get their electricity from hydrogen fuel cells rather than batteries. Those cars could be refueled in minutes, just like current cars, rather than requiring half-hour (or much longer) recharging periods. Of course, the fuel-cell route will require a nationwide hydrogen infrastructure, with its own massive investment need.

A more cautious study on an EV future was released last month by Boston Consulting Group. It projects EVs as unlikely to gain much traction until 2025 or later, and will account for only 14% of annual vehicle production by 2030 (and a much smaller portion of the total personal vehicle fleet by that date). That strikes me as far more realistic than what you can read in some rah-rah articles even in respectable publications such as The Economist and The Wall Street Journal.

(This article first ran in the December 2017 issue of Surface Transportation Innovations)

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About Bob Poole

Bob Poole is director of transportation policy and Searle Freedom Trust Transportation Fellow at Reason Foundation. Poole, an MIT-trained engineer, has advised the previous four presidential administrations on transportation and policy issues.
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One Response to What Future for Electric Cars?

  1. Larry Craun says:

    Finally, someone with their feet on the ground.

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