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3 Reasons Why Electric Cars Won’t Come to Garages Anytime Soon

“The slogan of progress is changing from the full dinner pail to the full garage,” Herbert Hoover said during his campaign for the presidency back in 1928. Eighty-three years later, President Barack Obama channeled that same vibe when he said the U.S. would “become the first country to have one million electric vehicles on the road by 2015.” Although Hoover and Obama could not be more diametrically opposed politically, both understood the importance of cars to the U.S. economy and American consumers’ psyche.

Hoover’s quest for that “full garage” was derailed by the Great Depression. And Obama’s quest for electric vehicles — his 21st century mantra of progress — faces headwinds as well. Obama is doing what he can to drive adoption of green technology, offering $7,500 tax credits to first-time buyers and requiring that all government agencies, by 2015, purchase only electric, alternative-fuel or hybrid vehicles.

Automakers like Ford (NYSE:F), General Motors (NYSE:GM), Chrysler, Tesla Motors (NASDAQ:TSLA), Toyota (NYSE:TM), Honda (NYSE:HMC) and Nissan also are rolling with the White House’s green vision. Notable models include the Chevy Volt and Nissan Leaf, Toyota’s new Prius-based plug-in, the Ford Focus Electric and the Tesla Model S.

But despite the fanfare, electric-vehicle sales are badly in need of jumper cables. According to J.D. Power and Associates’ 2011 U.S. Green Automotive study, electric and hybrid vehicles will comprise less than 10% of the U.S. market by 2016. “Alternative powertrains face an array of challenges as they attempt to gain widespread acceptance in the market,” said Mike VanNieuwkuyk, executive director of global vehicle research at J.D. Power. “The bottom line is that most consumers want to be green, but not if there is a significant personal cost to them.”

Here are three reasons why electric cars won’t come to garages anytime soon:

High Cost

Even with the healthy $7,500 tax credit, many consumers find electric and plug-in hybrid vehicles prohibitively expensive — averaging $40,000 after the credit. A recent study by the UK-based Low Carbon Vehicle Partnership found the total cost of ownership is more than $7,900 higher, on average, than conventional vehicles. When battery and fuel costs drop, that difference will narrow to as little as $790, but the researchers don’t see that happening until 2030.

Battery Anxiety

With battery ranges of 100 to 300 miles, a four- to 12-hour recharging cycle and precious few recharging stations, consumers are having a little trouble overcoming that traditional terror of running out of fuel in the middle of nowhere.

New Taxes

Fed up with the loss of gas tax revenue as consumers buy more fuel-efficient vehicles, states like Washington, Oregon, Colorado and others hope to assess a wide range of creative fees and taxes to drivers of such vehicles. The rationale: electric and hybrid plug-in vehicles use too little gas. That leaves fewer tax dollars available for funding roads and bridges. States and municipalities contend that electric vehicles should be forced to pay their fair share.

Bottom Line

At current prices, electric and plug-in hybrids are a nonstarter for most consumers. But the government, which already is on a mission to reduce greenhouse gas emissions, is trying to drive adoption with dollars. Obama’s directive has had some limited impact: The government has purchased 100 electric vehicles for a pilot program. The president’s new jobs bill also earmarks $15 million to accelerate adoption of electric vehicles. But real electrical vehicle growth will be driven by commercial fleets — FedEx (NYSE:FDX) and UPS (NYSE:UPS) fleets already boast EVs. And Coca-Cola (NYSE:KO) will place six electric trucks into service later this month.


Article printed from InvestorPlace Media, https://investorplace.com/2011/09/electric-cars-ford-gm-tsla-tm-hmc/.

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