Dr. David Robinson, a principal in Brattle’s Madrid office, has authored an article on the future of the electric vehicle (EV) in the February 2010 issue of Oxford Energy Forum. In the article, “Does the Electric Car have a Future?” Dr. Robinson argues that while the long-term prospects for an EV comeback are favorable due to increasing pressure to decarbonize the transportation sector and meet greenhouse gas emission targets, the EV will face serious obstacles over the next ten to twenty years, particularly high initial purchase cost and limited consumer appeal. These obstacles are similar to those that stopped the growth of EVs a century ago, when they were first developed.
According to Dr. Robinson, the future of EVs will depend on four key factors, including the initial cost versus eventual savings for consumers, the ability of vehicle manufacturers to turn over their car fleets, the attraction of EVs to consumers, and the degree to which the EV movement is supported politically. The first three key factors do not currently bode well for the near-term future of the EV. In particular, consumers are reluctant to pay a higher initial fixed cost when buying a new car, and the extra cost of an HEV is about $5,000. In order for the saved fuel costs to outweigh the higher fixed cost, studies suggest that there would need to be very high oil prices, very low electricity prices, and very low discount rates for customers, conditions that do not currently exist.
Additionally, while significant growth of EV fleets is likely to depend on sustained political support, including incentives and benefits to buy and run EVs and additional taxes on fossil fuels, there is currently little consensus on how to move forward to reduce carbon emissions and disagreement over who should lead the efforts.
Dr. Robinson argues that large developing countries, in particular China and India, are potentially the most important new market for EVs. Not only are these large and fast growing markets for road vehicles, they are also potentially the lowest cost manufacturers of EVs. However, from an environmental perspective, the real benefit of EVs will only be felt when the electricity sector is substantially decarbonized.
Published in Oxford Energy Forum