THE REAL COST OF ELECTRIC CARS

As the world watches oil prices rise and fall like a tidal surge and environmental groups continue to push for more green cars, the real cost of alternative fuel vehicles has to be examined. Obviously, the role of electric and hybrid vehicles will play an enormous role in reducing greenhouse gasses around the world. But industry and government has to ask how much will the conversion cost and is it worth it?

According to a study conducted by Boston Consulting Group, a management consulting firm, the fuel savings will not be enough incentive for consumers to switch to electric cars without some other incentive from the world’s governments. According to Boston Consulting, electric vehicles could conceivably make up a significant amount of the world’s fleet but not nearly a majority. According to Boston Consulting the costs of creating an automotive market dominated by electric cars are prohibitively high.

So what will cause a major shift? The most likely scenario is when oil prices rise over $150 per barrel and world governments mandate stricter standards. Experts estimate that about 3 million electric vehicles and 11 million hybrid vehicles will be sold globally in 2020. If that number is accurate, the alternative fuel vehicles would only make up about 28% of vehicles sold.

To support a market for that many electric vehicles, governments would be required to spend about $140 billion for industry support while reaping a relatively small $12 billion savings by switching to electric vehicles in Europe and the United States. Most of the industry support would be required to offset the high consumer cost of alternative vehicles. The fear is that the technology will be extremely expensive and without corresponding consumer support. Currently, the cost of a hybrid vehicle is about $7,000 more than its non-hybrid counterpart. While that amount is expected to decrease by 2020 it is still a hard sell for both dealers and consumers for the small amount of fuel savings. This hard sell is compounded by today’s relatively low fuel prices.