Is the Electric Car Tipping Point All About Cost?

A recent Bloomberg article “Big Oil Is About to Lose Control of the Auto Industry: A Pollution-free Revolution Is Coming,” reports that prices of batteries for electric cars are falling fast, that cost parity between electric and gasoline cars is likely to occur within a decade, and that worldwide electric car sales totaled 288,500 (0.5% of total sales) in 2014, five times the total in 2011.  The author posits that demand for gasoline is flat and gas prices are low in substantial part because of the increasing market share of low and zero-emissions vehicles.

Meanwhile, a report from auto website suggests that green cars sales are highly dependent on gas prices.   According to Edmunds, hybrid and electric vehicle sales in the first quarter of 2015 declined relative to the same period last year because of lower gas prices.  Edmunds also reported that only 45% of people trading in a hybrid or electric vehicle in 2015 bought another one, down from 60% in 2012.

The relative cost calculus of gas and electric cars will likely be murky for many years, given the patchwork of subsidies available at the time of car purchase, the fluctuating prices of gasoline and electricity, and concerns about the battery longevity and resale value of electric cars.    Consumers that are not moved by environmental concerns and social pressures are unlikely to consider electric vehicle purchases until the cost advantages of electric car ownership are clear and well established, probably 5-10 years after rough cost parity is achieved.  The cost advantages of electric cars will depend on economies of scale—the more electric cars sold, the less expensive they will be.

The number of consumers who buy electric cars for moral and social reasons (assuming rough cost and convenience parity) will therefore be a critical factor in determining the speed of the transition from a gasoline-powered fleet to an electric fleet.

“Engineering” of consumer sentiment to reject gasoline and embrace electric-powered cars must go hand-in-hand with the chemical and mechanical engineering of the electric car.  The engineering of public disapproval of gasoline usage is still in its infancy.  Few people today would criticize a person for driving a gasoline powered car of average fuel efficiency. Consumers feel no social or moral pressure to avoid the use of gasoline, and therefore no need to spend a few extra dollars on an electric car.

A successful campaign educating the public about the vast quantities of carbon pollution emitted by the family car, and asking citizens to take responsibility for avoiding that pollution, could go a long way towards ushering in the era of the electric car, and the demise of gasoline.

-Matthew Metz