The High Cost of Electric Cars: CNN Money

September 23, 2010

Real advances in the automobile industry don't happen overnight. If you need any proof of that, just look at how long it has taken car makers to come up with an affordable gas-electric hybrid.

In 2009 the Boston Consulting Group, a management consulting firm, issued a report stating that the cost savings in fuel for hybrid and electric vehicles wouldn't be nearly enough to provide consumer incentive without some sort of significant government assistance to car makers and/or consumers. CNN Money picked up on the story and, a year later, the major points of the study are as relevant today as before:

Under what BCG calls the "most likely" scenario—where oil costs about $150 a barrel and governments enforce existing CO2 regulations—about 11 million hybrid and 3 million electric vehicles will be sold globally in 2020. Even then, hybrids would only make up 28 percent of vehicles sold in the world's biggest markets.

Despite that meager level of market penetration will require governments in Europe to spend about $70 billion in industry support, either in tax breaks or subsidies. (And that doesn't include the construction necessary to build a nationwide infrastructure of fuel stations, electricity generators, etc.)

Today, a hybrid vehicle costs about $7,000 more to produce than a similar non-hybrid. That cost is expected to only fall to $4,000—less than half—by 2020.

Partly or fully-electric cars can achieve much greater efficiency, but at much higher costs. For every percentage-point-decease in C02, a hybrid or electric car would cost about $140 to $280 more to produce.

Plug-in vehicles of various types present greater cost challenges because of they need expensive batteries. By 2020, when battery costs will have likely fallen, a battery for an electric car with an 80-mile range will still cost about $14,000.

Click here to read the CNN Money article in its entirety.


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