EV report neglects total cost and environmental savings
The Lux Research report published this month paints a less-than-rosy picture for the rate of adoption for electric cars. The Wall Street Journal’s Keith Johnson gives a comprehensive overview of the study in his October 7th story, “Speed Bump: Don’t Bank on Electric-Car Revolution, Lux Says.”
The Lux report claims a much slower growth rate for plug-in vehicles over the next decade than industry expectations, with an estimated 3-8% market share of global new-car sales by 2020. The study cites the leveling off of oil prices and a slow decline of battery prices to keep the cost of electric cars high.
We think the study neglects two very important influencers that will factor into people’s purchasing decisions: 1) lower total cost of ownership and 2) people’s desire to do right by the environment.
Total Cost of Ownership Factor
While the cost of electric car batteries may be high right now, commercialization of battery systems and increased production will bring the per kilowatt hour price down, which in turn will lower the cost of electric cars. Even the Lux report estimates that battery prices could go down by 30-40% by 2020, which could lead to significant reductions in EV price points. Beyond the battery, driving an electric car over a gas car would save people thousands of dollars in operating and maintenance costs each year. Below is a comparison of potential savings between a gas car and the CODA electric car:
Assumptions:
- Price per gallon - $3
- Annual miles driven – 15,000
- Conventional mileage – 21 mpg
- Watt-hours per mile of battery – 300
- Mileage per kilowatt hour – 4 miles
- Electricity cost per kilowatt hour - $0.07
Gas Car | CODA Electric Car | |
Annual fuel/charging costs | $2,143 | $263 |
Maintenance costs per year (oil & other) | $250 | $50 |
Total annual costs | $2,343 | $313 |
Cost per mile | $0.16 | $0.02 |
Annual operating savings | $0 | $2,080 |
Environmental Factor
The Lux report completely ignores consumer’s increasing desire for products that help them reduce their carbon footprint. In 2007, the Alliance for Climate Change and Roper Reports found that only 28% of Americans are environmentally uninterested. Of those that are interested in protecting the environment, 13% can be categorized as “selfless greens” – meaning, they are willing to change their behaviors and sacrifice for the environment. That’s about 40 million Americans who probably dislike “big oil” and would actively try to change their lifestyle to protect the environment.
Saving money and the environment? We think the Lux report underestimates how much demand there will be for electric cars once Americans understand the economics and environmental rewards.
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