Will Electric Cars Transform the U.S. Market

Abstract

For the past forty years, United States Presidents have repeatedly called for a reduction in the country's dependence on fossil fuels in general and foreign oil specifically. Stronger efficiency standards and higher taxes on motor fuels are a step in this direction, but achieving even greater reductions in oil consumption will require changing the way Americans power their transportation system. Some officials advocate the electrification of the passenger vehicle fleet as a path to meeting this goal. The Obama administration has, for example, embraced a goal of having one million electric-powered vehicles on U.S. roads by 2015, while others proposed a medium-term goal where electric vehicles would consist of 20% of the passenger vehicle fleet by 2030—approximately 30 million electric vehicles. The technology itself is not in question—many of the global automobile companies are planning to sell plug-in hybrid electric vehicles (PHEVs) and/or battery electric vehicles (BEVs) by 2012. The key question is, will Americans buy them? The answer depends on four additional questions: 1. Is the cost of purchasing and operating an electric vehicle more or less expensive than the cost of a comparable conventional gasoline-powered vehicle? 2. Are the comparative costs likely to change over the next twenty years? 3. Do electric vehicles provide the same attributes as conventional cars, and if not, do the differences matter? 4. Will electric car owners be able to access the electricity needed to power their vehicles? This paper attempts to answer these four questions.