Even With Subsidies

Few products have received as many subsidies as the electric car. Subsidies have been given to build battery factories, to install charging stations, to build car factories and given to buyers of BEVs and PHEVs.

Yet, BEVs and PHEVs are failing in the market place.

Remember the goal to have one million such vehicles on the road by the end of 2015?

After six months in 2012, the Volt, GM’s Plug-in hybrid electric vehicle (PHEV), had sales of 8,817 cars.

The Nissan Leaf, an all-electric vehicle (BEV), had six month 2012 sales of 3,148 cars.

The Department of Energy (DOE) in 2011 estimated that 120,000 Volts and 25,000 Leaf’s would be sold in 2012.

Both the Volt and the Leaf will be hard pressed to reach these goals.

What about other makes of BEV and PHEV vehicles?

CBS did a revealing story in June about electric vehicles.

  • Fisker, alone, got a $524 million taxpayer loan, but didn’t open the plant in Deleware and then built its cars in Finland. CBS estimates Fisker will sell only 3,000 cars in 2012.
  • Navistar built 100 eStar vehicles, and then stopped.
  • Tesla Roadster, zero in 2012 and beyond.
  • Think City, zero in 2012 and beyond.
  • Ford Transit Connect, 500 before filing for bankruptcy.

CBS mentioned a few other makes with similarly depressing estimates.

These vehicles are non-competitive, even on a life-time cost basis where the cost of gasoline is included in the cost of ownership, primarily because of the high cost of the battery. At $10,000, or more, for each battery pack, BEVs and PHEVs are inherently high priced.

 McKinsey recently issued a report indicating that battery costs could come down from around $500 per kWh today to around $160 per kWh by 2025.

The problem with the McKinsey report is it mentions few specifics and talked about generalities, like increased manufacturing volume.

They are pushing an uphill battle. Every product has a learning curve that establishes predictable cost improvements with each doubling of production. In the case of Li-Ion batteries, they have already been subject to high volume production for use in laptop computers and cell phones, so that major improvements in lowering cost have already been harvested. It’s true that Li-Ion batteries for cars are different, but not so different as to exhibit entirely new learning curves with huge opportunities for cost improvements.

The McKinsey paper says that if the cost of the battery is cut in half, from $500 to $250 /kWh, the BEV or PHEV might be competitive “on a total cost of ownership basis.”

There is little evidence that battery costs will be cut in half, let alone by two thirds, any time soon.

Supporters of BEVs and PHEVs put an optimistic spin on current events.

They include sales from hybrids, like the Prius, when talking about electric vehicles. This inflates electric vehicle sales, making it necessary to dig out the real numbers to understand that BEVs and PHEVs are failing in the market place.

Should we really invest another $4 to $5 billion of taxpayer money to subsidize BEVs and PHEVs?

See EV Update November 2011, for an earlier status report with information on resale value and utility costs.


Vehicles that rely solely on battery power for propulsion are referred to as BEVs, for Battery Electric Vehicles, or EVs, for Electric Vehicles. The Prius, and cars similar to it, are hybrids that incorporate electric motors and are frequently represented in the press as electric vehicles.

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