The arguments for electric cars are many and hard to argue with. They can provide a new alternative for transportation while helping reduce the world’s dependence on oil, the commodity that threatens to suffocate global growth as prices march higher. The world’s dependence on oil will need to wane sometime in the future and electric cars will help this transition. And yet, very few know that it was one of the more preferred cars before the advent of the internal combustion engine and gradually lost the battle of becoming the preferred choice for customers.
In the 1890′s and early 19th century, many electric cars competitions were held where they competed to clock the fastest speed. In 1899, an electric car designed by Cammille Jenatzy, clocked a record speed of 65.79 mph. The first sustained effort to provide a recharging infrastructure for these electric cars was made in 1896 by Hartford Electric Light Company which covered over 6 million miles. The first commercial application of electric cars was made in 1897 when a fleet of electric New York taxis came into existence. However, in spite of this, it did not enter public consciousness until the energy crisis of 70′s and 80′s when it was suggested as an alternative to counter the monopoly of oil.
However, understanding why these cars went out of vogue is critical to understanding why their sales are not picking up right now. The gasoline cars which came out were cheaper, had an almost infinite range (since they could be refueled anywhere) and required negligible maintenance cost compared to electric cars. Since at that time, oil was in abundance, it was a no brainer for anyone to switch to the gasoline cars. Although the cost of driving the electric car was lower, it was a benefit which was realized over time and the consumers went for the cheaper gasoline car where they could save money immediately. Besides, it also saved the consumer from all the hassles of recharging and always keeping stock of the range traveled.
The situation remains pretty much the same right now, except that oil has become expensive and industry advocates are starting to lobby harder the point that the long term savings of running an electric car might triumph the price differential. Their are also concerns about pollution and an energy crisis.
In spite of these developments, the price differential between gasoline and electric cars remains enough (over $10K ) for an average consumer to prefer the gasoline car, especially since he think that he would be replacing it in the next 2-3 years. All the other factors of speed, maintenance costs, range and refueling exist as they did earlier with practically no improvement.
While the pollution and energy crisis appeals to the conscience of the consumer, it faces the same problem as that faced by UN in asking developed countries to cut carbon emissions. The consumers are going to assume that while they are sacrificing comfort for the sake of other people, other people are enjoying all the comforts and also nullifying their efforts. The fight between day to day comfort and conscience will most of the time be won by comfort.
Factors promoting gasoline cars - Price, Speed, Maintenance Costs, Range, Refueling ( All things car drivers care about )
Factors promoting electric cars – Lower Running Costs, Energy efficiency, Lower Pollution Levels ( All things users conscience cares about )
Personally, we think electric cars won’t be successful unless break through technology is able to make itself attractive on the parameters which the users care about – price, speed, maintenance cost, range and refueling. In other words appealing to the conscience of the consumer won’t have a meaningful impact unless a dramatic crisis forced this change.
We currently have a Trefis price estimate of $40.74 for Tesla Motors’s Stock, around 49% above the current market price.