Yes, EVs can cost twice that of gas-powered cars, and for many only make sense with tax credits. But some manufacturing trends indicate this revolution is just getting charged up.
The electric-powered Chevy Bolt costs $20,000 more than the Cruze, but without tax incentives, would anyone consider buying one?
Edmunds, the car-research company, recently weighed in with a hard no of its own, warning that the elimination of a $7,500 U.S. tax credit is "likely to kill [the] U.S. EV market." Edmunds pinned its argument on what happened in Georgia, a state that became an unlikely leader in electric cars thanks to an extra $5,000 incentive. At one point, almost 4% of new cars being sold in Georgia were electric. Then they pulled away the punch bowl.
But a very illuminating thing happened after Georgia's incentives expired. Unlike the Nissan Leaf, which made up the majority of the EV market there, sales of electric-luxury Teslas were barely affected by the loss of the tax credit. In fact, more people are buying Teslas in Georgia today than during the subsidy years.
As a result, the Model S is now the best-selling large luxury vehicle in America. Changes to state or federal incentives are unlikely to alter that fact. But those Teslas are premium cars that start around $70,000. For plugins to really pass the subsidy test and take over the auto industry, they'll need to prove themselves in cheaper classes of car, and there will have to me more manufacturers besides Tesla.
For true mass-market appeal, the up-front sticker price is what matters most, and battery prices must come down further. Fortunately, prices are falling fast—by roughly 20% a year. The manufacturing cost of electric cars will fall below their gasoline counterparts across the board around 2026, according to a recent analysis by Bloomberg New Energy Finance.
The question of when electric cars will cost the same as their combustion counterparts isn't academic. The $7,500 federal incentive is set to taper off as each manufacturer reaches its 200,000th U.S. sale. For Tesla, that day will arrive sometime next year. Nissan and GM won't be far behind—and any extension of the subsidy by the Trump administration seems unlikely.
Government incentives were crucial to the birth of the EV industry, and many countries and local governments will continue to offer them because of the critical role electric cars play in reducing pollution and combating climate change.
But even where governments are less enlightened, the valley of despair is coming to an end. Tesla, the first to approach price and function parity in the Model S sedan and Model X SUV, will attempt to recreate that magic later this year with the Model 3, a $35,000 entry-level luxury sedan. A longer-range Nissan Leaf will be unveiled in September, and depending on its pricetag, it could begin to approach the parity zone in the sub-$30,000 market.
And then watch out: In 2018, Volkswagen plows into electrification with an Audi SUV and the first high-speed U.S. charging network to rival Tesla's Superchargers. Jaguar and Volvo both have promising cars on the way too, and by 2020, the avalanche really begins, with Mercedes, VW, General Motors and others releasing dozens of new models.