U.S. Environment Not the Best for Electric Vehicles By John Gartner

Nissan is touting the success of the registration program for its upcoming Leaf EV, boasting 13,000 orders for its vehicles.

It is hoped across the industry (and in Washington DC) that sales of Electric vehicles will revive the American auto industry. While Pike Research believes that sales of EVs will grow relatively quickly, Electric car sales would likely grow much higher if it weren’t for our relatively cheap gasoline.

China will be the global leader in EV sales, with more than a quarter million of Electric vehicles sold in 2015, according to our projections at Pike Research. Sales of Electric Cars in Europe – even with fewer homes with convenient access to home charging – are expected to outpace the American market.

As shown in the table below, the cost of fuel in the U.S. is the lowest in the world thanks to lower taxes. While the average cost of electricity is also among the lowest in the world, the relative cost of fuel to electricity is the lowest in the world.

We calculated the annual savings of driving an EV instead of an equivalent passenger car and found that American drivers would save less than half as much (just over $800) by switching to an EV as drivers in Japan, France, Great Britain and Norway, who can save up to $2,000. This model even allows that in Europe, more fuel-efficient cars would be replaced (30 mpg was assumed for vehicles in the U.S., and 35 mpg diesel vehicles in Europe).

This simplistic model does not include the cost of the vehicle or any consumer tax incentives. Still it underscores how much can be saved by operating the vehicle. Smaller annual savings means a longer time to pay back the premium that EV buyers are likely to pay. While many of the early EV owners will be thinking more about the environment (and showing off to their neighbors) than about their wallets when buying, a shorter payback period would help to convince consumers who are more price-sensitive to purchase an EV.

In Europe, gasoline is more than 2.5 times the price in the U.S. thanks to higher taxes. In the EU, seventeen states also charge CO2-related taxes on passenger cars, according to the European Automobile Manufacturers Association.

Major efforts are underway in the U.S. to install charging equipment in metropolitan areas, and federal (up to $7,500) and state incentives will make EVs more affordable to prospective buyers. But raising the gas tax or adding a carbon tax would likely be the most direct route to increasing EV adoption here.

By John Gartner, www.pikeresearch.com