Fair Price Comparisons for Electric Cars

Journalists unfortunately are not serving us well when covering the development of electric cars. Rather than taking a clear look at the issue, reporters–who are, after all, like the rest of us–too easily fall into fallacies that serve the automotive and energy status quo. A recent Washington Post article is a textbook example. The article begins talking about the promise of the Chevrolet Volt, but quickly gets to a criticism:

The problem is GM will likely have to price the vehicle far higher than a comparable family car with a gas-powered engine, putting it out of reach for many consumers, particularly if oil prices remain low.

This is a false comparison because it assumes that retail gas prices reflect the actual cost of using that fuel. In fact, while retail gas prices are kept artificially low in the United States, the hidden costs of gasoline–from the military forces required to secure oil supplies to environmental and health effects–could well make the true price of a gas-driven car much closer to the cost of owning and operating a plug-in electric vehicle. There may be good metrics for a proper comparison out there, but damning the Volt because it retails at $10,000 more than “comparable” gas cars is crappy analysis. How about considering the differences in maintenance for a car that requires no oil changes, spark plugs, fuel injectors, air filters, transmission fluid, or timing belts?

The article then goes on to talk about competing strategies, such as more efficient hybrids from other companies and the luxury-first approach that Tesla took. Tesla’s model is based on the idea of having the first generation of these cars start as luxury models for early adopters. The argument holds that those early adopters will make the technology cheaper over time, paving the way for mass adoption as was the case with DVD players and flat screen TVs. As the Tesla CEO said, “We didn’t start with a Honda Civic because it would be a $70,000 to $80,000 Honda Civic.”

Fair enough. But we have a lot more at stake in the mass production of electric cars than we did in the development of the DVD. Moreover, the Volt’s critics are missing the fact that the Volt is coming in at just $10,000 over other family cars. By doing so, Chevy is showing Tesla that GM can leapfrog the luxury step and deliver the true game changer–a mass-production EV developed and built in this country. For the value of moving our country that much faster toward the day when we abandon the internal combustion engine, that much faster toward the day we no longer need to send our troops to secure Middle Eastern oil, a $10,000 tax credit or other incentive would be money well spent.

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