If electric cars are the answer, what’s the question?

An eVgo charging station
An eVgo charging station

Like many environmentalists, I’d love to see lots of people driving electric cars. If  broadly adopted, electric cars will go some way towards limiting air pollution, reducing greenhouse gas emissions and undermining the power of oil oligarchs in the Arab world and elsewhere. Electric cars produce what economists call “positive externalities,” that is, consequences that benefit people other than their owners.

But what problem to do they solve for electric-car owners? That question has been on my mind since my recent visit to Israel, when I drove a Better Place car and experienced, first-hand, one of the obvious drawbacks of electric vehicles: They don’t go very far without refueling. [See my January blogpost, Better Place is alive but not well.] This is a problem not just for Better Place, but for other sellers of pure electric cars, like the Nissan Leaf and the Tesla Model S.

Today, I took a closer look at Better Place in a story for the YaleEnvironment360 website. Here’s how it begins:

If you want to sell electric cars, Israel looks like a great place to start. It’s a small country, with most people clustered around Tel Aviv and Jerusalem. Gasoline costs more than $7.50 a gallon, and oil revenues help support Israel’s Arab foes. So it’s easy to understand why Shai Agassi, an entrepreneur who was born in Israel and made a fortune in Silicon Valley, chose to launch his Better Place electric-car company in Israel, while preparing plans to expand in Europe, Australia, Japan, China, and the U.S.

What’s harder to understand is why things have gone so badly. Better Place, which staked out its position in the electric car market with an innovative battery-swapping technology, has sold only about 750 cars in Israel, while piling up losses of more than $500 million. Agassi was forced out of Better Place in October, his successor as CEO quit in January, and the company has put its global rollout on hold. Better Place needs to raise more money this year, and that won’t be easy, insiders say.

Start-ups often stumble, of course, but Better Place’s woes raise questions that matter to anyone who cares about electric cars and their future in a low-carbon economy. Has Better Place sputtered because of its own mistakes, or are the company’s difficulties a sign of the broader challenges facing electric cars?

As part of my reporting (much of which didn’t make its way into the story) I spoke to executives at General Motors, Nissan, the charging network eVgo and others, to see how electric cars are faring here in the U.S. Last year, Americans bought 52,000 all-electric cars or plug-in hybrids–vehicles, that is, designed to run primarily on electricity, like the Leaf,  the Chevy Volt and the Tesla. That’s about 0.35% of U.S. car sales, which topped 14.5 million in 2012. By comparison, the best-selling passenger car, the Toyota Camry, sold 405,000 units, without, incidentally, the benefit of the billions of dollars in government loans, grants and tax credits that have flowed to the electric car industry. EVs have attracted lots of attention but they have been slow to penetrate the mainstream.

Probably the most important consumer benefit of electric cars is that they cost less to operate than gas-powered cars, although how much less depends upon electricity and gas prices. EPA estimates that owners of the Nissan Leaf will save $1750 a year in fuel costs, and that Chevrolet Volt owners will save $1350 a year, compared to buyers of the average new car. Buying electricity for an EV is the equivalent of buying gas for about $1 a gallon, says the Electric Drive Transportation Association, an industry group.

By most accounts, electric cars are also quiet, fun to drive, high-tech, low maintenance and peppy, their owners say. The Volt topped Consumer Reports’ annual owner-satisfaction survey for two years in a row. Positive word-of-mouth should help drive future sales.

Then there are those positive externalities. EVs reduce oil dependence. And, most important for environmentalists, they curb greenhouse gas emissions, particularly in places where electricity is generated by low-carbon sources. A thorough 2012 analysis by the Union of Concerned Scientists concluded “in every part of the country, EVs outperform most gasoline-powered vehicles when it comes to global warming emissions.”

It’s for all these reasons, as well as the elusive promise of “green” manufacturing jobs, that the Obama administration — which set a goal of getting 1 million electric vehicles on the road by 2015 — has thrown its wholehearted support behind the electric-car and battery industries. An energy department program made guaranteed loans of $1.4 billion to Nissan North America, $529 million to troubled Fisker Automotive (which is reportedly up for sale) and $465 million to Tesla. Battery companies A123, which went bankrupt, and LG Chem, which has yet to scale up US production, got grants of about $132 million and $151 million, respectively. Meantime, electric car buyers, including those willing to fork over $101,000 for a Tesla, are eligible for $7,500 tax credits. Subsidizing millionaires to buy Teslas seems nutty to me, as does providing tax dollars to the battery-makers, but these subsidies have narrowed the sticker price gap between EVs and comparable gas-powered cars.

The $109,000 Tesla Roadster: your tax dollars at work
The $109,000 Tesla Roadster: your tax dollars at work

What no amount of government subsidy can do is solve the problem of “range anxiety,” that is, the fear that you will run out of power with nary a plug in site. Better Place offered a battery-swapping model, but it’s not working, so far. What we’re left with are a couple of competing approaches, both of which require tradeoffs. Nissan’s Leaf and other all-electrics rely, in part, on public charging stations, which are few and far between. The Chevy Volt has a backup gasoline engine, adding expense and weight.

John Curl, a product planning executive with Nissan, told me that  owners of the Leaf quickly learn to overcome any anxiety. Typically, they drive about 30 miles a day, so that an overnight charge at home gets them all the power they need. Depending on driving conditions, the 2013 Leaf and its 24kWh lithium-ion battery, delivers a range of about 80 miles. “You realize that you’re not driving as much as you think you are, and you find that the Leaf is a very, very good car for daily transportation,” Curl says.

For longer trips, electric car owners will have to rely on companies like eVgo, which is building networks of fast-charging stations, known as Freedom Stations, in Houston and Dallas, greater Washington, D.C., and along the West coast. These so-called fast chargers can deliver about 150 miles of added range per hour, according to Arun Banskota, the president of eVgo, which is owned by utility company NRG Energy. Other chargers, located in office buildings, shopping centers and airports, will deliver about 12 to 24 miles of range per hour.

Over time, Banskota says, the lower operating costs of EVs will drive them into the mass market. But the paradox of electric cars is that the economics make sense only if the cars are driven a lot, to recoup the higher sticker price–and that requires convenient, ubiquitous charging. “It’s going to happen, but I think it is going to take longer than anyone projected a few years ago,” Banskota says. “We’ve learned how challenging it is to change consumer behavior.”

The Volt asks less of its owners. It carries a gasoline engine and a 9.3 gallon fuel tank to supplement its electric motor so that “you don’t have to worry about finding a plug,” said Larry Nitz, who is executive director of electrification for GM. While the Volt has a smaller 16.5 kWh battery and thus less pure-electric range than the Leaf — roughly 25 to 45 miles per charge — that design reduces battery costs  and provides enough power for most trips. “Most customers get a lot of gas-free driving,” Nitz said. Critics scoff at the Volt as an clunky compromise because you are “always dragging a redundant drive train around with you,” a rival exec said.  But Nitz says having gasoline in reserve delivers peace of mind.  “You have to start somewhere,” he said.

The Volt and Leaf are pricey, with MSRPs of $39,145 for the Volt and $28,800 for the Leaf, before those $7500 tax credits kick in. The Volt is the bigger seller in the US, while the Leaf is the global leader. Sales for both cars are growing briskly, and no fewer than 30 EVs from Ford, Toyota, Mitsubishi and others will be on the road next year.

Meantime, though, all cars are becoming more efficient. My last two cars–a Honda Fit and a Honda Civic hybrid–get good gas mileage, and I simply don’t drive enough miles (6,000 a year) to upgrade to a more expensive electric car, much as I would like to.

So I’m still not sure exactly what the electric car makers are selling to the mainstream buyer. Lower operating costs? A hedge against rising gas prices? The elimination of the inconvenience of visiting the gas station? Or just a fun ride?

Brett Smith, who has been tracking the car industry for  years at the Center for Automotive Research in Ann Arbor, summed up the problem up nicely when we spoke: “Except for a very, very small group of people, an electric car is an inferior good at a higher price.”

No wonder EVs are a tough sell–at least for now. Of course, cheaper batteries or $5-a-gallon gasoline could change the equation in a hurry.


  1. says

    Here’s my stab at the question in your title:
    “How can we keep driving cars without using gasoline?”

    The reason the EV industry is getting so little traction is that, while the question has emotional appeal in our car-addicted culture, it’s really the wrong question. A much better question would be,

    “How can we continue to get where we need to go affordably while transitioning away from fossil fuels?”

    Electric vehicle technology is part of the answer to that question, but electric drive is not most appropriate in the car. As you point out in your article, the irony of EV technology is that it’s most cost effective when it’s used and recharged frequently. Hence it makes most sense for shared forms of transportation which are used intensively and return to predictable locations for recharging: fleet and mass transit vehicles with predictable routes, such as delivery trucks and buses, as well as cars from car sharing services.

    • Ed Reid says


      We are a long way from electric propulsion systems which can operate for a full day in a delivery truck or transit bus application.

    • Marc Gunther says

      Tom, I agree that those are good applications for EVs although as Ed notes, the current ranges (except for the Tesla S) won’t keep a car operating all day. But I don’t see a reason for most “ordinary” consumers to buy an EV. The carmakers are under pressure to push them because of the fuel-efficiency rules. The Obama administration is obviously pushing them, too, at significant expense, and by doing so feeding the mistaken idea that the government can’t do anything right. But one thing the government can’t do, thank goodness, is force people to buy stuff they don’t want.

  2. Brett says

    I think the cost and scarcity of stations are the big factors here. $28,800 is a lot for what is seen as an “experimental” car, and while the tax credits mitigate some of the pain, they’re also invisible at the point of purchase.

    But if your article was any indication, the problem with Better Place wasn’t dissatisfaction with customers or issues with the company itself. It was issues with other companies and local officialdom.

  3. Kevin Crowley says

    The idea that going to electric vehicles is somehow getting away from fossil fuels is so delusional as to be almost quaintly charming. Where does the electricity come from? It must be from CLEAN ENERGY Faerie(not). What percentage of the electricity that is generated actually gets to to the charger? What percentage of the electricity you put in the battery is available to actually move the car? By the time you add it all up you use more lbs of hydrocarbons to move an electric car than you do any other car on the market.

    Full disclosure. I belong to an electric car club and I am building an electric bike. I like the tech but it is not in any way practical. It needs 90% efficient batteries and storage for 300 miles and 15 minutes for a full charge.

    • Marc Gunther says

      Kevin, I think you are underestimating the climate potential of electric cars. No matter where in the US they are used, they reduce emissions, according to the Union of Concerned Scientists. Of course you’re right that there’s less impact in coal-dependent states, more in places like CA that have a lower-carbon electricity mix.

      Good luck with your electric bike! I’m fascinating by that technology, and hope to try it, and write about it soon.

    • Marc Gunther says

      That’s a fascinating chart, Jukka. If you’re right that the Leaf costs less to lease and less to operate than the Versa, leasing would eliminate the higher upfront costs of electric cars. All we are left with then is the challenge of range.

  4. Shawn Wilson says

    Uh, positive externalities? No. Reduced or different negative externalities are not the same thing as positive ones. Parks have positive externalities. Bakeries have positive externalities (if you like the smells). Electric cars do not.

    And merely not using oil doesn’t not mean fewer externalities. Those batteries are made from materials that must be imported. Merely a different dependency.

    Greater electricity consumption means more of those externalities. If your local power is gebnerated from coal (as 45% of US electricity is) electrics don’t even reduce emissions.

  5. Robert says

    Marc –

    I am a regular reader of your blog and have found that while I do not always agree with your perspective you usually do a great job of being accurate in your stories but I have to say, you have this one wrong; specifically in your references to Tesla and the Model S.

    I am a very proud Model S owner and an electric car enthusiast so I thought I would try to provide some additional information/perspective:

    • Tesla’s Model S won Motor Trends 2013 Car of the year. So this is not only an amazing EV it is an amazing car! Interested in hearing what others have to say about the Model S, follow this link: http://www.teslamotors.com/models/reviews. As an owner I can tell you it is truly a groundbreaking and industry changing EV but please go read what others have to say about it.

    • Your price point for a Tesla Model S is only accurate if buying a Performance Model S. Take a look at their pricing for the other options in batteries and configurations and you will find a wide range. Sure they are expensive cars but comparing them to other luxury sedans (the market that they are targeting) they are very comparable: http://www.teslamotors.com/models/options

    • As for your comment about subsidizing Tesla’s, please go and read Elon Musk’s blog where he addresses the question about the DOE loan (yes it was a loan not a subsidy as you state) http://www.teslamotors.com/blog/update-elon-musk

    To borrow a few lines from it:
    “The purpose of the DOE Advanced Technology Manufacturing Program was to serve as a catalyst for accelerating sustainable transport technology, which is in the best interests of all Americans and ultimately people throughout the world. In the case of Tesla, the result has been a resurgence in American manufacturing ability and the creation of over 3500 high quality jobs. Nonetheless, we have a duty at Tesla, having accepted this loan as a portion of our capital, to repay it at the earliest opportunity. We will do exactly that.”

    • I was very curious as to why you mention only the Model S in your article and then show a picture of the Roadster? You can find all kinds of Model S pictures on the Tesla website: http://www.teslamotors.com/models/gallery

    • Looking to take road trip in a Model S? Check out some of the amazing results that many journalists have had utilizing the ever expanding Tesla Supercharging Stations. In fact, you can even read about the journalist that tried to falsify and degrade the Model S’s performance- without success of course (of which he was publicly reversed by the New York Times for false and misleading reporting): http://www.teslamotors.com/blog/most-peculiar-test-drive-follow

    • Most Model S drivers have taken their cars on long road trips and the car has performed beautifully. Is there an opportunity to improve the convenience and ability to charge quickly, most certainly, but Tesla in particular is working very specifically on this subject. You can find more information about their Supercharging stations here: http://www.teslamotors.com/supercharger

    Thank you for writing about EV’s and for pointing out some of the challenges with the technology. While you raise some important points and critical issues for the EV industry and ones that do need solving, I hope the points above offer some additional insight and improved accuracy on your reporting on the Tesla Model S.

    Next time you are in the Dallas, TX area let me know, I am more than happy to show why the Model S is in a class of its own in the EV market.

    • Marc Gunther says

      Robert, many thanks for this. I’m glad you are a more than satisfied owner of a Model S. This seems to me to be the way forward for electric car adoption–happy owners, word of mouth, improved batteries and rising gas prices.

      To respond briefly: I used the photo of the Roadster to make the point that a $7500 tax credit for a $109,000 car seems wasteful to me. Anyone who can afford to buy the car won’t be swayed by the credit.

      I reported accurately that the $465 million to Tesla was a loan. Elon Musk, to his credit, has said that it will be repaid at least five years ahead of schedule. Is that loan technically a “subsidy”? Yes, if by that we mean that it saves Tesla money (it’s cheaper than a bank loan). No, in the sense that there’s no cost to taxpayers.

      If I do get to Dallas, I will take you up on your offer. I would love to check out the car!

  6. Sam says

    Just want to point out an couple of inaccuracies and or fallacies promoted by this article:

    1) “Funding Tesla = subsidising millionaires”

    – This is so wrong its kind of disturbing. Electric car technology is in a development phase, just entering mainstream. In other words it is low volume in the cosumer market now, but the idea is to eventually reach high volume general product status. The idea behind govt subsidies to help this technology make the bridge. Tesla’s strategy as it goes along is to put the technology in niche cars then increasingly progress towards mainstream: first a roadster, then a luxury sedan, then a crossover and then obviously looking a smaller sedan etc. Clearly the idea is to work down the food chain, but maximise the consumer utility so that at initial low volumes the company can reap as much from each consumer as possible on the way towards volume. In doing this Tesla in other words, makes the consumer bear as much as possible of the cost of getting to mainstream levels, to stretch further the cash from govt subsidies and investors equity. As such the subsidy is not just for “millionaires” but to enable the overall development of the technology as it progresses.

    This is very smart move b Testa. Which you should actually be praising as a model for eco-product development in general. But you chose here to take a quite misleading, populist-pandering line in bashing it. I expect better from you than this, sorry to tell you this. This was not your best here.

    2) “Except for a very, very small group of people, an electric car is an inferior good at a higher price.”

    – No, this is quite false. As your own article points out anyone who wants a zippy car and doesn’t drives long distances in one single go, having a daily commute of 40 miles or less,…..i.e. the vast majority of urban & city dwellers in the US, can find this type of vehicle to be a premium car not an inferior on. Like all things in cars, its up to the marketing department to position it correctly.

    I could tell you that a 60,000 dollar ex army pickup that gets 9 mpg, accelerates like a pregnant elephant, and is awful to park….”is Except for a very, very small group of people, an inferior good at a higher price”. But the auto industry has told the public that this ia “Humvee” and it is something that everyone wants.

    Clearly when the industry wants to sell turds as gold, it is well capable. Strangely enough when it has gold, it choses to treat it like turds. The press and columnists, present company included are glaringly complacent in not calling this for what it is – and in this particular case, are actually regurgitating what is actually false statements that are countered by the reality.

    Of course, its the same car industry that would be less profitable if the public takes a more utilitarian approach to buying cars, instead of buying 5x as much internal combustion horsepower as is needed, wile belching out masses of unnecessary carbon emissions and increasing the need to kowtow to dictators in oil producing countries. Only the industry itself benefits from this – the entire rest of society loses.

    You connect the dots, okay?

  7. says

    I enjoyed this post, and these are exactly the conversations we need to be having. I just decided to lease a Leaf, and just wrote a blog post about it at http://sustainableus.org/2013/05/26/leaf-economics/ . As discussed in the post, I was surprised when I ran the numbers that leasing a Leaf compares quite favorably with what I drive now– a much-older and fully-paid-for Subaru. For normal people who pay more for their cars, I can’t see how they wouldn’t come out ahead with a Leaf.
    The more EVs the public buys, the more charging stations there will be–Nissan just did a study about it and concluded that it was indeed a “chicken and egg” sort of situation. But for those of us concerned about the environment, this news means that buying an EV becomes a self-fulfilling prophesy in terms of increased practicality over time. -tb

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