The Real Reason Nobody Is Buying Electric Cars


The Real Reason Nobody Is Buying Electric Cars

2012 Chevrolet Volt © by Stradablog

As an investor in General Motors in the middle part of the last decade, I watched in anticipation as the company announced plans to come out with an all electric car. Hippies everywhere rejoiced, anxious to drive a car that would minimize their footprint on the environment. They probably celebrated by eating some granola and wearing something made of hemp. Oh, and don’t worry about my General Motors investment. I sold well before they went bankrupt, making a nice profit.

Anyway, as they went through and ultimately reemerged from bankruptcy protection, plans for their electric car continued. They came up with a name, continued to test the concept, before finally deeming the Volt ready for consumers in late 2010. A year later, GM had ramped up production enough to expand the Volt availability to across the United States and Canada, as well as in parts of Europe and China.

There’s just one problem. Nobody is buying electric cars.

In 2011, GM produced just 12,400 Volts. They only sold about three quarters of them, or 8200 units. Think about this for a minute. In the United States alone, General Motors sold over 2.5 million cars. The Volt accounted for about a third of one percent of their 2011 sales. They made only 12,400 units, and they couldn’t even sell all of them. Thus far, the Volt has been a giant flop. There are all sorts of reasons why, all of which are different symptoms of the same root problem. Let’s see if you can figure it out.

First of all, there’s the cost of buying the car in the first place. The Volt has a price tag of a little over $40,000 CDN, before you factor in any rebates. The sticker price is pretty expensive for a subcompact car not much bigger than my Ford Focus. Sure, the fuel economy is outstanding, assuming you don’t travel any further than the range of the battery.  (which is 40-80km, according to GM) Families with kids generally choose a vehicle that’s a little bigger than a small sedan. I wouldn’t want to ride in the backseat of the Volt.

The potential gas savings just aren’t there. Let’s say you spend $15k more for the volt than you’d pay for a comparable gas powered car. Let’s also estimate you’ll be using the normal gasoline engine 25% of the time, since most of us drive long distances, at least sometimes. The average Canadian spends about $2200 per year on gasoline. Even if driving a Volt cuts that down to $1100 per year, (which I think is a generous allowance) you’re still waiting 13 years before the investment becomes worth it. And that’s not factoring in a dime for the extra electricity needed to charge the thing.

Speaking of charging it, you can charge the battery by plugging it into a normal outlet, if you have 10-12 hours available to charge the thing. Or, you can upgrade to a 240 volt outlet, often at a cost of a couple thousand bucks if you live in an older home, to cut the charging time in half.

Oh, and it turns out the batteries may catch on fire randomly after an accident.

But hey, at least you’re saving the environment, right? Doesn’t that make it all worth it?

Uh, no.

Remember when I alluded to the big problem with electric cars? Well, even though you’ve probably figured it out, I’m gonna give you the answer. They just cost too much.

Hopefully, by reading this blog, you’ve demonstrated you care about sustainability, at least a little. But unless your last name is Gates or Buffett, you have to make trade-offs. You just can afford to spend thousands more on an electric car, especially when a gas powered car will still get you to work. The extra costs just don’t make sense.

At what point do they? How much extra will the average person be willing to pay for a car to be sustainable? Well, a basic Prius can be had for a little over $27,000, at least in Canada. You’re already saving $13,000 by buying a Prius compared to a Volt. Judging by the dismal sales numbers of the Volt compared to the Prius, it turns out sustainable people are just as frugal as the rest of the population. Hey, who likes throwing their money away?

The price of gasoline isn’t high enough yet to make the fuel savings worthwhile either. Plus, car manufacturers have made better fuel economy a priority, meaning most every model gets better gas mileage than it’s predecessor. The benefits of lower greenhouse gas emissions don’t even get close to the benefits of saving money on vehicle costs, at least for the short sighted among us.

Ultimately, electric cars are going to have to get considerably cheaper before the 99% even consider buying one. If you’re in the 1% of sustainable folks, congratulations for being ahead of the curve. For the rest of us, we’d rather save money.

Do you own a hybrid vehicle or electric car? Have you, or are you, on pace to recoup the extra money it cost?

 

 

82 comments to The Real Reason Nobody Is Buying Electric Cars

  • I think they’ll catch on a little more. Cost for new technology is always higher in the beginning. If the costs go down over the next few years, the break-even will be there and they’ll become more attractive.

  • Most electric or hybrid cars (including the Prius) take years to earn back your initial investment. Because of this and as you point out, I would guess most people that buy these cars are environmentally cautious (unless people buying are just bad at math).

    I’m curious how the Nissan Leaf is doing sales wise. I haven’t heard much about it, but hopefully it’s a better story an the Volt.

    • Nelson Smith

      Exactly. The people buying the Volt care about the environment, not their wallets.

      • Greg

        Agreed , the people buying the Volt care about the environment, Not their wallets, food in their stomachs, kids education, vacation, etc. Let the rich have em, their the only ones that can afford em anyway. Let em feel good about heating and cooling their 5000 square foot homes

  • I agree with everything you pointed out. Why would I spend $40K on a car when I can roughly the same car sans the hybrid engine for $20K? The time it takes to re-coup that extra $20K isn’t worth it. Especially since new MPG standards (here in the US) are forcing car manufacturers to increase MPG. New sub-compact cars are getting 35-40 MPG now. It just doesn’t make financial sense.

    I was initially curious about the cost of re-charging the battery too. Electricity costs money, meaning when you are plugging the car in, you are paying for it. I spoke with a GM dealership and they claim the cost is minute. I forget the exact figure but it wasn’t high at all.

    My question is this: does the battery fail after a set number of charges? The battery fails to hold a charge as it ages in just about everything else. I wonder how much it costs to replace the battery. I assume much more than just a standard battery.

    • Nelson Smith

      I’ve heard it costs $5k to replace the battery of a Prius. So maybe a little more for the Volt battery? I don’t know.

      • That’s a really old figure. Current retail is around $2-3k. Of course, it’s a bit of a moot point since the issue of failing is nothing like the common perception: Toyota last estimated their failure rate at 1 in 40,000 for the 2nd gen (now on 3rd gen); and Ford recently put the odds at 1 in 8.5 million.

        And even if you do get extremely unlucky, you don’t pay retail to fix it. More aftermarket packs arrive in scrapyards from accidents than fail and need replacing, and even then the nerds have figured out how to repair a battery pack that’s just had one or two cells go.

        Now, all that said, that’s for Ford and Toyota. Honda had a bit more trouble (largely traced to their hybrids with manual transmissions and much blame was put on the drivers — new Honda hybrids don’t have manual gearboxes), and I would be a bit more suspicious of a GM Volt since this is still a 1st-gen pack for them, and damn the conspiracy theories, they just seem to engineer their hybrids to fail on purpose. The pack will go through a deeper charge-discharge cycle (on a regular hybrid the battery is kept in a narrow range of charge to extend battery life, except for more extreme driving conditions). It will be substantially more expensive, though again it’s likely that by the time you need one (if you need one), there will be enough wrecks that you can get an aftermarket one for cheap.

        Anyway, as for the set number of charges question, yes and no. It’s anticipated that the battery packs will have a lifetime limited by both charging cycles and time, but both are quite generous: 20-30 years whether you use it or not, and a million kilometres worth of charge/discharge cycles if you do use it. But that’s all from extrapolation: the time factor we’ll just have to wait and see (the first gens are only ~15 years old now), and only a few taxis have hit the million kilometre mark, and they’re still running.

  • You had me at $40,000… that’s way too high of a sticker price for me… I was hoping the Nissa Leaf would be better…

  • For most people, the charge time is not an issue. The vehicle recharges overnight (when rates are cheaper, by the way), and in some cases the vehicle can be plugged in while at work. The up-front costs and the gasoline costs defrayed are a much bigger issue. When the upfront costs fall a bit and gasoline costs more (both are likely, it’s just a question of when), electric cars will become more attractive.

    • Nelson Smith

      Plus, there’s the backup gasoline engine, which I think is needed.

      At some point, as the price of the electric cars go down and gas prices go up, it’ll make economic sense. It just doesn’t right now.

  • You assume it will use the engine 25% of the time, but 50% of the cost of gas?? I thought that was to include the cost of electricity, but then you later say that it isn’t… Also, you forgot the provincial subsidies available. Though those are only in 3 provinces, they’re the only 3 provinces where GM is even attempting to sell Volts!

    Anyway, nitpicking aside, this is a decent article explaining why the Volt sucks. And it is a horrid little car — us hybrid/EV freaks have been panning it for years as misguided vapourware. Now that it’s actually here, it’s not much better.

    Did they design it to be a series-hybrid with an efficient Atkinson-like engine for range extension? No, they slapped in an off-the-shelf Otto cycle engine.

    Did they design it from the ground up to be efficient, both in terms of fuel consumption and space usage? Nope: you can see the design philosophy in the concept version, which was jokingly said to be more aerodynamic when put backwards in the air tunnel. The end result only seats 4 people, and has limited cargo space and visibility.

    I’m looking forward to the plug-in Prius later this year, which should hopefully hold up a bit better on the eco-friendly and wallet-friendly scores. The Rav4EV was a big hit in the 90’s, so its reincarnation should be fun and frugal too.

    • Nelson Smith

      Considering my own driving habits, I use very little gas driving around town, and then using large amounts when I take some sort of road trip. That’s why I assumed the you use 50% of the gas for 25% of the time. The criticisms about the government rebates are valid.

      Most of the other stuff in your comment I barely understand. Nerd. :)

    • The new Prius V has quite a bit more storage.
      We looked at the Ford Explorer hybrid when buying our Outback but the price tag and engine type just didn’t do it for us as most of the miles we put on our car are highway.

  • brad

    I think apart from sticker shock the big issue for most people is range and time. If you’re driving a long distance in a standard car, you just pull up to a gas station and fill up your tank, it takes 5-10 minutes max. With an electric car you have to sit and wait 12 hours for your battery to recharge. Some people never drive more than 10km/day, but most people want the option to be able to drive farther if they want to.

    There’s a company (can’t remember the name, unfortunately) that has developed a modular battery that can be switched in/switched out at a gas station in about 15 seconds. They’ve set up networks of these battery-swapping stations at gas stations in Hawaii and some other islands, also in Israel if I remember correctly. That has made people much more receptive to the idea of electric cars, because it gives them the security of knowing they won’t be stuck somewhere for 12 hours waiting for a recharge. If that model takes hold, it’ll knock down one of the biggest barriers to electric cars.

    The other barrier, up-front cost, would come down once you get economies of scale. You’re already seeing that with hybrids, for example — the new Honda Insight is way cheaper than a Prius.

    • Nelson Smith

      I should probably mention that the Volt has a backup gasoline engine, and in my opinion anyway, every electric car will have one. The problem with a fully electric car is the range. Sure, 95% of the time you won’t leave the range, but when you do, you’re screwed.

  • I think they cost too much compared to gas. It may not be worth spending that extra money yet. As gas prices continue to increase, this reason may change and more people will turn to electric or hybrid cars.

  • I will never by an electric car as long as my province continues generating electricity from coal-fired electric power plants!

  • Wow. I didn’t realize they only had a range of 40-80 km before you had to recharge. That’s amazingly bad.

  • The U.S. Dept. of Energy has created a tool that compares cumulative cost of ownership for different vehicles.
    http://www.afdc.energy.gov/afdc/calc/
    In case you were wondering, your point against the Volt holds up…too expensive.

  • I have often thought about buying a hybrid car, but won’t because of price and battery replacement cost. It just does not make sense.

  • I want so badly for electric vehicles to make economic sense, because I love the idea of having one. Here’s another problem you didn’t mention.

    If you live in an apartment like me, you can’t have one at all. There’s nowhere to charge it. I don’t know the % of people who live in apartments, but they immediately lose a very large percentage of potential customers.

  • Electric cars will eventually get there, it’s only a matter of time. Maybe it will be another one or two decades, but good old technological progress as well as dwindling supplies of fossil fuels will all but assure it.

  • I think it’s definitely still that kind of “let’s test on the rich” stage. Prices will drop and tech will improve. For now a hybrid is prob the best way to go.

  • brad

    I think once gasoline hits $20/gallon, which it will eventually due to the laws of supply and demand, I think everyone will be driving electric cars. ;-)

  • Simple Rich Living

    I agree that people are buying electric cars for the environment and to feel like they are doing something better for the environment, it’s definitely not for the saving gas. If it does end up saving them money, it’s a bonus.

  • Sharon

    One very important piece of information not included in your article:

    “Now James Hohman at Michigan’s Mackinac Center has added up the numbers at the supply end and found the public subsidy for the Volt amounts to a $3 billion, putting the public subsidy per car at a whopping $250,000 per car.” (widely available by googling)

    ” … putting the public subsidy per car at a whopping $250,000 per car.” !!!!!!!!!!!!!!

    If this is what is spent to produce “green cars” ….perhaps we should stop. No?

  • As soon as the costs can match what the consumer can pay these should take off, at least in some areas. However it all depends on the price of electricity. In some places gas costs less so electric cars are not going to seem like a good option when it comes to the monthly budget. In this case, I think subsidies should be put in effect. Regardless, alternative technologies do need to take off soon if we are going to make any headway.

    • Nelson Smith

      That’s always the problem with new technology. For the most part, the early adopters end up subsidizing the cost for the company so they can end up making the changes needed to make it attractive to the masses.

  • I desperately want a Tesla- any Tesla, but they are all substantially more than the Volt.
    We drive a diesel vehicle and run B99. We chose this over a hybrid because there isn’t the down the road expense of paying for a new battery, gas mileage is better than on a gas car (though not as good as if we were running regular diesel), and the engine will last forever. We will likely never have to replace this car, and it pulls us off standard oil products almost completely- like an all electric car.
    Given that, this last week, our diesel car has been in the shop after being hit. We got a Nissan Leaf as our rental. Good acceleration, did well going up hills (matters when you live in Seattle), and got C to school and back at roughly 60 miles round trip. My problems with it are that it only has at best a 100 mile range on the battery. Turing on the headlights, the windshield wipers, or defrosting the windows all reduces that substantially. Going up hills reduces. The 60 mile trip C too was essentially it’s entire range. Basically, it would be good as our secondary car, but not our primary.

    • Nelson Smith

      Does the Leaf not have a secondary gasoline engine? If it doesn’t, I think it’s doomed, no matter how cool it is. I wouldn’t drive past the battery range very often, but I need a car to be able to.

  • Hunter @ Bike Lane Living

    The auto market place is fickle. The challenge that GM had when developing the Volt is that they did not know what price gasoline would be at launch…oil was $147 per barrel (US) in 2008. Plus, GM had to develop the technology and this proved to be very expensive. I see many ways to be critical of the Volt but it is a groundbreaking achievement by GM to follow through and be the first to get a plug-in hybrid to market.

    It would be interesting to re-visit this article in 12 months and see evaluate the economics of electric / plugin hybrid / gas-electric hybrid vehicles. We’re about to experience an avalance of new models by most manufacturers and this will surely drive prices lower. I think the performance of eco cars will improve to with advances in battery technology. Also, oil is likely to rise in the first half of 2012. More expensive gasoline narrows the break-even margin between time but it it will also increase the demand of fuel efficient vehicles, and auto makers don’t discount vehicles in high demand. The best time to jump into a hybrid is not a simple decision at all.

    • Nelson Smith

      From my back of the napkin calculations, the price of gas would have to double (at least) for me to even rethink the gasoline savings. I don’t think that happens anytime soon, barring some sort of war with Iran.

      The technology is promising, and I think in a few years they’ll make sense. We’re just too early into the game so far.

      • I think you’re using fuzzy math. The Volt hybrid premium is not that steep. In The U.S. the Volt has an MSRP of $31,645 after $7,500 tax credit. Try buying anyother family sedan of similar size (Malibu, Camry, Fusion) with realistic options that most consumers require and you’ll find that most of these cars are also approaching $30,000.

        The point about new models is that market forces will push electric / hybris car prices lower.

        If GM wants to sell more they could lower the price.

  • The only way automobile manufacturers can make the newer alternative fuel vehicles accessible to a broader market is through a lease. About one third of Volt owners took advantage of the lease and 15% of the Nissan Leaf owners went with the lease. As a matter of fact that is the only way you can purchase the Honda FCX Clarity.

    • Nelson Smith

      I do prefer to own my cars outright. That way I can drive them into the ground and reap the benefits of a very low ownership cost when the car is paid off.

  • One thing that should be factored in is the carbon footprint in making these vehicles. According to the infamous Top Gear motoring program in the UK, for the Prius and others made in SE Asia, the raw materials come from Canada are processed in Germany, moved to China for assembly into batteries then to Japan for assembly before being shipped back to the US or Europe. I don’t about US-made cars whether they send things round the world too but the price seems to be very high anyway.

    when you compare the consumption particularly for a diesel car, it does make little sense. However there are new battery technologies coming along that will change things.

    As far as gas/petrol is concerned, even over here where petrol is about twice the cost (£1.30+ a litre) and with generally shorter distances, hybrids are still not that common out of the city centre.

    • brad

      There are lots of studies showing that the carbon footprint of manufacturing a car (even one with parts made and shipped from multiple countries, which is most cars these days) is dwarfed by the carbon footprint associated with its lifetime gasoline use. This also holds true even when you allocate the carbon footprint associated with designing the car in the first place and creating/upgrading the factory space and tools required to make it (those emissions are allocated to all of the cars manufactured in the factor, so the embedded emissions per car are relatively small).

    • Nelson Smith

      Good point.

      I have heard that the carbon footprint of a Prius is bigger than that of a Hummer. Not sure if that’s true or not, but it’s food for thought.

  • If you’re looking for pure fuel economy, a VW Golf TDI is hard to beat. 42MPG highway, a good legacy engine design, good power to weight, and a somewhat upgraded interior. Of course, depending on the price ratio of diesel to gas where you are, that may or may not be attractive.

    Personally, being 6’6″ tall these all look like clown cars to me. I couldn’t drive one regardless of the economics or environmental impact.

  • This doesn’t take into account areas with ridiculous electricity rates. For example my 1400 sq foot condo uses about $250 worth of electricity per month…imagine if I added my car on to it?! I wouldn’t be offsetting the costs I would just be shifting.

  • I would love to help the environment by decreasing my transportation effects, but simply cannot justify the economic cost at this time.

  • I think I’m just like everyone else. I like the idea of buying an electric car, but I’m not willing to spend $40,000 for a minimal savings.

  • Allen

    I don’t think Mr. Buffett would invest in a Volt. There is very little cost benefit or opportunity for the initial investment recovery for the reasons you highlight.

    Overall I agree that it is just a bad investment with little pay back opportunities.

  • Ariel

    I Think that the Electric sport cars looks great (Tesla) but now is a little expensive!! Here in Europa we have a lot of E – Cars but the people not buy them. I think that we must wait at least 10 year to see some change at the Street!!
    Gretings from Frankfurt!

  • Karl

    I just don’t see the point of hybrids, or what all the fuss is over for these new cars with 40mpg. My ’93 Civic VX is scoring me over 60mpg a tank, no hypermilling. Sure, it sucks at going over the rockies but not that much. It’s still a better drive than a Sebring. Why don’t manufacturers just do a refresh of their old econoboxes? Cheaper to buy and make, better for the environment than a big nickle battery pack, and the mpg is just as good, or better. I reckon my Civic gets to 60mph faster than the Volt or the Prius too.

    Refresh the econoboxes!

    • Karl: LOL.

      Remember: don’t mix up your units. It’s always best to use L/100 km not only because it makes more sense, but also because there isn’t the imperial/US gallon confusion. The tests that would give your old civic VX 60 MPG would give a Prius 76 MPG — and the Prius gets that in the city, too, not just out on the open road. In the Canadian test, the Civic VX is at 4.7/4.3 L/100 km vs the Prius at 3.7/3.8 L/100 km.

      Plus it’s much roomier, much safer, much quieter, and the emissions are much cleaner.

      That’s what the big deal is.

      On the last point of cleaner emissions, that’s particularly relevant to the VX, which got much of its fuel efficiency improvement vs the rest of the civics that year thanks to lean burning. There are very few (no?) lean burning engines on modern cars in north america due to the difficulties in cleaning the emissions.

  • Jayce Cameron

    I have chronic asthma. As a result I’ve had to quit smoking cigarettes ( I used to really enjoy ) Can’t perform extended cardio workouts ( used to love sports ) and whenever someone burns toast I have to leave the room. I lost my last job as a bio-composter venting into the air made breathing difficult. Driving behind a diesel is the absolute worste as I have to increase the distance between me and the offender a staggering amount and then people start honking at me. “STFU please! I’m literally dying here trying to get to work FFS!”.. so needless to say I’m entirely behind the electric car movement. That said I don’t make much money, even after going to school. My current car was the cheapest on the lot. an 11 yr old car that I haggled down to $2,200 form $3K. My entire life savings including my RRSP’s tallies at $30K. I’d like to be able to buy a house one day but at the price of these electric cars it’s one or the other. not both. I wil lhave to wait until I find on on a used car lot 10-15 years from now with a price tag of $3K. I will then haggle them down to $2,200 and be able to sleep and breath better. until that time sadly we all suffer. especially us asthma folks 8-( please don’t buy diesel, they are more efficient as far as price goes for fuel economy but many pollutants still exist and it doesn’t burn cleaner. Do us a favor and at least buy a gasoline car 8-(

  • I have driven a Nissan Leaf and can attest to the fact that it’s a fantastic car. It’s fast, quiet, and statistically able to fulfill the needs of most North American drivers. The problem is that people don’t want to pay a 20k premium for a car that meets most, not all of their needs. Factory built electric will have their day once battery prices come down and the cars are selling enough to warrant more mass production.

    If you love the idea of an electric car but not the price, consider building one yourself. I am in the home built electric car industry and its really not that hard. You can build a decent newer model electric car or truck for under 20k. Much less if you’re willing to put some work into an older car. My Chevrolet Sprint conversion was under $3500. I realize but everybody is going to be happy driving a Sprint but the point is that you can drive an electric car for much, much less than 40k.

  • Urdu Shayari

    I think they cost too much compared to gas. It may not be worth spending that extra money yet. As gas prices continue to increase, this reason may change and more people will turn to electric or hybrid cars.

  • rahul

    This doesn’t take into account areas with ridiculous electricity rates. For example my 1400 sq foot condo uses about $250 worth of electricity per month…imagine if I added my car on to it?! I wouldn’t be offsetting the costs I would just be shifting.

    • Jeff

      Nobody has suggested that shifting from gas to electric would be cheaper. But if Natural gas starts to power the electric plants, it could start to be cheaper to use electric vs the cost of transporting/refining oil.

  • Exam-Results

    I agree that people are buying electric cars for the environment and to feel like they are doing something better for the environment, it’s definitely not for the saving gas. If it does end up saving them money, it’s a bonus.

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