(MoneyWatch) The electric car industry has just seen another casualty: Better Place has filed to close its doors. The Israeli startup, which had raised $850 million in capital and once had a market valuation of $2.25 billion, only managed to sell 1300 cars.
Another way of looking at it is that there was roughly $654,000 put into each vehicle it sold. Although the industry isn't a complete loss -- Tesla Motors is profitable without accounting games and repaid a Department of Energy loan nine years early -- the going is far tougher than most people in it expected. Cost, limited range, battery issues, lower immediate price of oil, a lack of charging stations, and the inconsistent nature of tax subsidies makes a purchase risky for most people.
Logically, there should be little doubt that replacing fossil fuel cars with electric vehicles should make sense. electronic car era was dawning in the U.S.and shifting to electric could reduce air pollution and even result in quieter streets, as the motors are relatively silent. There are reasons that people asked whether an
However, look at the overall industry results and you see a mixed bag.
The vast majority of consumers aren't adapting to or adopting the new technology for a variety of reasons:
- Price -- The average cost of a new vehicle is around $30,000, not including average dealer incentive of $2,446. The Volt is about $40,000. The Fisker Karma is close to $100,000. A Tesla Model S runs $62,400 to $87,400. That could change over time as more sales mean greater economies of scale and lower per-unit manufacturing costs. Plus, Nissan dropped the Leaf's price to under $30,000 before any tax incentives.
- Limited range -- Gasoline has a great energy density, which means the amount of energy in a given volume of space. However, it must constantly be replaced. Batteries can be recharged, but they have a low energy density, which generally means that an electric car can travel fewer miles without recharging than car can do on a full tank of gas. This is an inconvenience that most consumers seem unwilling to put up with.
- Battery issues -- Not only is there the question of how much energy the battery can store, but its life span. Batteries only recharge a certain number of times. There is the potential for this expensive component to need replacement after a number of years, although the models haven't been out long enough to see.
- Price of oil -- Automobile technologies are like solar power: they get hot every time global oil prices significantly soar. Remember that oil prices jumped in 2008. Now that they are much lower again, consumers feel less pressure to make the move.
- Lack of charging stations -- One of the moves that made petroleum-based automobiles popular was the building of fuel stations all over the country. Suddenly drivers could refuel and avoid being stranded. There isn't a broadly-available equivalent that will necessarily work with all electric cars. Better Place tried to combine tying the sale of cars (the Renault Fluence Z.E.) with a network of charging stations (in Israel and Denmark, for starters). People driving any electric car need to be able to plug in wherever they are.
- Inconsistent nature of tax subsidies -- Tax subsidies of thousands of dollars in the U.S. have taken a big chunk off the price sticker of a new electric car. But that sort of public policy move is hardly guaranteed to remain. Consumers see enough other problems that reducing the tax bill doesn't become the major incentive for a purchase that legislators hoped it might.
Electric cars won't be widely adopted until enough of these challenges are solved, or until people get so desperate that buying an electric vehicle seems like a wise investment.