(MoneyWatch) The sleek and speedy Tesla Model S is one of the coolest cars on the planet. The electric sport sedan got one of the highest rankings ever given by Consumer Reports. The company recently demonstrated that it can swap batteries in less time than it takes to fill up a gasoline car. But at prices ranging from $62,400 to $87,400, the luxury sport sedan remains out of the reach of most car buyers.
Touted as a way to cut driving costs and reduce greenhouse gases contributing to global warming, electric cars have ample governmental support. More affordable electric cars like the Nissan Leaf and the Chevrolet Volt are seeing stronger sales this year because of a combination of discounts from automakers and federal and state tax credits. But to get costs low enough for significant sales without heavy subsidies, companies must find a technological breakthrough that will lower the current cost of batteries.
Powertrain analyst Michael Omotoso of research firm LMC Automotive projects that plug-in hybrids like the Volt and the Toyota Prius will reach only 2 percent of the U.S. auto market, while all-battery cars like the Leaf and the Tesla models will just reach 1 percent. "To raise those numbers, we would have to see a steep drop in the cost of lithium-ion batteries," he says.
Auto companies had hopes that gas prices settling at historically high U.S. levels above $3.50 a gallon would encourage electric car buyers. According to the U.S. Department of Energy, the electric equivalent of a gallon of gas would cost just $1.14. In addition, companies are bringing out new electric models such as the Ford Focus Electric to help them meet stringent federal mileage standards that call for a company-wide average of 54.5 miles per gallon by 2025. Electric cars boost that average. For instance, the EPA rates the Nissan Leaf for the equivalent of 129 MPG in city driving and 102 on the highway.
While driver deals like the Nissan Leaf's $199 a month lease have nearly doubled the vehicle's sales in 2013, there remain serious barriers to wide adoption of all-electric and plug-in hybrid cars:
- Unfamiliarity with the technology. "The thought of utilizing this new technology will scare many midsize sedan buyers away," says analyst Jessica Caldwell of automotive website Edmunds.com. She also points out that while suburbanites can install home chargers in their garages that will recharge the batteries overnight, this will not be practical for many urban dwellers in high-rise buildings.
- Limited range. The Nissan Leaf can go just under 80 miles before a recharge, and many would-be buyers have so-called "range anxiety" about whether they can get to the next charging station before their battery runs out. The Tesla Model S has upped that to 265 miles, but still would be a problem for a long road trip. As a plug-in hybrid, the Chevy Volt can average about 40 miles on the battery and then another 340 miles before needing gasoline.
- Slow charging. Home charging takes overnight, but now companies are installing faster chargers that can go from fully depleted to 80 per cent charged in 30 minutes. But you still have to go to the special sites. Nissan is installing such facilities in some dealerships, and Tesla is building fast-charging stations between San Francisco and Los Angeles and on the East Coast between Washington, D.C., and Boston. Public fast-charging stations also are being built, and there are about 13,000 of them in the U.S. "But that's not much compared to the 150,000 gas stations," notes analyst Michael Omotoso of LMC Automotive.
If you are considering buying an electric car, consider these variables before pulling the trigger:
State tax incentives. In addition to the $7,500 federal tax credit available on most electric many states have tax credits or other incentives (Click here to check on your state.)
Local electricity costs. Electric rates vary greatly by state. States such as Washington with inexpensive hydroelectric power average 6.58 cents per kilowatt hour. In Connecticut, with some oil-fired plants the cost is more than double at 16.35 cents. (Click here to check your state costs.)
Electric cars will likely grow in sales as more buyers become familiar with the technology. But unless battery costs come down sharply and recharging issues are solved, electrics may never gain a big share of the U.S. market.