Gas must hit $4.50 to make electric cars cost-effective

Harvard University’s Belfer Center has released a study arguing that Americans will eventually buy electric cars, but for now the green vehicles remain more expensive than conventional gas-powered automobiles, even when gasoline is taken into account.

Due to the high cost of electric car batteries, the study authors, Henry Lee and Grant Lovellette, allowed that electric vehicles currently cost between $4819-$5377 more than conventional vehicles over the life of the car. Gas prices must rise to between $4.50-$5.50, the study authors suggest, for electric vehicles to become less expensive to own than gas-powered vehicles.

The limited range of most electric vehicles also impedes consumer demand for the eco-friendly cars, say Lee and Lovellette. The authors seem to think “range anxiety” is a poor but common reason to dislike electric cars, “since urban drivers, on average, drive less than 20 miles per day, but no one has ever asserted that consumers base their car purchases solely on rational calculations.”

Lee and Lovellette reveal to some degree the importance of government in making electric vehicles a viable commercial product. Government subsidies for battery technology research “and a willingness by Congress to place a cost on oil imports and conventional and unconventional air pollutants would accelerate [the] process,” they write.

Of course, this omits the other method of making electric cars competitive — enact fuel efficiency standards that make gas-powered vehicles illegal to make or impossibly expensive. Given President Obama’s announcement today that fuel economy standards are set to rise to 54.5 mpg between 2017 and 2025, it seems that the electric vehicle industry is getting the government props necessary to make consumers buy the cars.

Beltway ConfidentialUS

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