CNN Money: Electric Vehicles Still Too Expensive to be Cost Competitive; EVs Need a $12,000 Tax Credit to Compete

4 years ago by Eric Loveday 13

Or Lease Me for as Low as $199 Per Month

Or Lease Me for as Low as $199 Per Month

CNN Money says that, according to the Congressional Budget Office’s (CBO) presentation at the 2013 Energy Information Administration conference on June 24, electric vehicles are still too expensive to compete with gas-burning automobiles.

The Chevrolet Spark EV And Fiat 500e Lineup Well Against Each Other (click to enlarge)

Both Lease for Only $199 Per Month

While we wholeheartedly disagree with this statement, it was definitely touched upon at the conference and so is worth highlighting here to further the discussion.

The CBO’s presentation wasn’t only examining the purchase price of electric vehicles.  The $7,500 tax credit was included and it was one of those total ownership cost discussions.

Here’s the explanation from CNN Money:

“Based on 2011 prices, federal tax credits alone do not offset the higher lifetime cost of driving electric vehicles compared to traditional gasoline-fueled cars. A key assumption underlying the analysis is that tax credits are responsible for an estimated 30% of electric-vehicle sales.”

Of course, that “based on 2011 prices” is bound to be the biggest issue here, as several electric vehicles have come down in price since then.

Putting that price issue aside for now, Ron Gecan, analyst at CBO’s microeconomic studies division, states this, according to CNN Money:

“The federal tax credit would need a substantial increase for greenhouse gas emission-free cars to be as cost effective as traditional vehicles. It would take a federal tax-credit of more than $12,000 to make a 16-kWh battery-powered car commercially competitive with a traditional high fuel-economy compact car.”

It doesn’t take a rocket scientist to figure out that, at $12,000, some electric vehicles would essentially be free to lease, but we’re assuming the CBO examines only buying, while ignoring the method chosen by most Americans: leasing.

We personally wouldn’t push for a $12,000 credit, but we’d take it for awhile if the government wants to go that route.  It surely would spark the industry, but it’s not sustainable and there’s really no need for it.  The industry already grows on a monthly basis and will continue to do so without the help of additional incentives.

Source: CNN Money

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13 responses to "CNN Money: Electric Vehicles Still Too Expensive to be Cost Competitive; EVs Need a $12,000 Tax Credit to Compete"

  1. Josh says:

    The only additional incentive that makes sense is to make the $7500 a point of purchase instant rebate. This might help balance the purchase/lease ratio.

  2. David Murray says:

    I went over to the article and left my two cents. Here’s what I posted:

    The prices are wrong in this article. The list the Ford Focus EV at $39,995 but it is actually $34,995.

    Also they claim “well publicized troubles with GM’s Volt.” There have been no troubles with the Volt. What troubles? Let me guess, all of the fire stories? Guess what there has never been a Volt catch on fire outside of the Lab, ever.. And there are tens of thousands of them on the roads. Add to that, gasoline cars catch on fire all the time and nobody mentions that.

    And how do you compare the price of an electric car to the price of a gasoline car? Let me guess. The media loves to compare a Volt to a Cruze or compare a Leaf to a Versa. Come on people, you have to go down to a dealership and actually sit in these cars for a whole 10 seconds to realize there is no comparison in these vehicles. You might as well be comparing a Yugo to a Maserati, it is that insane.

    But the most important thing is that EVs don’t need to be cost competitive. I love driving an EV because of the experience. Its hard to explain if you haven’t driven one. The ride is smooth and silent and the acceleration response is incredible. There is no delay from a transmission shifting or engine revving. Plus I get to charge up at night while I’m sleeping and never have to take time out of my schedule to go to gas station. These things are worth a lot to me. I mean, people buy expensive wheels, stereos, or 4×4 vehicles just because they like them. Nobody asks them if those features pay for themselves. It just so happens an electric drive WILL pay for itself eventually, but that doesn’t have to be the main reason for buying one!

    1. kdawg says:

      Good points. I can’t believe they said “troubles with the Volt”. Ugh.

      Someone should mention Kiplinger’s calculator that showed the 5 year cost on the Volt is only $1000 more than the Chevy Cruze.

  3. Dave K. says:

    Ditto to D. M., people don’t really base their car buying decisions on logic. But the article is just wrong, I bought a Leaf in 2011 and my math says it was a good financial decision even without the tax credits(we have a state credit as well). With the credits it becomes very compelling, I think the credits are good to get people to try this new technology but within 5 years I think they will become unnecessary.

  4. Mark H says:

    Old but still valid. Use the DOE calculator with new EV pricing to make the comparison to any car BUT consider performance when you do so. i.e. you would not compare a 4cyl Accord to a 6cyl Accord so don’t pull the same stun on an EV

    http://insideevs.com/what-does-an-ev-really-cost/
    http://insideevs.com/ev-vs-ice-maintenance-the-first-100000-miles/

  5. Anderlan says:

    Why isn’t $12k sustainable? Yes, it’s not sustainable when half of the 20 million cars sold per year are electric. That’s 120 billion dollars per year, or one year in Iraq or Afghanistan…

    So, half of all car sales at $12k, that’s clearly too far. But where do you think the line should be?

    I think it should be $4 billion, or the low side of calculations of oil&gas subsidies per year. So, at $12k, we could subsidize 333,333 EV sales per year. Anyone complains about the money, REMIND them we are publicly supporting the most mature profitable industry there is the exact same amount.

  6. cleantech investor says:

    This Fortune CNN article is misleading – the $12,000 figure is not for EVs but hybrids.
    The CBO report itself is completely invalid.
    It is based on completely theoretica EVs rather than actual EVs..
    The battery prices used are twice actual prices.
    The interest rates used are 3 times higher than actual interest rates.
    The miles driven assumption is lower than reality.
    In other words it is complete BS.
    Newer studies based on real EVs show they pay for themselves within one or two years.

  7. Anthony says:

    “GM’s money-losing Volt”

    That’s when I knew this article was trash.

  8. bloggin says:

    Let’s see….

    The $70k+ Tesla Model S outsells the BMW 7-Series and BM S-Class combined.

    The $30k Leaf outsells the Audi A5

    The $40k Volt outsells the Mini Countryman

    The $40k Focus Electric outsells the Volvo C30.

    It seems those ignorant of EVs or just against EV are really struggling with the consistent sales increase of EVs, so their arguments are becoming more and more out of balance.

    Trying to compare the ever emerging technological advancement that is the EV to the centuries old ICE vehicle, is like trying to compare a smart phone with centuries old rotary phone. The vehicle may get you there, and the call may go through, but how it’s done is a world of difference.

    It seems their challenge is not being able to be forward thinking, but stuck basing their present ideas and concepts on the past, which keeps them stuck there.

    But July’s even higher EV sales will just freak them out even more.

    1. bloggin says:

      oops…..was supposed to be MB S-Class. ha ha

  9. Lou Grinzo says:

    Prior comments already hit the points I would make, and they do it better than I would while seeing red over such a deeply flawed report. So let me take a different approach to this situation, and point out that the EV haters (which includes Toyota when they push hydrogen fuel cells and bash EVs) are putting ever more weight on the wrong foot. Likely within 5 to 10 years we’ll see reductions in battery costs that push the market to a tipping point where EVs take off and, barring any supply constraints, are “everywhere” on the roads. Think for a moment what that means for oil companies, parts suppliers, local businesses (anyone care to work out at the local gym that offers free EV charging, or have lunch at the nearest EV cafe?), health impacts, etc.

    This is going to be the most disruptive technological change since the Internet or the invention of the PC, and we’re right at the beginning of it. Those betting against it are going to look very foolish, and in the case of companies like Toyota, will have to do a tire-squealing, neck-snapping 180-degree turn and introduce their own EV and then try to convince us they’ve been an EV booster all along.

    1. Josh says:

      I agree with you sentiments about Toyota. They are minting money on the synergy drive right now, so it makes good business sense to keep the status quo.

      I think their real hedge is the investment/partnership with Tesla. When the EV market really takes off, they will be swooping in to buy them to get both the technology and add Tesla to the brand lineup (for instant EV credibility).

  10. Ocean Railroader says:

    If they cut the price of the Ford EV by $5000 grand and there is the existing 7500 tax credit that alone creates a price cut of $12,500 like they are talking about. Now if we think a head what could knock this augment out is if the Chevy Volt and several other electric cars go into another sires of price cuts this year or next year. In that they saw they are cutting existing costs of the batteries currently on the market.