Can The Open Road Truly be Electrifying?
Will the electric car jump the barriers of cost, low gas prices, preferences and range anxiety of the average car buyer?
President
Obama’s goal in 2008 was to ‘put 1 million advanced technology vehicles on the
road by 2015’[i].
Clearly we haven’t reached that goal with the different incentives from the
federal government, and other independent state initiatives. The federal
government’s three pronged approach of investing in R&D, rebates, and
rewarding communities that invest in electric vehicle infrastructure, has not
been enough to overcome the challenges of technology and buyer’s perceptions to
make the goal achievable. There needs to a shift in the policy’s focus to
change the current rate of market adoption of electric cars as a viable
alternative.
Understanding what worked and didn’t
work
The three
strategies mentioned above primarily focused on changing the market for
vehicles. However, their estimates of efforts have fallen short partly due to
the drop in gas prices, as well as underestimating the effort to shift mindsets
of car buyer. The three strategies have had varying levels of success, but none
provided the intended boost expected.
R&D
The
investment in R&D probably helped the most, as it provided impetus in
improving battery technology, making it possible to have vehicles with
comparable ranges of gas powered vehicles. However, the high costs of
delivering new technology to the market has proven to be a barrier, especially
after the fall in gas prices. This weaned automakers commitments towards new
electric motor based cars. Secondly, high cost of manufacturing such cars
requires focusing on higher segments of the car buying market, which is why
Tesla, and other luxury brands have been more successful in bringing such
products to market, while more conventional automakers have token alternative
fuel cars, focusing on traditional hybrids, and plug-in hybrid to address the
relatively small demand of such cars.
Tax Rebates
The tax
rebates for alternative fuel cars was a good idea on paper, but the delayed
benefit, and the fact that most taxpayers do not have a tax liability great
enough to even use the credit (only20% of tax payers had an estimated tax
liability of $7500 or more; and only 40% had a $2500+ liability in 2011)[ii],
led to lower than expected utilization of the rebate. Therefore increasing the
rebate may not result in significantly greater sales of electric cars.
Benefits to Communities for Infrastructure
The
incentive for communities was provided to help setup electric charging stations
network that would help reduce the often cited range anxiety. This has helped
in setting up several charging stations, and reducing some of the range anxiety
argument. However, studies have shown that charging has been primarily been
done at home or offices, even for longer commute electric car users, therefore
investing in charging stations isn’t significantly moving the market from gas
to electric[iii].
On the other
hand the HOV/HOT access stickers initiated by California (not part of the Obama
initiative) has been hugely successful in getting people to shift to
alternative fuel and hybrids, and pure electric cars[iv].
The program had to up its limits on the number of the stickers. The program
also is termed only 2019.
Future Strategies to Encourage Future
Car Buyers
Moving
forward, it is clear that new strategies have to be utilized to help
alternative fuel vehicles gain market share. These will have to include
strategies that actively discourage fossil fuel vehicles, and looking at niche
market sectors that can be easily convinced to make the shift.
New Incentives and Disincentives
While it is
always preferred to encourage people to change habits, but considering the
inertia of the status quo and familiarity make it hard for only positive
encouragement to work. In China, the banning of motorcycles inadvertently
created a booming market of electric powered two wheelers which, when compared
to the failure of Taiwan’s program of subsidizing electric two wheelers, seems
that the stick works better than a carrot to gain a shift in consumer
preference.[v]
If the goal is to rapidly shift from fossil-fuel to alternative energy
vehicles, efforts should be made to actively discourage the use fossil fuel
vehicles. While increasing taxes on gas may not be politically feasible,
helping local communities actively discourage fossil fuel car usage through
subsidies and other incentives maybe easier to implement. It is a long
established fact that people primarily drive cars because the cost of parking
is externalized. If cities can be encouraged to increase parking rates, reduce
parking for fossil fuel vehicles, while subsidizing alternative fuel vehicle
parking may work more effectively to shift buying preferences. One can find a corollary for this with the
HOV sticker program in California. People primarily bought hybrids and electric
vehicles because of the sticker.[vi]
This provides a strong argument for including parking availability as strategy
to shift people’s preference. Extending the HOV/HOT access program should also
be considered, however that will have to be done keeping in mind the viable
capacities of such lanes to absorbing new vehicles.
Shifting Rebates from Individuals to Companies.
As
previously mentioned, the tax rebate may not cover a majority of drivers who
may not have a large enough tax liability to encourage them to buy alternative
fuel cars, but transportation based businesses would be prime candidates to
entice with tax rebates[vii].
Car-share companies, delivery companies, the US postal service and rideshare
companies would be prime candidates, since their daily miles rarely exceed the
typical driving range of electric cars, and have a fixed location (either
company yards, designated parking spots, or homes) where they are parked that
can easily be used as their charging posts.
A time limited rebate program could help shift significant number of
vehicles on the roads.
Co-opting the Changing Preferences of New Buyers
Much has
been written about millennials not being interested in owning cars[viii],
while the same has been negated by others.[ix]
However, one aspect of new buyers is that their preferences in private
transportation now includes technology and environmental concerns. This is can
be capitalized upon, by working with private car companies to integrate the two
(something Tesla has done wonderfully). Furthermore, most car purchases are
financed, hence providing rebates on car loan interest rates[x],
decreasing the monthly premiums for alternate fuel vehicles, would have a
strong influence new drivers to switch their preference.
With
predictions of climate change being revised to more rapid rates of warming, the
necessity to change gears in strategies to shift the car buying market to
alternative fuels has become more urgent. No longer can government just
encourage buyers to change, but they have to actively start discouraging the
status quo.
[i] Whitehouse.gov, n.d. FACTSHEET: President Obama's Plan
to Make the U.S. the First Country to Put 1 Million Advanced Technology
Vehicles on the Road. http://www.whitehouse.gov/sites/default/files/other/fact-sheet-one-million-advanced-
technology-vehicles.pdf
[ii] Green, Erin H., Steven J. Skerlos, and James J.
Winebrake. "Increasing electric vehicle policy efficiency and
effectiveness by reducing mainstream market bias." Energy Policy 65
(2014): 562-566.
[iv] Tal, Gil, and Michael A. Nicholas. Exploring the
Impact of High Occupancy Vehicle (HOV) Lane Access on Plug-in Vehicle Sales and
Usage in California. No. UCD-ITS-RR-14-16. 2014.
[v] Yang, Chi-Jen. "Launching strategy for electric
vehicles: Lessons from China and Taiwan." Technological Forecasting and
Social Change 77.5 (2010): 831-834.
[vi] Tal, Gil, and Michael A. Nicholas. Ibid.
[vii] Green, Erin H., Steven J. Skerlos, and James J.
Winebrake. Ibid.
[viii] Streetsblog USA. Are Millennials Racing to Buy Cars?
Nope.(2016). http://usa.streetsblog.org/2016/04/25/are-millennials-racing-to-buy-cars-again-nope/
[ix] The Business Insider. Everything we thought about
millennials not buying cars was wrong. (2016). http://www.businessinsider.com/everything-we-thought-about-millennials-not-buying-cars-was-wrong-2016-3
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