Is an all-electric car a bad investment?


Are all-electric cars a waste of money and time?
The brand new all-electric Ford Focus is displayed at the 2011 International Consumer Electronics Show in Las Vegas, Nev.
The brand new all-electric Ford Focus is displayed at the 2011 International Consumer Electronics Show in Las Vegas, Nev.
Justin Sullivan/Getty Images

So, what about the car companies and the federal government that fund research and development of electric vehicles and batteries? Is it all just a waste of time and money?

During the 2012 presidential debates, Republican candidate Mitt Romney called out electric car makers Tesla Motors and Fisker Automotive as business "losers" receiving government backing for renewable energy development. Electric battery maker A123 Systems, recipient of $132 million in federal government grants under the Obama administration and $6 million under the George W. Bush presidency, declared bankruptcy in October 2012. It appeared at the time of this writing that auto parts maker Johnson Controls would purchase the automotive business of A123, preserving the considerable work the company has made to make batteries cheaper and more powerful. If completed, the sale would also ensure access to state-of-the-art batteries for U.S. automakers that produce electric vehicles.

Electric cars are meant to solve specific problems -- some short term and some that are longer-term in nature. In the short run, they help solve the problem of using gasoline and having to depend on other countries for oil that makes gasoline. The way business works is that whoever solves customer problems most effectively at a reasonable price succeeds. New solutions that improve on the old ones are collectively called innovation. The cycle of innovation causes new industries to be born, obsolete industries to die, and innovative countries to rise in influence while others fade into irrelevance.

So whether you believe that research funding should come from the taxpayers, industry alone, or both, the fact is, other countries badly want to lead the race on electric vehicle technology. They see it as one of the pathways to prosperity and power as this century unfolds.

To answer our original question then, an all-electric car could for one person be an ill-advised purchase. At the same time, it could be for someone else one of the most satisfying and logical buys she ever makes. It depends on the buyer's transportation needs, not to mention tolerance for risk. For instance, GM and Nissan will likely be around several years from now to honor any potential claims. Lesser-established manufacturers might or might not be -- ever since there were car companies, there have been car company failures.

In the long run, electric cars seem to be on the path of many previous "disruptive technologies": shaky, pricey and not very impressive at first; but as they become more capable, adoption expands until it seems everybody has one. It's a well-established pattern that's played out with technologies ranging from video players to cellular telephones to personal computing [source: Innosight]. Will all-electric cars be worth the investment by companies (and taxpayers)? Placing such big technology bets is certainly risky, not to mention expensive. But no one wants to be the automotive equivalent of the next "buggy whip maker" or "typewriter manufacturer," when and if fully electric vehicles become the next big thing.

Author's Note: Is an all-electric car a bad investment?

After you crunch all the relevant numbers, the purchase or non-purchase of an all-electric car will be a highly personal one. From what I gather, much of the enthusiasm for electrics (OK, let's just call it "hype") needs to be tempered with a bit more patience -- newer technologies are going to experience setbacks. They'll require an education curve before potential adopters embrace them in large numbers. Likewise, a good amount of the naysaying about electrics is mere sensationalism or uninformed punditry.

In writing this article, I looked to the not-so-distant past for guidance. If you want a really good picture of how BEVs might play out in the marketplace, look no further than the Toyota Prius. The first-generation Prius was by most accounts underpowered and awkward to behold. When it came to the United States in 2000, sales were sluggish. As Toyota revamped, refined and repositioned the Prius, it began to carve out its own category and dominate it. Critics of hybrid gasoline-electric technology went from outright dismissal to opposition, to finally, a grudging respect. I think going completely electric is the next logical step from hybrids like the Prius. Will all-electric cars be the ultimate heirs to the internal combustion engine? Nothing's a sure thing until it's done, but I think it would be shortsighted (and foolish, really) to bet against the long-term success of the all-electric vehicle.

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