Electric vehicles (EVs) are what President Obama called the "future of automobiles." With GM under government supervision and focusing on its EV program, the EV industry prepares ready to take off. The first step towards that vision will be the release of the Chevy Volt next year -- the Volt will be the first plug-in from a major automaker.
However, significant doubts remain over exactly how quickly the electric vehicle industry will take off. First, the industry currently is using the scarce resource lithium in its battery packs. With net deposits of lithium scarce, pricey, and in volatile regions there's significant doubts over the ability of electric vehicles, in their current state, to see broad adoption.
For the consumer, it’s not about resources; it’s about the price they carry. The Obama administration in response to GM's February bailout proposal wrote, "[The Volt] is currently projected to be much more expensive than its gasoline-fueled peers and will likely need substantial reductions in manufacturing cost in order to become commercially viable."
A recent 2009 study by the Boston Consulting Group looked at the alternative-energy friendly Germany as an ideal location to deploy electric vehicles. What it found was that the five-year cost of an electric vehicle would remain "relatively unattractive to consumers in 2020, unless its cost is subsidized."
The study identified $280/barrel as a break-even point for the industry. Oil is currently approximately $50/barrel. Geoffrey Styles, founder of the energy consultant GSW Strategy Group, says that even at $4/gallon gasoline, customers would take six years to recoup the cost differential between a Toyota Prius Hybrid and the Volt -- and that's with a $7,500 tax credit, and a significant loss per vehicle for GM.
And while the Volt will indeed help cut emissions, it raises new questions over battery disposal. Lithium batteries are toxic, and will require careful recycling.
In all, the electric industry for the time being may be practical for high-end vehicles like Tesla Motors' Roadster which retails for $100,000+ USD. However, for consumer autos, electric-only vehicles remain impractical for one key reason -- the shortcomings of current battery technology. While adoption might spur the development of such technology, it comes at a high cost, and it is more questionable than direct investment in the research.
The impracticality of the lithium battery plug-in industry is exacerbated by the fact that the mild hybrid industry (which uses smaller batteries, making lithium less of a concern) has been showing strong profits for several years, and direct injection efforts are taking off. While it appears that both consumers and the auto industry are eager to adopt a more environmentally friendly stance, the question remains how best to do it.
As the electric vehicle industry prepares to put its pedal to the floor, it is perhaps time to take a look back and refocus on the base technologies needed to make such an industry possible, as these studies suggest.