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Will Tesla Crack the Range Anxiety Problem?

Monday, 23 Jan 2012 | 11:06 AM ET

Range anxiety and pricing remain the two issues electric car critics use that are difficult for electric car fanatics to defend. But the latest report on Teslamay give electric car fans some new ammunition in their arguments.

Tesla
Tesla

After visiting Tesla headquarters and meeting with the management there, J.P. Morgan is telling clients it can see Tesla developing a 400 mile range powertrain in the next 3-4 years.

Analyst Himanshu Patel wrote, “…a 400-450-mile range capable vehicle may be the tipping point, in our view, where the range is so clearly overkill (for daily use) that Tesla’s addressable market is then truly expanded to fully encompass the affluent yet single-car household.” In other words, a Tesla model that gets 400 or more miles on one charge could be much more than a niche electric vehicle.

An electric car that can go 400 miles on a charge won’t have huge sales if the price premium for the battery pack remains high relative to internal combustion gas-powered vehicles. J.P. Morgan’s Patel believes, “Tesla’s battery pack costs would probably fall prospectively about 25 percent in each of the next five years [i.e., to around $225/kWh in five years from today].” Patel adds the drop in costs could happen even sooner. He writes, “We suspect this timeframe may even prove conservative, as we have recently sensed that Tesla has already identified many of the technical changes that it plans to make to its current generation battery technology (i.e., that to be used in the S) to be able to create a 400-mile range capable vehicle.”

Admittedly, there are numerous technical hurdles that still need to be cleared. Forecasting electric car demand has proven to be a guessing game for everyone involved. Look at how Chevy Volt sales failed to reach the goal GM established for 2011. In addition, the primary driver of electric car sales remains the price of gas. If it moves higher (as it’s expected to do) that should help EV sales. If it holds steady or falls (don’t laugh, it could happen) EV demand will plummet.

But if Tesla can crack the anxiety range problem and build a car that gets 400 or 450 miles on a charge it would have huge significance for the electric car market. Most Americans drive fewer than 40 miles a day, but it’s the idea that they would be unable to make a longer drive that may keep potential EV buyers from plugging in and going electric.

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___________________________ Questions? Comments? BehindTheWheel@cnbc.comand Follow me on Twitter @LeBeauCarNews

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  • Phil LeBeau is a CNBC auto and airline industry reporter based in the Chicago bureau and editor of the Behind the Wheel section on CNBC.com.

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