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Electric Cars are Coming, But Don't Expect Sales to Get Charged Up

A new study this morning by J.D. Power & Associatesconfirms what many in the auto industry have been predicting for some time: The electric car revolution is likely to be more of a slow change.

Nissan Leaf
Source: nissanusa.com
Nissan Leaf

That's not commentary on whether hybrid electric or fully electric cars make sense environmentally. It is a reflection of the fact that green car sales will depend on the #1 factor impacting all car sales: does it make sense financially?

According to J.D.Power, worldwide sales of hybrid electric and fully electric vehicles will hit 5.1 million by the end of the decade. That's projected to be just 7.3 percent of auto sales in 2020. Sure it's a steady and healthy improvement over the estimated 954,000 electrics that will be sold this year (2.2% of total market), but it's not a revolution. Why? Well, it all comes down to price and impact on the wallet.

J.D. Power says three big factors impacting a buyers decision about whether to go electric include:

  • Whether gas prices surge higher
  • Whether green technologies advance to the point of bringing down the cost of electrics
  • If governments adopt policies to encourage people to buy electrics (tax breaks, incentives, etc.)

Most of us want cleaner burning cars. That's not a question. And I suspect when people start driving hybrid electric or fully electric cars, they will be impressed with the performance and may even find themselves wanting to buy an electric. But you better make it cost effective.

Chevy Volt
Source: chevrolet.com
Chevy Volt

As a friend of mine said last weekend, "I'd be interested in a Chevy Volt, but not for $41,000."

Even with a $7,500 federal tax credit and additional tax breaks from state governments, the person who buys the Volt will still have to take out a loan/pay $41,000 when they go in to get the car.

Yes, the car will wind up costing far less in the long run after people do their taxes, but that's a different feeling than if you went into a dealership and they said, "Hey, the list price is 41 grand, but with these rebates, you can walk out the door only paying/borrowing 30 or 32 grand."

Bottom line: The electrics are coming. But it will be a slow charge, not quick jolt.

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