Ready for the Electric Car Era?

With new technologies and Uncle Sam’s incentives, battery-powered autos are getting cheaper and easier to find in U.S. market.

By Jim Ostroff, Associate Editor, The Kiplinger Letter

February 13, 2009

Automakers are racing to go electric. Within five years, they'll sell about 200,000 cars powered mainly by rechargeable batteries. By 2015, they’ll triple that number. The car won't be cheap, with sticker prices of about $5000 more than comparable gasoline models. But their ability to get 100 miles per gallon will be a head-turning sales attraction, along with the likelihood of tax breaks the Obama administration should advance either this year or next.

Toyota will be first off the starting block. By December, it's expected to field about 100 plug-ins for commercial fleets and then quickly rev up production for motorists. It's angling to leapfrog General Motors, which is touting the launch of its Chevy Volt by the end of 2010 and a plug-in Saturn Vue version soon after. Ford isn't idling, either. Next year, it will sell a small, plug-in delivery truck and in 2011, three passenger electric cars. Look for sales of plug-in vehicles to hit 4 million in 2020, accounting for more than 20% of new cars sold that year. By then, the sticker price premium likely will be less than $1,000.

Uncle Sam is a major force behind the move toward electric vehicles. Laws that are almost sure to be enacted limiting carbon dioxide emissions will give automakers little choice but to make ultrahigh mileage vehicles that will spew out less of the pollutants linked to global warming.

A confluence of technologies is giving plug-ins a big boost. Advanced batteries and new electronics are ready for prime time after years of research and dead-ends, says Aaron Bragman, an auto analyst with IHS Global Insight, a business consultancy. "Ethanol as a fuel to totally replace gasoline has been pushed aside as impractical for a while and hydrogen is the 'fuel of the future' and always will be," says Bragman.

GM is partnering with 30 electric utilities to develop auto recharging stations for offices, parking lots and communities. Likewise, Coulomb Technologies has teamed up with San Jose to transform hundreds of the California city's street light poles into plug-in refilling stations. Legislation likely to be enacted within a year or so to address climate change and spur alternative energy development will offer incentives to install electric vehicle recharging units in public parking lots, office, commercial and apartment buildings.

Keep an eye on China’s BYD, an advanced battery-maker. It is already selling plug-in cars at home in China. Much ballyhooed plans to crash the U.S. market are a pipedream given some high hurdles: no dealer outlets, stiff U.S. safety requirements and consumer wariness. But with billions of dollars in new investments, the odds are that BYD will make its U.S. entrance by building plug-ins for European or Asian carmakers with established U.S. dealer networks and sell them under well-known brand names.

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