Comparing Electric and Conventional Cars in the Context of the Economy

Electric car has failed before, but this time it is different. Interestingly, although there are never short of articles reporting on electric cars, they focus on the immediate impact as a means of transportation on the consumers. In this integrated world, change is increasingly much faster, and any product and services should be viewed in the context of not just the immediate impact, but of an economy, if not the global economy. Thus, the key to success is integration in this integrated world.

On the micro-economic front, central to the success of electric car or vehicle is the batteries replacing gasoline. Looking ahead, “battery price-performance is improving at a rate of about 8% per year. At this rate, the breakeven price of batteries will probably be $2 a gallon in 2013.” (For details, read http://truecostblog.com/2009/01/04/electric-vs-gasoline/). On the flip side, based on a conservative average 6% rate of increase, the average gasoline price will rise to about $4 in 2013. (read more details in http://www.inflationdata.com/inflation/inflation_rate/Gasoline_Inflation.asp). Moreover, it can also happen any time, as evident by the spike to more than $4, due to the recent chaos in Libya. Thus, the buyer of an electric car now would loses out at most two years or less but gains more than 8 years, as car generally last more than 10 years. Conversely, buyer of new conventional car now gains at most 2 years or less but lose out more than 8 years! The choice would be even clearer, when the next few factors are also considered.

On the green economy front, besides gasoline, electric vehicle also reduces reliance on lubricating oil and transmission fluid. There is also always the possibility of installing solar panels and wind turbine on vehicles to extend the range, and at home to have the electric vehicle batteries doubling up as backup power supply during outages, like during hurricane season or earth quake. In addition, as it has much less moving parts, it has longer life span, saving on production resources. Furthermore, it reduces the risk of gasoline explosion in vehicles and the dangerous emissions in enclosed garage or room, as well as minimises gasoline tankers as road hazards. In addition, by minimising emission and noise on the road, the depressed values of residential real estate next to roads would appreciate. At the same time, with greater demand on the power grid, the power grid companies will then have greater economy of scale to switch to non-oil sources of energy that may also be renewable.

On the macro-economic front, while the savings on maintenance and driving costs encourage consumers to increase their economic activities, companies that rely on gasoline vehicles for income will switch to other more viable products and services to generate beneficial economic activities. Besides cutting down on oil imports and improving the trade deficit, the success of electric vehicle epitomizes the integration of transportation and thus spurs growth in the main street economy. More importantly, before Wall St integrated the America housing with the global economy, the vehicle is already part of global economy. Furthermore, by and large, vehicle is among the second largest asset in America households after the house and that do not differ much in most parts of the world.

Evidently, on the global economy front, with the electric vehicle as the way forward, it is a case of either you are in or you are out. Many big car manufacturers, like General Motors, already experienced what it is like in a global economy. With this mind, it can be sure that car manufacturers will invest in electric vehicles, and make larger production to enable larger economy of scale to drive down the price of electric cars. At the same time, electric car will lead to greater integration of transportation with electric innovations that enable greater integration of global economies and better chance for global peace. This paradigm shift in the economy is what this global economy needs not only to keep its recovery on track, but to a better future.

Therefore, there is no doubt electric car will succeed, it is just how soon. This appreciation of the benefits of electric car far beyond the immediate impact will make the cost factor much less relevant. Hopefully, this will speed up the success of electric car and its subsequent benefits, especially greater global peace, as well.