With the Tesla (Nasdaq: TSLA) Model S due out later this month, excitement for electric cars is likely to mount once again. The first unit of the all-electric sedan was delivered last week, and shipments to the public will begin June 22. Priced between $49,900 and $97,900 (after a $7,500 federal tax credit), it represents the next step in Tesla's "skimming" strategy to target wealthier early adopters. This is the second model the company's released, following the sporty Roadster, and more than 10,000 prospective buyers have already plunked down deposits for the Model S. Tesla plans to make more than 5,000 of the sedans this year and over 20,000 in 2013; CEO Elon Musk expects the breakeven point to be at around 8,000 cars.

While Tesla seems to have proven that there's a market for the high-end, electric car, the central question with the futuristic automobile is if it can make the transition to the mainstream. Sales of General Motors' (NYSE: GM) Chevy Volt, which runs on gas after a 35-mile electric range, have come in under projections since their debut. The carmaker had hoped to sell 10,000 last year but only moved 7,671, and had earlier been aiming for 45,000 in 2012. However, through May of this year, only 7,057 had been sold, and GM now says it intends simply to meet demand. Nissan, which makes the fully-electric Leaf, sold nearly 10,000 of its EVs last year. That company has set a goal of selling 20,000 Leafs this year, but has only tallied 2,600 through May.

Though the electric car market still looks like a guessing game, other companies are jumping into the race. Honda (NYSE: HMC), which is set to release its Fit EV later this year, has designed the most efficient car sold in the United States. The Fit EV will get the equivalent of 118 MPG, and will cost the average driver just $500 a year in electricity bills. The car carries a price tag of $29,125 after the federal tax credit and is set to roll out in California and Oregon this summer.

Still tethered to the charger
EV ranges have improved -- Tesla's Model S is listed at a range of 160-300 miles depending on the version -- but remain a key limitation. Infrastructure similar to Clean Energy Fuel's "Natural Gas Highway" might be necessary for EVs to take off. The warehouse chain Costco notably installed 90 electric charging stations at its stores in 2006, but removed them last year due to lack of demand. It looks like a classic chicken-and-egg problem.

According to the Department of Energy, there are currently over 10,000 electric charging stations across the country, but some projections say that there will 1.4 million (public and residential) charging stations by 2016. About a third of those would be open to the general public. By comparison, there are only about 115,000 gas stations in the U.S., though that number doesn't include individual pumps.

Hybrids still rule the (green) road
Electric vehicles may still be in a nascent phase, but their hybrid cousins have made the transition to the mainstream. Toyota (NYSE: TM), the maker of the top-selling Prius, said that hybrids have accounted for 15% of its global vehicle sales so far this year, and the company has now sold 4 million total hybrids since their introduction in 1997. The Prius has dominated the U.S. market, accounting for about half of the hybrids on the road. Some economists see its popularity as evidence of a new kind of conspicuous consumption they call conspicuous conservation. Unlike other hybrid models like the Honda Civic or the Ford Escape, the Prius looks distinct from traditional cars, adding value for those who want to be seen being green.

With a Prius C that now gets over 50 mpg with a price tag of just $21,600, the new hybrids could render the EV obsolete, especially considering the head start they have in market share.

The natural gas option
With natural gas at rock-bottom prices, a third option has emerged for alternative-fuel vehicles. According to the Department of Energy, 112,000 vehicles in the U.S. are powered by natural gas; though, because of a lack of infrastructure most of those are short-haul trucks, buses, and other vehicles that make up a centrally located fleet. The drop in commodity prices has led to a boom for companies like Westport Innovations (Nasdaq: WPRT), a designer of natural gas engines, which partners with manufacturers such as Cummins and Caterpillar. Westport also has agreements to build natural gas engines for Ford pickup trucks so the company could see more growth in commercial vehicle market on the way. A natural gas version of the Honda Civic has been available for years, but was up for sale in just a few states until recently. Despite the spread, the carmaker is targeting sales of only 4,000 of the natural gas sedan for this year. Compressed natural gas takes up more space than gasoline, so it is in some ways less amenable for smaller vehicles.

Foolish takeaway
Unsurprisingly, oil companies don't see a bright future for EVs. BP and Exxon recently released studies showing that electric cars will only take 4%-5% of the global market in 20-30 years, arguing that electric cars will remain more expensive than their gasoline-powered equivalents. Of course, technological advances could change the feasibility of the electric car, but these projections affect government policy and guide billions of dollars in capital investment for the oil majors.

A small company like Tesla could find a niche in EV's, but electric vehicles seem unlikely to take over the mainstream any time soon. Advances in hybrid technology will make filling up cheaper, and help bring down oil prices by lowering demand. Oil consumption is already on the decline, falling from 90.4 millions of barrels per day to 88.5 millions of barrels per day in just the first four months of the year, and the natural gas boom should further ease oil demand as adoption increases in the truck and bus market. Americans' historical reluctance to adopt new forms of transportation, whether it be the ballyhooed high-speed-train network of the early days of the Obama administration or the flop that was the Segway, is another reason to look skeptically at EVs. It looks like oil prices would have to skyrocket in order for EVs to take off, and under current market conditions that seems unlikely. If consumers can purchase a 50-plus mpg Prius for $21,600, EV prices are going to have to plummet before they can be truly competitive.

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