Sales of plug-in vehicles such as the Nissan Leaf and Tesla (TSLA -1.11%) Model S are soaring, with 54,000 combined sales in the first six months of the year, a 33% increase over 2013.
Given Tesla's ambitious plans to reach an annual sales rate of 100,000 vehicles by the end of 2015 with the introduction of the Model X (and 500,000 sales a year with the introduction of the its third model in 2017), electric car fans have much to cheer about.
In fact, critics of America's historically low fuel economy have cause to celebrate as well, with America's average fuel economy reaching a record high of 25.2 mpg, up 25.4% since 2007, according to a report from the University of Michigan Transportation Research Institute. Those concerned about climate change will also be happy to hear that CO2 emissions per driver have declined by 22% in that time.
The reason for the increasing gas mileage is the Obama administration's strict new fuel efficiency standards of 54.5 mpg by 2025. Speaking on the standards, which would more than double current fleet mileage, President Obama stated, "These fuel standards represent the single most important step we've ever taken to reduce our dependence on foreign oil."
Both environmentalists and the automotive industry support the new standards. According to Greg Martin, General Motors' (GM 0.48%) executive director for communications, "Customers want higher fuel efficiency in their cars and trucks, and GM is going to give it to them. ... We expect the rules to be tough, but we have a strong history of innovation, and we'll do our best to meet them."
Unexpected consequences
However, a serious consequence of the rise in the nation's fuel efficiency thanks to cars such as the Toyota (TM 0.60%) Prius and GM's Chevy Volt is that the highway trust fund, which pays for maintenance and construction of new highways, is now virtually depleted. The fast growing popularity of electric vehicles, which use roads but consume no gas (and thus pay no gas taxes), is set to make the problem worse in the future. In fact, the fund is expected to face a shortfall of $170 billion over the next decade.
Source: U.S. Federal Department of Transportation
Luckily, Congress just passed a short-term $11 billion funding bill that prevents a 28% reduction in federal highway and mass transit spending.
Other contributors to the problem
The problem extends beyond the popularity of electric cars, though. For one thing, the federal gas tax is currently 18.4 cents per gallon, or 24.4 cents per gallon of diesel, and it hasn't been raised since 1993. Had the tax been adjusted for inflation, it would be 30.2 cents per gallon today.
Furthermore, according to a study by Phineas Baxandall from the U.S. Public Interest Research Group Education Fund, U.S. per capita driving peaked in 2004 and has declined by 7.4% between then and 2012.
Source: "Moving Off the Road: A State-by-State Analysis of the National Decline in Driving"
Many theories have been postulated about what's causing Americans to drive less, including the rise in telecommuting, increased population growth in urban areas (where public transportation is used more), and a stagnation in inflation-adjusted income. Even the 2008 financial crash has been proposed as a reason that millennials (those born from around 1980 to 2000) are buying cars in far lower numbers than young people in the past have -- they can't afford them. However, Baxandall's study found that these factors can't explain the changes in decreased driving patterns by state.
It seems that younger Americans are simply less interested in car ownership, with fewer owning driver's licenses and more hating the car-buying experience than any other demographic group.
In fact, a 2011 study showed that baby boomers are 15 times as likely to buy a new car, and even those 75 and older were more interested in owning a vehicle.
Solutions to the problem
The most obvious immediate solution would seem to be to raise the gas tax and index it to inflation, to prevent Congress from having to constantly step in with short-term funding bills. This is exactly what Sens. Bob Corker (R-Tenn.) and Chris Murphy (D-Conn.) have proposed in a bill that would raise the gas tax 12 cents over the next two years and include annual adjustments for inflation.
Unfortunately, this idea fails to address the decreased revenues that will result from fewer miles driven combined with higher fuel efficiency standards (or, in the case of electric cars, no gas consumption at all). Meanwhile, America's highways are in terrible need of repair.
According to Robert Poole, director of transportation policy at the Reason Foundation, "Most of that pavement was intended to last 50 years, and that was 50 years ago." According to Poole, to rebuild worn-out interstates and widen congested stretches of highway would cost $983 billion, a figure which "[t]here's basically zero chance" of securing.
Then there are those who propose a completely new way of thinking. "It's time to let go of the gas tax," says Susanne Trimbath, an economist and consultant on transportation and infrastructure issues. These transportation economists propose charging drivers per mile driven, which would make the highway trust fund sustainable in the age of the electric car and higher fuel economy standards. An 11-state consortium is in favor of the idea and planning on conducting studies to test its feasibility.
Bottom line
Plug-in cars might be great for the environment and help America lessen dependence on foreign oil; however, under the current highway maintenance system they are doing no favors for our crumbling infrastructure. Federal, state, and local governments must act now to study and implement new road funding methods before the rising popularity of electric vehicles, in conjunction with higher fuel economy standards and less driving, leaves America with roads that resemble those of an undeveloped nation.
