With the Tesla
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'
Though the electric car market still looks like a guessing game, other companies are jumping into the race. Honda
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
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
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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Fool contributor Jeremy Bowman holds no positions in the companies in this article. The Motley Fool owns shares of Tesla Motors, Ford Motor, Costco Wholesale, and Westport Innovations. Motley Fool newsletter services have recommended buying shares of Tesla Motors, Ford Motor, Westport Innovations, Cummins, Costco Wholesale, Clean Energy Fuels, and General Motors Company Common S.Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.