Washington, DC, August 8, 2006 --  

Electric and hybrid cars will remain niche products so long as Americans remain in love with the SUV.

Nonsense conspiracy theories and popular entertainment have long been complementary. So it is with this summer's offbeat documentary, "Who Killed the Electric Car?" The film focuses on the abrupt end to General Motors' 1996 experiment with selling the EV1 model with an entirely electric drive train. The company was forced by a California emissions law to market the zero-emissions car, and when the legal requirement was removed, GM abruptly cancelled all leases and took back the electric cars from their drivers.

While clearly an idiotic public relations move, GM's confiscation of the vehicles made sense from a business perspective. Why fund an expensive infrastructure to maintain unprofitable vehicles for a few hundred zealous enthusiasts? Regardless of logic, the heavy-handed universal confiscation of the cars fueled conspiracy theories.

In the end, the demise of the GM EV1 really doesn't matter to the future of electric vehicles. Since it was retired, most major auto makers have come up with hybrid models that have duel gasoline and electric motors. GM is reportedly working on a new hybrid model for next year's auto show that will have the ability to plug into a standard wall socket, eliminating the need to ever use the gasoline engine.¹ And another high-profile startup company, Tesla Motors, is working on a new high performance all-electric vehicle.²

The modest success of hybrid vehicles in the American market has driven largely by regulatory incentives. Drivers get tax breaks for buying hybrid cars, and then get exemptions from carpool restrictions on congested highways. Such incentives have created niche markets. On the freeway leading into Washington past the Pentagon, carpool lanes have become so congested with hybrid vehicles carrying single drivers that policymakers are considering removing the incentive to keep traffic flowing.³

But even if such incentives continue, there are limits to the size of the market for these vehicles. Only a relatively small percentage of the American population wants to ride in the carpool lanes leading into Washington. And without such incentives, the market for these vehicles in America, like the market for the EV1, will be limited to environmental zealots and technology enthusiasts.

The ultimate success of electric vehicles in the American market will be whether the general population embraces them -- the same general population that currently rolls around the suburbs in enormous sport utility vehicles. The main disadvantage of the SUV compared with electric and hybrid vehicles is cost of operation -- a disadvantage that has become acute with rising fuel prices. Ever since oil prices first went above $40 per barrel two years ago, people have been predicting the death of the SUV. Since then, oil has surged above $50, and then $60 per barrel.

Yet despite cutesy anecdotes about people trading in Ford Escalades for Toyota Priuses, the SUV refuses to die. While full and mid-size SUV sales are down significantly in the past year, entry-level and luxury SUV sales continue to grow at a rapid clip.⁴ Given that the cost of fueling these vehicles has doubled in the past four years, it is stunning that Americans have continued to buy them.

So long as Americans are still willing to pay these gas-guzzling behemoths in the face of such expensive fuel prices, there is no chance of electric or hybrid cars catching on. No conspiracy is needed to kill the electric car so long as skyrocketing fuel costs can't kill Americans' love for the SUV.

Worse Than Nothing
Regulating Efficient SUVs, June 26, 2001

Promoting Obnoxious 'Burbs, June 15, 1999

1. Bloomberg News, GM Plans Gas-Electric Car to Catch Up to Toyota, People Say, June 23, 2006

2. The Economist, Not So Shocking, July 27, 2006

3. Washington Post, Hybrids Could Lose HOV Perk Early, March 2, 2005

4. Detroit News, Some older models are suddenly hot sellers, July 29, 2006