Economics: Market Forces and the Electric Car

TORONTO, ONTARIO - The Christian Science Monitor recently ran a capsule with an interesting headline, Who Killed the Electric Car? Henry Ford. Rather than present some conspiracy theory about the pulling of the General Motors EV-1 from the California market, this article was a look back to how electric automobiles had an impact on the vehicle business from about 1830 to 1930--that's right, 1830 to 1930.

That electric propulsion was contemplated for personal vehicles at their infancy should not have been a surprise. The dominant form of overland transportation in that era, the railroad, may have been dominated by steam locomotives, but there were notable installations of electric power by the late 19th century. After New York city banned steam locomotives, all railroads to that hub adopted electric power, and it powered long-distance trains for hundreds of miles on the Milwaukee Road in Montana, Idaho, and Washington as late as the 1970's.

The Monitor pointed out that battery technology was advanced enough that the Electric Carriage and Wagon Company of Philadelphia built an entire fleet of taxis for use in New York City in 1891. Other details of early successes appear in a variety of on-line articles including at about.com. In 1916, Clinton Edgar Woods even invented a hybrid car that ran on an internal combustion and an electric motor, almost three-quarters of a century before the Toyota Prius.

So what caused the electric car to fade into history? The reasons should sound familiar. While the short range of a battery might have been fine for a jaunt from uptown to midtown Manhattan, as roads outside of cities became more passable, people wanted to drive farther, and the battery-powered vehicles could not take them there. Yet, what really killed the electric car wasn't the desire for longer trips, but cost. When Henry Ford used the assembly line to bring down the price of cars powered by internal-combustion engines, there was no longer a compelling reason to buy an electric car. Ford's cars sold for between $500 and $1000. Electric cars sold for more than 50% more than that. By the Great Depression, it was all over for electric vehicles.

All of these problems remain today. A purely electric car cannot take long trips unless the batteries are exchanged regularly, a concept that is occasionally proposed but unlikely to be implemented with hybrid technology able to extend the range of vehicles more easily. Any electric car, hybrid or otherwise, costs substantially more than a gas-powered car, in most cases by about that 50% figure from the previous era.

Clearly, until the price issue and the range issue are addressed, the common person will not purchase an electric vehicle. While fuel cell technology presents a long-term promise to replace petroleum, in the interim there's a basic economic problem that isn't going to be solved by simply providing tax incentives to purchase a fuel-efficient vehicle such as electric one. Attempts to convert from a gas tax to a mileage tax using GPS technology won't help, either, as that also serves to lessen the incentive to use an efficient vehicle.

While I certainly favor such things as higher gas taxes, income tax deductions for the purchase of fuel-efficient vehicles, investment in quality alternative forms of transportation like intercity rail and public transit, that's just playing with the margins. It's clear that the fundamental problem needs to be addressed head-on. The United States government needs to invest much more in technology research to find improved personal transportation technologies that can be commercialized down the road that will actually be competitive with the internal combustion engine. The longer it fails to do so, the more opportunity there is for places like China or Canada to develop a technology instead.

Only with more investment will there be a fighting chance for personal transportation to end its dependence on the non-renewable resource of oil. The market killed the electric vehicle before, and it will do so again until it is actually competitive.