3 Reasons Why You're Not Buying an Electric Car


The electric car has arrived, but odds are that there isn't one in your driveway.

Several factors have gotten in the way of the eco-friendly automotive revolution, but at least now we can ask conspiracy theorists -- the ones arguing that oil companies and the government are blocking plug-in electric cars from the road -- to leave the room and take their tinfoil hats with them.

The electric car is here. Drivers simply have other plans.

What's wrong with electric cars?

Tesla Motors (TSLA) reported revenue of $39 million in its latest quarter, 9% ahead of where it was last year. It may be an impressive figure from the California-based maker of electric cars, but we're essentially talking about the sale of 150 of Tesla's original Roadsters.

Tesla has sold 2,150 Roadsters since launching the model four years ago. The six-figure price tag has been a stumbling block, naturally. But Tesla has moved on: The remaining Roadsters will be sold outside of the United States as the company gears up for the July rollout of the more affordable Model S sedan. Tesla also has deals in place with Toyota (TM) and Mercedes-Benz.

The 2006 documentary Who Killed the Electric Car? explored the short-lived EV1, General Motors' (GM) fuel-efficient vehicle that hit the market in the 1990s. Was it Chevron's (CVX) purchase of patents for cost-effective NiMH batteries in electric vehicles that forced the industry into more expensive lithium-ion battery cells? Did oil-producing countries in the Middle East have some serious sway over the EV1's demise?

Again, the cars are here now. Why aren't they driving off the lot?

There are at least three good reasons for the slow-moving sales of gas-free vehicles.

1. Electric cars are too expensive

When Tesla introduced its third model earlier this month, the Model X turned heads. Between the comfortable seating for seven passengers in this crossover SUV and the rear passenger doors that open up like falcon wings, "Model X" was the third most searched query on Google the day after Tesla unveiled the new model to reporters.

A few days later, Tesla revealed that it received a record $40 million in reservations for the new car, which won't even hit streets until early 2014. Interested parties can pay a fully refundable $5,000 to reserve the car. It may be impressive to see $40 million in future sales potentially reserved in a single day but, here again, we're really only talking about a little more than 500 cars.

The "accessible" Model S and Model X cars start at a lofty $50,000 -- and the entry-level models won't get you very far. The $50,000 Model S runs on a 40 kWh battery that needs to be recharged every 160 miles. Drivers wanting to nearly double that range to 300 miles will need to pay $20,000 more for a larger battery.

Tesla is a premium brand. It's not supposed to be as cheap as traditional cars. However, even the few electric cars on the market aren't exactly bargains.

  • Nissan's Leaf starts at $35,200. Even with the maximum tax savings of $7,500 backed out, we're still looking at a very expensive car by Nissan's standards.

  • Ford's (F) Focus is coming out as an electric car this year with a starting MSRP of $39,200. That is more than double the starting price of the regular gas-powered Focus.

  • Even the Chevy Volt -- the plug-in hybrid that can fall back to gas between charges -- is priced too high ($39,145 MSRP) relative to the rest of Chevy's fleet of cars and trucks.

2. Range anxiety is real

When GM took out full-page ads last month to let consumers know that its Chevy Volt had remedied the embarrassing issue of engine fires after severe crashes, the carmaker took a shot at pure plug-in electric vehicles.

The ad plays up the "range anxiety" that plagues drivers of electric cars. They can't take extended road trips or run out on unforeseen errands because of a fear that they'll run out of juice with no charging station nearby.

It's a legitimate point.

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There's a finite range that electric cars can travel on a charge, and there will always be some degree of uncertainty about the availability of a charging station on the other end.

More and more places are beginning to set up charging stations. Restaurants, hotels, and (ironically) gas stations are coming around. This will take some time, though.

3. Fear of service
If a traditional car breaks down, you see a mechanic. Where do you take your electric car when it doesn't want to play along?

Tesla has just 20 stores and galleries. It plans to open another eight to 10 locations -- and 10-15 service centers -- but the chances of having a Tesla service center nearby when you need it are slim. Thankfully, there's the Tesla Ranger program that provides house calls. It's not cheap, but it is a solution.

Moving on

The climate will get kinder for electric cars.

A prolonged spike in oil prices may send consumers scrambling toward electric. Wider adoption rates should result in lower battery and car prices down the line.

We're just not there yet.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article, except for Ford. The Motley Fool owns shares of Ford Motor. Motley Fool newsletter services have recommended buying shares of General Motors, Chevron, Tesla Motors, and Ford Motor. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor.

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