Has Obama's Electric Car Revolution Failed?


Last Friday's news that Fisker Automotive would lay off 75% of its staff after failing to find a buyer was yet another blow to the Obama administration's efforts to foster an electrified automotive future.

Fisker received $193 million in U.S. government money, and produced some 2,500 cars - but it never came close to turning a profit, and its short history was marked by a long series of missteps.

Electric cars haven't exactly taken the market by storm. President Obama's onetime goal of having 1 million electric cars on U.S. roads by 2015 now looks like a pipe dream. Was this whole idea misguided from the start?

Fisker wasn't even building proper electric cars
In a way, Fisker's failure isn't a fair test. Despite receiving millions from a Department of Energy loan program, Fisker's car, a luxury sedan called the Karma, wasn't even a true electric car, or BEV (for "battery electric vehicle"). Instead, it was a plug-in hybrid, a term that means a conventional gas-electric hybrid that can be plugged in to charge the batteries.

Plug-in hybrids can typically go a short distance without using any gas at all. That was a cutting-edge idea when the Karma was first shown way back in 2008. But nowadays, plug-in hybrids are pretty mainstream: Toyota's popular Prius comes in a plug-in version, as do the hybrid versions of Ford's Fusion and C-Max and a number of other cars.

Several of the mass-market automakers also offer (or plan to offer) pure electric BEVs. Nissan's LEAF is probably the best-known, but there are a few others. Ford offers an electric version of its Focus compact, and General Motors will roll out an electric version of its tiny Chevy Spark in a few markets later this year.

The problem with electric cars
The LEAF and those other BEVs were introduced with much fanfare over the last few years. But the LEAF has missed its sales goals, and the Focus Electric has sold just over a thousand examples in its year-plus on the market - next to none, in other words, in the grand scheme of things.

There are several problems with electric cars - a lack of recharging stations is one - but a big obstacle is that the batteries are still too expensive. By mass-market standards, that means that electric cars that have enough batteries to give a decent range are too expensive for what they are. Or put another way, why pay almost $40,000 for an electric Focus when you can get a more useable gas-powered version for half of that?

That's something that the government hasn't yet figured out how to fix. But the only company that seems to be succeeding with electric cars so far, Tesla Motors , has figured out how to work around it.

Does Tesla's success show that electric cars are only for the rich?
As far as pure electric cars go, Tesla's Model S is as good as it gets right now. It's a big, luxurious, powerful sedan that just happens to be electric. And it's priced like a big luxurious sedan: The Model S starts at $62,400 (after a $7,500 Federal tax credit). Fully loaded, the price can exceed $100,000.

That puts the Model S squarely in BMW territory, hardly "mass-market". But it's the only electric car so far that has real-world range comparable to the average gas-powered vehicle, about 300 miles in the top of the line version.

It's almost as if Tesla figured out how much it would cost to build an electric car with that kind of range - and then designed a car around it that would arguably be worthy of the price.

That has worked out well for Tesla, which is hitting its sales goals and is close to reporting its first profit. But even though it received (and to be fair, is paying back ahead of schedule) $465 million in government loans, Tesla's sales are barely a drop in President Obama's million-electric-car bucket: Tesla CEO Elon Musk says that his company expects to sell 20,000 cars this year.

That's an awfully long way from a million cars by 2015. And as of right now, there's nothing in sight that is likely to do much to close that gap.

Will Tesla's success continue?
Tesla's execution so far has been nearly faultless, but the road ahead remains a hard one. If Tesla shows that there's a market for electric luxury cars, will it be able to fend off its big-name competitors? The Motley Fool answers this question and more in our most in-depth Tesla research available for smart investors like you. Thousands have already claimed their own premium ticker coverage, and you can gain instant access to your own by clicking here now.

The article Has Obama's Electric Car Revolution Failed? originally appeared on Fool.com.

Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool recommends BMW, Ford, General Motors, and Tesla Motors. The Motley Fool owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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