Opinion: Low Oil Prices Need not Slow Electric Cars

on March 04, 2015 at 10:00 AM

German Summit On Electric Mobility

The sudden decline in oil price has prompted some analysts to predict bad days ahead for electric and other fuel-efficient cars. While the price of oil may be low today, history teaches us that it will rise again. The true cost of our oil dependence remains high. Oil pollutes our air and water, is dangerously altering our climate, and undermines the security of our nation. The last two years’ experience with electric vehicles proves that clean fuel technologies can compete with oil, and the continued strong sales of the last few months prove it, even at oil’s new price.

There’s plenty of evidence to show that the forces driving faster adoption of electric cars go well beyond any price trade-off with gasoline. Sales of EVs, including pure battery electrics and plug-in hybrids, rose 23 percent in 2014, despite the price of gasoline plummeting toward the end of the year. In fact, despite lower oil prices, sales of pure battery electric vehicles, including the Nissan Leaf, Tesla Model S and BMW i3, increased 33 percent in December 2014 compared with the previous year. Nissan delivered 30,200 all-electric Leafs last year, a U.S. record for EVs.

A major reason EVs are still doing well is that they are simply better cars. For instance, the Tesla S competes with other high-end cars like the Mercedes S55 and the BMW 750, and Tesla is winning. Buyers of such cars don’t care much about gasoline prices. Many Tesla owners say this is the best car they’ve ever had. And yet you can’t go to the store and get a Tesla – you have to wait up to three months for the car to be delivered.

And the EV product models keep getting better. Tesla this year will begin delivery of its Model X, a high-end SUV, which competes against vehicles like the BMW X5, Porsche Cayenne and the Cadillac Escalade. The Model X could easily be the Escalade-killer – not only because Escalade is a gas-guzzler, but because the Model X likely will turn out to be a better car.

GM just unveiled the next-generation Chevy Volt, its plug-in hybrid. The new Volt will have greater range (50 versus 40 miles) and more seats (5 vs 4). In 2016, GM will bring to market an affordable 200-mile-range pure battery electric car, the Chevy Bolt. It will compete head to head with Tesla’s Model III, which promises similar driving and price range.

More needs to happen to ensure greater success in the market. Tesla has broken ground on its “Gigafactory” battery plant in Nevada, which holds the promise to unblock bottlenecks in the supply chain. Auto makers have to solve the “dealer dilemma.” Dealers make most of their money from maintenance, not from car sales. Electric vehicles (even plug-in hybrids like the Volt) require much less maintenance and therefore reduce the dealerships’ main revenue source. Tesla found one way, Nissan another. The sale numbers show that when given the choice, Americans buy electric cars. Lastly, utilities have a role to play.  They need to be allowed to invest in the development of charging networks.

With oil prices low for the moment, we undoubtedly will hear calls for rolling back the successful polices that are moving forward clean transportation. But oil prices will not remain low forever. And the pollution and security costs of our oil dependency are only going up, not down. More important, Americans from Atlanta to San Francisco LOVE their electric cars. So why would any politician want to go against the people?

Peter Lehner is Executive Director of the Natural Resources Defense Council and Yossie Hollander is Cofounder of the Fuel Freedom Foundation.