How Much Does an Electric Car Really Cost?

Detroit's the Motor City. California's car culture is unsurpassed. But when the electric car industry staged an "innovation motorcade" of electric cars and trucks today, it did so in Washington, D.C. -- fittingly, because, without the government, there would simply be no electric car industry.

Indeed, the market for electric cars is so distorted by government subsidies that it's all but impossible to determine the true cost of an electric car.

Notice that I said cost and not price; there's a difference, and it's relevant to any conversation about business and the environment. Coal-powered electricity is cheap but the price doesn't reflect the costs of burning coal, including lung disease, mining accidents and greenhouse gas emissions. (See "Fossil Fuels: A Legacy of Disaster" from the Center for American Progress.) Hamburgers are cheap but the true cost of beef includes methane emissions, farm subsidies and, arguably, heart disease. Gasoline-powered cars externalize costs that include smog, carbon emissions and, some would say, a foreign policy that favors stability, i.e., autocracy over democracy in the Middle East.

Markets, needless to say, work better when prices reflect true costs.

So what's the true cost of an electric car? Hard to say. Sticker prices are high -- Chevrolet's Volt has an MSRP of $40,280, while the Nissan Leaf is priced at $32,780 -- but buyers get a $7,500 tax credit that reduces the cost. The government even gives tax credits to buyers of the $109,000 Tesla Roadster.

The tax credits are merely the most visible form of federal support. Energy Secretary Steven Chu, who spoke at today's event, said the government has invested $5 billion so far to electrify the nation's transportation system. It provided loans of $2.6 billion to Nissan, Tesla and Fisker to established electric car factories, $2.4 billion in grants to establish 30 electric vehicle battery and component and another $80 million for advanced research and development. (Here's a DOE report, PDF, download, with details.)

Virtually every car and component maker on display today in D.C. reflected your tax dollars at work. Ecotality, for example, which makes the Blink charging stations, is leading a $230 million initiative, half of which is funded by DOE, that plans to install more than 15,000 EV charging stations in the coming months.

What benefits are generated by all the subsidies? That was the focus of remarks by Energy Secretary Steven Chu and Ed Markey, the Democratic congressman from Massachusetts. Energy Secretary Steven Chu

Jobs and economic growth, Chu said. "We're in a global race to develop these technologies," he said. "The prize is a multi, multi-billion dollar market." The government stimulated and subsidized the development of semi-conductors, computers, the Internet, biotech and even the airplane, all of which delivered jobs and other untold benefits to Americans.

No more support for oil sheiks, according to Markey. "Americans are ready for an oil change," he said. "It is time to break the monopoly that oil has on our transportation sector."