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Will Electric Cars Transform the U.S. Vehicle Market? An Analysis of the Key Determinates

Will Electric Cars Transform the U.S. Vehicle Market? An Analysis of the Key Determinates

In this discussion paper by colleagues at Harvard University, the future of a large U.S. electric vehicle market is examined based on key questions. To answer these questions, battery electric vehicles (BEVs), plug-in electric vehicles (PHEVs), and internal combustion engine vehicles (ICEVs) are compared with current and projected future lifecycle costs and various scenarios (change in gas/electricity cost, battery cost, customer discount rates, and vehicle efficiency). It is found that currently BEVs and PHEVs are $4000-$5000 more than ICEVs based on lifecycle cost, but in 10-20 years BEVs will be $1000-$7000 cheaper than ICEVs while PHEVs will possible remain more expensive than ICEVs unless battery cost drops significantly and gas prices rise. It is concluded that for the electric vehicle market to increase substantially in the next 10-20 years, gas prices will need to be $4.50 to $5.50 per gallon while battery technology and range increase. However, this can be accelerated with government assistance.

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