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POLITICS: PennAve

Subsidies boost market for electric vehicles

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Transportation,PennAve,Energy and Environment,Zack Colman,Technology,Subsidies

Even after Juris Shibayama's Tesla Model S plug-in electric car became the third to catch fire in six weeks, his confidence in the car didn't waver.

"I would buy another one a heartbeat," Shibayama, who described the advance warnings the vehicle's emergency system sounded before it went ablaze in Smyrna, Tenn., wrote on Tesla's blog.

Shibayama is one of an increasing number of electric vehicle drivers, as the industry outperforms expectations with the help of state and federal government subsidies.

"The market is stronger than expected, and it's not all high-end Tesla buyers, either," Costa Samaras, a senior energy researcher at RAND Corporation, said in an email.

The new generation of plug-in electric vehicles accounts for 200,000 of the 240 million passenger vehicles currently registered in the U.S. Two-thirds of the electric vehicles were sold in 2012 and 2013, according to the U.S. Energy Information Administration.

Still, the upfront cost of electric vehicles remains prohibitive for many, even if saving money on gasoline wipes away some of that difference in the long term. While the Tesla Model S is one of the pricier options at $71,000 — before accounting for a $7,500 federal rebate — one of the cheapest is the $27,495 Chevrolet Spark.

Those price points likely will threaten President Obama's goal of putting 1 million electric vehicles on the road by 2015, as the vehicles comprise just 4 percent of annual U.S. automobile sales, according to the Electric Drive Transportation Association.

Energy Department officials point out that costs are dropping— one noted that lithium-ion battery prices have fallen 50 percent in the past four years and could hit $10,000 by 2015.

Still, Energy Secretary Ernest Moniz said his agency is looking into whether it should restart the Advanced Technology Vehicle Manufacturing program, a $25 billion initiative created in the waning days of former President George W. Bush's administration.

The program, which attempts to commercialize everything from battery to charging technology, still has $16.6 billion it can lend.

Tesla is the program's biggest success story — it repaid its $465 million loan this year, a decade ahead of schedule.

But the effort has produced some notable flops, pushing the administration to abandon it in 2011 amid criticism from congressional Republicans.

The Energy Department should be careful if it reopens the program, said John Gartner, Smart Transportation research director with Navigant Research.

"They just have to be very selective in looking at the right parts of the market," he said. "A company with a track record of success and financial oversight can repay [a loan] relatively quickly."

Gartner said the industry is on an upward trajectory. He expects 2.5 million plug-in electric vehicles on the road by 2022.

Experts say a mix of state and federal incentives has helped reduce cost, spur installation of electric charging infrastructure and pull more manufacturers into the market.

In all, 28 states offer incentives, and the federal government offers consumers a credit worth between $2,500 and $7,500.

Last month, eight states — including California and New York — agreed to put 3.3 million zero-emission vehicles on the road within 12 years, an effort that will include coordination on building codes to promote charging infrastructure adoption and incentives for buying the cars.

Higher auto mileage standards also will boost the market, Gartner said, as light-duty vehicles will have to get 54.5 miles per gallon by 2025.

"You're seeing more choices, more models out there. If you look back about 18 months ago, there was essentially the Nissan Leaf and the Chevy Volt," said Dave Reichmuth, senior engineer with the Union of Concerned Scientists' clean vehicles program.

Now, Cadillac, BMW, Volkswagen and others are entering the fray.

Chrysler is rolling out its first electric vehicle — the FIAT 500e — largely because the market has matured, an auto industry official suggested.

"Chrysler Group is not late to the party. Its strategy aligns perfectly with the market — which should be the primary consideration of every business," the official wrote in an email.

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Zack Colman

Staff Writer
The Washington Examiner