The Cost of EV Adoption? Just $6 Trillion

Alternative fuel advocates often suggest that if society could simply get the lead out on solving the infrastructure problem, electric vehicle adoption would reach an all-time high. They’re most likely correct, too. With so much of the world set to gradually ban internal combustion vehicles, EV sales are almost assured to rise. But holdouts abound due to electric vehicles’ laundry list of shortcomings.

Electric cars are often more expensive than their combustion counterparts, offer diminished range, take longer to “refuel,” and are subjected to a charging network that’s less robust than than those associated with petroleum. If the industry is to solve those problems, it’s going to need a lot of money. Around $6 trillion should do the trick.

The estimate, surmised by Goldman Sachs and published by Bloomberg last week, claims the world would need to spend about 7.5 percent of its gross domestic product (or $6 trillion USD) on electric infrastructure to put EVs on equal footing. That’s almost unfathomable and doesn’t include money going toward vehicle assembly and battery development.

If you’re wondering who’ll pick up the check, you’ve probably seen them in the mirror. A large portion of EV adoption has been helped via government programs and tax breaks. But Goldman Sachs says that’s not a sustainable business model. It’s also warning that the transition costs will have to be reduced through additional government subsidies and support. Withdrawing support from the market too early, as was the case with Tesla in Denmark and Hong Kong, obliterates sales almost immediately.

The reality is that most automakers building EVs suffer from supply issues. Nor is the technology advancing as quickly as anyone would like. Storage capacity continues to improve but not at the pace automakers were hoping for. The end result is electric vehicles that are superior to what was on offer two years ago but are still prohibitively expensive to make and dependent upon hardware that’s in high demand globally. This is one reason you see automakers offering EVs in selective markets — it’s not just because companies don’t think they’ll sell everywhere, it’s because they absolutely can’t. Manufacturers aren’t able to build enough, and their clientele will prove less than receptive if there’s no local charging infrastructure to speak of.

Does this mean EVs are dead in the water? No. It just means they’ll have a longer, harder path than many initially assumed. It also means they’ll remain heavily dependent upon government action if they’re to continue gaining a share of the market over the next few years.

[Image: Nissan]