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If You Thought The Auto Bailout Made No Sense Now. . .



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. . . wait until the bailout for the electric car market begins. CNN/Money:

Electric cars have a big role to play in reducing the world’s greenhouse gas emissions, but it’s going to cost a lot, according to a new report. It could even push automakers into further trouble.

For electric and hybrid vehicles to achieve their environmental potential, the world’s governments will need to step in with high levels of financial support for consumers and industry, according to a report by the Boston Consulting Group, a management consulting firm. And the cost savings in fuel won’t be nearly enough to provide the incentive without that government cash.

Electric vehicles could realistically make up a significant fraction of the world’s car market in the foreseeable future, but not nearly a majority, according to BCG. “The costs of creating an automotive market dominated by electric and hybrid cars are prohibitively high,” said the report.

Under what BCG calls the “most likely” scenario – where oil costs about $150 a barrel and governments enforce existing CO2 regulations – about 11 million hybrid and 3 million electric vehicles will be sold globally in 2020. Even then, they will make up just 28% of those sold in the word’s biggest markets.

But even that level of market penetration will require governments in Europe alone to spend about $70 billion in industry support, BCG said. In return, a relatively small amount – about $6 billion – would be saved by switching vehicles from oil-based fuel to electricity.

The numbers would be similar for the United States, said Xavier Mosquet, one of the report’s authors.

High cost of green

Most of that money would go to help the auto industry engineer and manufacturer the vehicles and to provide cash incentives to offset their high costs to consumers.

These investments will require a firm commitment to reducing greenhouse gases, according to the report, regardless of cost.

If cost-effectiveness were the goal, improving the performance of today’s internal combustion engines would be the best option.



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