Are you interested in a $9,500 (U.S.) electric vehicle (EV)?

Spinning through the blogosphere is this contention that when Tesla Motors starts selling its Model 3 EV (sometime in 2017 or 2018), you’ll be able to buy one for $9,500 (U.S.).

The Nssan Leaf is the best-selling pure EV in history. And you can argue it costs $41 to own and operate over 96 months, or eight years.

Seeking Alpha’s Anton Wahlman argues that this is the bedrock pitch Tesla (NASDAQ: TSLA) will make to consumers when the Model 3 is finally unveiled (all in U.S. dollars):

Gross purchase price: $35,000

Federal tax credit: $7,500

California state rebate: $4,000

7.5 year gasoline savings: $9,000

Value of California’s white carpool sticker: $5,000

Total savings: $24,500

NET cost to the California consumer: $9,500

 
The first thing you might notice about the subsidy story is that in the U.S., the federal and state governments are heavily invested in pushing a green vehicle agenda. California’s direct subsidies alone are worth $9,000.

(Under the previous Harper Conservative Government, with its umbilical ties to Alberta’s petroleum industry, never allowed the feds to venture into the EV subsidy game. Indeed the Harperites strictly avoided any mention of climate change or a national energy strategy that might include subsidies for emerging technologies that would reduce our dependency on fossil fuels. At the same time, as the advocacy group Oil Change International found, Canada’s total federal and provincial support for the petroleum industry is about $2.7 billion (U.S.) annually.)

The Chevrolet Volt is a plug-in hybrid.

Oil industry subsidies aside, what if direct EV subsidies are modest, say in the range of $8,500? This brings us to Canada where only three provinces (Ontario, Quebec and British Columbia) are in the EV subsidy game.

Next, I want you to put aside the Model 3 and consider the EV industry leader, Nissan’s Leaf with its long track record of success (Canadian dollars):

Gross purchase price: $32,698

Ontario tax credit: $8,500

Fuel savings over eight years: $9,720 (Natural Resources Canada says the Leaf uses $442 a year in gasoline; a comparably-sized Kia Forte hatchback uses $1,657. Annual savings: $1,215.)

The 2016 Nissan Leaf is a modern car in every way — and far cleaner than the 90 million internal combustion engine cars sold in 2015.

Maintenance savings over eight years: $3,500 (EVs with far fewer moving parts and lower regular maintenance costs are much cheaper on the upkeep.)
Total savings: $21,270

Net cost for a Leaf (Ontario consumer): $11,428, or $119 a month over a eight years.

If the current Liberal Government in Ottawa decides to match Washington to the tune of a $7,500 federal tax credit, the net cost to an Ontario consumer drops to $3,928 or $41 a month over eight years. It is not unreasonable, I’d add, to expect the Liberals to move on EV subsidies, given how much attention the prime minister and his acolytes have given to the issue of climate change.

And what if the cost of electricity goes down? Then the case for EVs gets more compelling. The investment firm Lazard, in fact, says the cost of using wind power fell 61 per cent from 2009 to 2015 in the U.S.; the cost of solar power fell 82 per cent.

So the cost of renewable energy is quickly becoming competitive with fossil fuels and that only bolsters the case for EVs generally.

The obvious question is, why don’t car companies selling EVs make the economic case more forcefully in their marketing? Because it’s bad for business.

The global auto industry last year sold almost 90 million new vehicles powered by fossil fuels. The car business has invested heavily in vehicles powered by internal combustion engines (ICE). These companies want a return on that investment before they completely upend their ICE business in a switch to EVs and plug-ins generally.

The production version of the 2017 Chevrolet Bolt is no longer a mystery.

Nonetheless, we’re on the verge of an EV revolution in personal transportation. Tesla’s presence has forced the traditional car business to juice EV planning.

We’ve already reached the point where some families can easily make the economic case for switching to one of the very good EVs heading to showrooms in the next five years or less. The new crop of EVs makes the functional case, too; they’re roomy, quick, nimble and do not give their owners range anxiety.

Indeed, the coming Chevrolet Bolt EV, due at least 18 months before the Model 3 hits showrooms, is a perfect example of the near future in EVs: 320-km range, roomy cabin, pleasant ride and handling.

The future of EVs has arrived, and for consumers, the economics are finally starting to make sense.