Pricing of Electric Cars and how to Encourage People to Buy Them Term Paper

Introduction

Pollution from the automobile industry has highlighted the need to find “green” means of transport. The development of electric cars has emerged as a viable option to meet this goal. However, there has been a slow adoption of this type of car because of its high purchase costs and its limited usability and practicality (Great Britain Parliament, 2012).

Since it is not feasible to continue using the internal combustion engine model for long, there is a need to solve some of the inherent challenges inhibiting the adoption of the electric car. This paper proposes different strategies for reducing the cost of electric cars and encouraging people to buy them.

How to Solve Pricing Problems of Electric Cars and Encourage People to buy them

Subsidizing Costs of Electric Cars

This paper has already shown that the high cost of purchasing electric cars is part of the problem inhibiting their adoption. To manage this problem, governments should subsidize the cost of purchasing an electric car and make them affordable to the general populace (Klöckner, 2015).

Exempting them from tax is one way of doing so because it would make them cheaper than buying a conventional car (Ndege, 2012). To make sure such a strategy is effective, governments could increase the taxes levied on conventional cars to discourage people from buying them. Norway has adopted such a strategy successfully (Klöckner, 2015). It has subsidized electric cars at the expense of conventional cars, thereby encouraging its citizens to buy them (Boxwell, 2014).

This is why experts say the country is among the best adopters of the electric car model (Klöckner, 2015). In fact, electric car sales account for one-fifth of the total car sales in the country (Klöckner, 2015). The United Kingdom (U.K) has also adopted similar measures because in 2011, it allocated more than 230 million pounds as subsidies for people who bought electric cars (Veloce Publishing Ltd, 2015).

However, this action was controversial because the government excluded people who bought hybrid vehicles from enjoying the subsidy. Critics of this proposal say that subsidizing electric cars is “taking taxpayers for a ride” because the government subsidizes these cars using taxes (Veloce Publishing Ltd, 2015).

Instead, they have proposed to adopt tax relief measures, as it is more acceptable. This is why the proposal has been adopted relatively well in America. Nonetheless, introducing subsidies to encourage the purchase of electric cars remains a viable option for governments.

Increase Cost of Operating Conventional Cars

Subsidizing the cost of electric cars is one way of encouraging people to buy electric cars. However, another side of the cost strategy is to increase the cost of operating conventional cars. Governments could achieve this goal by using different strategies, including increasing parking fees, hiking the cost of transporting a conventional car via sea vessels, and increasing toll charges on the same cars (Chiras, 2013).

The government also needs to exempt electric cars from such charges to make sure this strategy is effective. Part of this suggestion involves recommending local authorities to exempt electric cars from parking charges. This proposal comes from research studies, which have shown that 65% of car buyers would be inclined to buy an electric car if they got free parking (Duer, Rosenhagen, & Nordic Council of Ministers, 2011).

Improve Vehicle-Charging Infrastructure

Part of the problem noted for the failure of countries to embrace electric cars is the lack of proper infrastructure to charge vehicles. Observers have reported this problem in many cities around the world that struggle to embrace electric cars as the main form of transportation (Duer et al., 2011).

For example, Los Angeles suffers from this problem (Westbrook, Institution of Electrical Engineers & Society of Automotive Engineers, 2001). In fact, in some places, there have been cases where customers have nearly fought for charging spots. Norwegian cities are also suffering the same problem (Klöckner, 2015).

Its existence shows that the demand for electric cars has outstripped the capacity available to support it. In this regard, governments need to provide more incentives for investors to build this infrastructure because it would be futile to manage the demand side of the problem and neglect the supply side (Neckermann, 2015). For example, they could provide incentives for utilities centers to have a charging point for electric vehicles.

Israel has been on the forefront in adopting such recommendations because, recently, it started an initiative to build hundreds of thousands of charging stations across the country (Anderson & Anderson, 2004). In line with this recommendation, the country also reduced the tax rate for electric cars to 10% to encourage more people to purchase electric cars (taxes in Israel could be as high as 100%) (Anderson & Anderson, 2004).

To tackle the problem of drivers who may want to drive longer distances, Israel contracted American companies to supply new batteries to drivers who may want to swap their batteries for new ones when they exhaust their charge (Anderson & Anderson, 2004). There are proposals to replicate the same concept in China because this market is also a fan of electric cars (Anderson & Anderson, 2004).

However, experts are yet to know how Israel’s proposals would work in a small country. Similarly, we are yet to know how the proposals of such a small country, such as Israel, could work in a big country such as China.

Conclusion

The insights highlighted in this paper provide us with valuable insight regarding what potential electric car buyers could be looking for when considering the decision of whether to buy an electric car, or not. Particularly, it draws our attention to the potential for merging government and private efforts in instilling the idea that electric cars are not only good for the environment, but also cheaper to own, compared to conventional cars.

Although most of the recommendations highlighted in this paper are plausible, it is difficult to predict future consumer behavior. Therefore, it is important to apply some of the recommendations proposed in this paper cautiously because they may not have a lot of merit once conventional cars become mainstream.

References

Anderson, C., & Anderson, J. (2004). Electric and Hybrid Cars: A History, 2d ed. New York, NY: McFarland.

Boxwell, M. (2014). The Electric Car Guide – 2015 Edition: Discover the truth about owning and using electric cars. New York, NY: Greenstream Publishing Limited.

Chiras, D. (2013). EcoKids: Raising Children Who Care for the Earth. New York, NY: New Society Publishers.

Duer, H., Rosenhagen, C., & Nordic Council of Ministers. (2011). A Comparative Analysis of Taxes and CO2 Emissions from Passenger Cars in the Nordic Countries. London, UK: Nordic Council of Ministers.

Great Britain Parliament. (2012). Plug-In Vehicles, Plugged in Policy?: Fourth Report of Session 2012-13: Report, Together With Formal Minutes, Oral and Written Evidence, Volume 1. London, UK: The Stationery Office.

Klöckner, C. (2015). The Psychology of Pro-Environmental Communication: Beyond Standard Information Strategies. London, UK: Palgrave Macmillan.

Ndege, J. (2012). Solutions America. New York, NY: Trafford Publishing.

Neckermann, L. (2015). The Mobility Revolution: Zero Emissions, Zero Accidents, Zero Ownership. New York, NY: Troubador Publishing Ltd.

Veloce Publishing Ltd. (2015). Electric Cars – The Future is Now! London, UK: Veloce Publishing Ltd.

Westbrook, N., Institution of Electrical Engineers., & Society of Automotive Engineers. (2001). The Electric Car: Development and Future of Battery, Hybrid and Fuel-cell Cars. New York, NY: IET.