Would You Pay $30K for an Electric Car?
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  • If you've been following the news surrounding Tesla Motors' proposed "Gigafactory," then you know the cornerstone assumption behind it: Drive the cost of electric cars down to $30,000 apiece, and millions of mainstream buyers will start snapping them up.

    The problem, though, is that no one really knows what mainstream buyers will do. True, a $30,000 electric car is about as dead-center as you can get in terms of cost. Last August, USA Today reported that the average transaction price for a new vehicle was $31,252. Similarly, Kelley Blue Book calculated an average price at $32,086 last year. So at $30,000 in today's dollars, Tesla's proposed Gen III vehicle cost would actually be a tad below average.

    The unknown, however, is that no one can be sure how mainstream buyers will react to this new value proposition. Electric cars -- even those with a 200-mile range like that of the Gen III -- appeal to consumers in different ways than traditional gas-burners. They're fast, fashionable, quiet, safe, and they handle well. They're also cost effective -- the result of replacing gasoline with electricity.

    But "fast, fashionable, and quiet" don't necessarily register high on the priority meter of mainstream buyers. With the average US family income at $51,017 (according to 2012 US Census Bureau figures), many consumers don't have the money for a $30,000 car, let alone a small one that may still have to be backed up by another gas-burning vehicle for making longer trips. For them, financial practicality still trumps fashion, speed, and decibel level.

    Industry analysts like to say that the average commute to work is roughly 30 miles round-trip in the US, suggesting that electric cars needn't offer long-range capabilities. But that's not really an honest argument, mainly because few consumers buy vehicles only for their daily commutes.

    Over the years, Toyota has repeatedly expressed skepticism about the average consumer's willingness to purchase a vehicle based on daily commuting distance. "It's a very, very small number of people who would buy a car for their average usage, and not their exceptional usage," Bill Reinert, national manager of advanced technology vehicles, told Design News in 2011. 'Even if you're covered in 90% of the cases, you're unlikely to buy a car that leaves you uncovered 10% of the time."

    Undoubtedly, there are some mainstream buyers who adhere to unbending driving schedules, and others who will be willing to rent cars for those occasional trips outside the neighborhood. But could you really blame a mainstream consumer for not being willing to purchase a $30,000 vehicle that requires monthly use of a rental car?

    Up to now, automakers have been good at predicting the likes and dislikes of their customers. Because vehicles were always so mind-numbingly similar, marketers appealed to self-image, status, and libido as ways to sell vehicles to consumers.

    But those marketing techniques may be about to go the way of the station wagon. Now, it's going to be about pragmatism. Do you drive your kids to college? Do you take vacations in your car? What's your longest round trip? How fast do you need to recharge? Where will you plug it in?

    Right now, no one knows how tens of millions of mainstream buyers will answer those questions. But even if automakers cut the cost of the battery and reach the $30,000 target, big sales are hardly a foregone conclusion. There's still no guarantee that large percentages of mainstream buyers will bite.

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