OTA’s evaluation yields results that can be interpreted in either an optimistic or pessimistic manner. On the one hand, we conclude that reasonable success in technology development can yield vehicles with superior fuel economy—at least twice that of today’s vehicles, and quite possibly even higher.
Further, there is a good chance that the vehicles can avoid extreme performance tradeoffs and will be acceptable to most consumers in this regard. On the other hand, we believe that bringing technology costs down to the point where advanced vehicles can compete in price with conventional vehicles is a significantly more difficult challenge.
All about Technology
Although we readily admit that projecting the future costs of new technologies is a highly uncertain business, we conclude that most of the advanced vehicles discussed here will likely cost the purchaser at least a few thousand dollars more than comparable conventional vehicles. Higher vehicle prices could be a major stumbling block to commercializing advanced vehicles, even in exchange for improved fuel economy and lower emissions.
In today’s vehicle market, fuel economy is far less valued than comfort, safety, and performance, and reduced emissions will likely have little value to vehicle purchasers. Also, vehicle purchasers generally weigh purchase price far more heavily than fuel costs and, in fact, fuel savings are unlikely to pay for the efficiency improvements unless gasoline prices rise sharply.
Price of Technology
Consequently, without government intervention, the real market for these vehicles may be in Europe, Japan, and other areas where gasoline prices approach $3 or $4 a gallon, and yearly gasoline costs for a 30 mpg vehicle may be $1,000 or more. 70 It is worth noting, however, that these high prices have thus far stimulated only a modest differential in automobile fuel economy between the United States and the high-gasoline-price nations.
Alternatively, this price increment eventually may be reduced as greater experience is gained with the technologies or if breakthroughs occur in manufacturing methods or technology designs. Further, consumers have implicitly accepted price increases of this magnitude before-industry estimates of the price impact of current emission controls exceed $1,000 a vehicle, yet purchasers 7 0 Assuming 10,000 miles per year. European “per car” driving levels are below U.S. levels but are catching up.
This implies that it might be possible to build a market for advanced vehicles by somehow shifting the market’s valuation of some of the “nonmarket” benefits of these vehicles, such as striking a blow for energy security or improving the environment.