This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

China's Oil Appetite to Charge Electric Car Market


Based on the recent three-year period, which incorporates a boom-bust-boom cycle on crude, Walters observes a 96% correlation between gasoline and crude oil prices.

While electric vehicle demand looks like it's poised to pop by year-end, cuts to federal tax incentives for the vehicles could tap the brakes.

"As we get further along election cycle, cost expenditures at the federal level are being scrutinized a lot," said Center for Automotive Research director Kim Hill. "I think there's resistance to putting money into programs on a lot of fronts."

Meanwhile, Cheng of A.T. Kearney notes that "without some of these tax credits, the cost of plug-in hybrids would be "prohibitively high" -- mainly due to the cost of the large battery pack required in the vehicle to sustain its propulsion. He estimates that gasoline prices would probably need to approach about $8 a gallon or levels similar to those in Europe before buyers, aside from the early adopters and those interested in making a statement on their commitment to environmental sustainability, would buy plug-in hybrid electric vehicles like the Nissan (NSANY) Leaf and hybrids from automakers such as GM (GM) and Ford (F).

"It would be relatively safe to say that if incentives were eliminated, the total cost of ownership for plug-in electric hybrid vehicles could push many potential buyers away," says Cheng.

Wall Street Strategies analyst David Silver estimates a potential cut in the range of $4,000 to $5,000, noting that tax breaks for ethanol producers were recently repealed, so a reduction on the fuel-efficient vehicle incentives could also be on the table. It takes about 24 months of buying gasoline, or 200 miles a week, to make up for the difference between the cost of a hybrid vehicle when compared to a "normal" vehicle, adds Silver.

Right now the federal tax credit for plug-in electric drive motor vehicles that qualify for such incentives has been between $2,500 and $7,500 and limited to 200,000 vehicles for each manufacturer, according to Cheng. That would be a maximum of $500 million per manufacturer at the low end or $1.5 billion per manufacturer at the high end.

"Over time, if plug-in hybrids go into mass production, you would expect to see economies of scale drive down the overall cost -- perhaps to a point where government incentives would not be required -- but that might take five to ten years," said Cheng.

2 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs