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Big Cities Ideal Test Bed for Electric Cars, McKinsey Study Finds

The range limitations of most early electric cars will matter less in tightly packed urban areas, where the daily driving distance is likely to be much shorter than in the suburbs or rural areas.

Published: 13-Jan-2010

Hold the vroom and bring on the zoom because the theme of the most important motor show in the U.S. is electricity, with carmakers ranging from Chrysler to Ford to Volkswagen presenting battery-powered new models. After nearly two decades of failed promise, 2010 could finally be the year of the electric car, with at least two major models — the plug-in hybrid Chevrolet Volt and the all-electric Nissan Leaf — set to hit dealers' lots by the end of the year.

Automakers will still need to convince skeptical consumers to go electric — and even some of the top models, such as Chevy's Volt, will come with range limitations and high sticker prices that could discourage many drivers. But a new report by the consulting firm McKinsey finds that in megacities — metropolitan areas with over 10 million people — there might already be enough interest to get electric cars moving off the lots surprisingly fast. In New York City alone — one of three megacities McKinsey surveyed, along with Paris and Shanghai — the firm estimates that electrics could account for up to 16% of new-vehicle sales as soon as 2015, up from virtually nothing today. "There's a small group of early adopters, people who are really interested in this technology," says Stefan Knupfer, who heads McKinsey's Automotive and Assembly practice in the Americas. "The question is how to identify those early adopters."

Megacities are the perfect place to find them. Already densely populated and set to grow — 286 million people lived in 19 megacities in 2007, a number expected to rise to 447 million people in 27 megacities by 2025 — megacities are the perfect laboratory for the electric car. The range limitations of most early electric cars will matter less in tightly packed urban areas, where the daily driving distance is likely to be much shorter than in the suburbs or rural areas. There's also a strong need in megacities to reduce greenhouse-gas emissions and other air pollutants — megacities already emit roughly 10% of global CO2 emissions. That's led some cities, like New York, to consider direct incentives for electric-car buyers, including preferred lanes for EVs and sizable tax credits.

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