The document discusses the transition from traditional gasoline vehicles to electric vehicles. It provides background on air pollution caused by gasoline vehicles and notes Tesla's announcement of the more affordable Model 3 electric car. The document considers different viewpoints on government incentives for electric vehicles and outlines factors that should be analyzed to accurately assess the costs and benefits of transitioning to electric vehicles over the long run, such as impacts on related industries and expected job growth.

1. Scott Marks
Econ 320
Research Assignment
For years, Americans and their automobiles have been criticized as being one of
the largest contributors of air pollutants. According to a study by MIT as reported by Chu
(2013), “​Emissions from road transportation are the most significant contributor, causing
53,000 premature deaths, followed closely by power generation, with 52,000.”
Unfortunately, aside from taking public transportation or carpooling, there have never
been any other truly affordable options for Americans.
This changed on March 31, 2016 when Tesla Motors CEO Elon Musk announced
that the Tesla Model 3 would likely be released in 2017. As recounted by Golson
(20​16), “At the unveiling of the Model 3 this evening at the company's design studio in
Hawthorne, California, Tesla CEO Elon Musk said the car will deliver at least 215 miles
of range beginning at just $35,000 — that's a bold claim, and an important one for Tesla
to meet. Musk is ‘fairly confident’ that deliveries will begin by the end of 2017, and ‘you
will not be able to buy a better car for $35,000, even with no options.’ And it will be one
of the safest cars in the world, according to Musk.” When one includes the Plug­In
Electric Drive Vehicle Credit, the approximate price for the baseline Model 3 would be
$27,500. Additionally, Musk has recently been quoted as saying, “‘I’m super­excited
about being able to produce a car that most people can afford,” Musk said of the new
Model 3. “And there will be future cars that are even more affordable down the road.
But, with something like the Model 3, it’s designed such that roughly half the people will
be able to afford the car. Then, with fourth generation and smaller cars, we’ll ultimately
be in the position where everyone will be able to afford the car’” (Epstein, 2016).
The future of the electric car seems to be looking bright, but it cannot be
assumed that everyone will agree. For instance, it is probably safe to assume that
conservatives will be of the opinion that with an increased level of affordability that the
different tax credits should be removed. Additionally, they would argue that these credits
place an unfair advantage on the side of electric cars and that market forces should be
left to work on their own to determine whether or not the American people want to
switch. Radicals will almost certainly agree with the idea that the tax credits should be
removed, but for a different reason. They will agree that the tax credits need to be

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removed, but because they unnecessarily influence the populace into purchasing
electric cars over being able to choose freely for themselves. Liberals, however, will
most likely be of the belief that the current system of tax breaks should be further
improved upon to ensure that everyone who wants to obtain an electric car has the
means to do so.
Considering these differing points of view will eventually lead to the line of
thought of whether or not electric cars would be more cost effective than our current
internal combustion engine automobiles and whether the environmental impact would
be worth it. I would hypothesize that it would most certainly be more cost effective in the
long run to transition from current internal combustion automobiles to electric ones.
Furthermore, I feel that the positive environmental impact of transitioning to electric cars
would far outweigh any negative effects that may arise from the transition.
Now, determining whether or not the long­term transition to electric vehicles
would be worth it or not should be a fairly simple procedure. First, the tester would have
to collect all of the existing data regarding internal combustion engine automobiles. This
data would include factors such as: total costs to run and maintain the industry, current
levels of jobs produced from the internal combustion automobile industry, current levels
of pollution being produced from both vehicles and factories, total revenue from current
internal combustion automobile sales, and the total of net exports generated from the
internal combustion engine automobile industry.
Next, the tester would have to gather all the data related to the electric
automobile industry. Unlike the internal combustion automobile industry, this data would
have to include some speculative/estimated values since the mainstream electric car
market is just starting to get off the ground. Potential variables that could be tested
would be similar to those dealing with the internal combustion engine such as: costs,
pollution levels from both the vehicles and the factories, current revenue from electric
car sales and the total of net exports. Additionally, it would also behoove the tester to
determine the expected values of certain variables including the forecasted revenues of
electric cars as well as expected job growth from the growing market.

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Beyond simply the previously mentioned direct variables, it would also benefit the
tester to take other extraneous factors into consideration. For example, one would have
to consider what other industries would be affected by the movement from internal
combustion automobiles to fully electric ones. Things like the state of the oil industry,
the increased demand for materials, such as lithium, used in the production of the high
powered batteries or the drastic decrease in demand for now obsolete car components,
such as fuel injectors and engine pistons. All of these factors, and in all likelihood more
on top of these that would arise through the process of experimentation, would be
required to create an accurate cost/benefit analysis regarding the potential benefits of
moving from the internal combustion automobile to fully electric ones.
To varying degrees, some of these ideas/variables have already been analyzed.
Some studies have analyzed Tesla Motors’ stance on open innovation while others took
that analysis a step further and included the “Carbon Crisis”. Another study examined all
the previously done studies on electric and hybrid vehicles and their effects on the
environment, while a fourth study compared the potential for newer companies and
entrepreneurships to be able to compete with the long­established giants of their
industry. The final study that was reviewed involved analyzing the technological trends,
the infrastructure implications and the cost comparisons regarding electric automobiles.
The policy of open innovation, in regards to electric automobiles, was first
introduced by Tesla Motors on June 12, 2014. On this day, “Elon Musk, the chief
executive officer of the electric car manufacturer, Tesla Motors, announced in a blog
that ‘all our patents belong to you.’ He explained that the company would adopt an open
source philosophy in respect of its intellectual property in order to encourage the
development of the industry of electric cars, and address the carbon crisis” (Rimmer,
2014). Before progressing any further, it would be prudent to first lay out the differences
between closed innovation and open innovation. As it is laid out in a table by
Karamitsios (2013), the principles of closed innovation are: “The smart people in the
field work for us.”, “To profit from R&D, we must discover it, develop it and ship it
ourselves.”, “If we discover it ourselves, we will get it to the market first.”, “The company

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that gets an innovation to the market first will win.”, “If we create the most and the best
ideas in the industry, we will win.”; however, the principles of open innovation are: “Not
all the smart people in the field work for us. We need to work with smart people inside
and outside the company.”, “External R&D can create significant value: internal R&D is
needed to claim some portion of that value.”, “We don’t have to originate the research to
profit from it.”, “Building a better business model is better than getting to the market
first.”, “If we make the best use of internal and external ideas, we will win.” With the
advent of Tesla Motors’ decision regarding open innovation, Rimmer (2014) went on to
point out, “The decision to open source electric cars was praised by environmental
leaders—such as the Sierra Club and the Climate Council in Australia. Jeff Tittel of the
New Jersey Sierra Club has maintained: ‘We need zero­emission vehicles, which
means we also need to educate consumers and inform them about the benefits of
owning an electric car.’”
Despite all the positive things that could be said about open innovation,
Karamitsios (2013) did go on to conclude in his article, “However, despite the many
advantages of open innovation, several risks exist. Some of them are hidden costs,
opportunistic behavior and the likelihood that one of the partnering companies may face
financial difficulties, which may affect the outcome of the cooperation.” This leads
directly into the next idea of the difficulty that new corporations and entrepreneurships
face when attempting to enter a market. In their paper, ​Greening Goliaths versus
emerging Davids — Theorizing about the role of incumbents and new entrants in
sustainable entrepreneurship​, Hockerts and Wüstenhagen (2010) conclude that, “Our
analysis has resulted in a dynamic view of industry transformation, where the initial
phase is characterized by sustainability initiatives of idealistic ‘Davids’. In a second
phase, some pioneering ‘Goliaths’, for example retailers with a higher quality
positioning, mimic some of the David initiatives and try to bring them into their
mainstream distribution channels. In isolation, none of these two developments would
necessarily lead to sustainable transformation of mainstream markets, because as we
have argued above Davids tend to get stuck in their high­quality, low­market penetration

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niche, while Goliaths have an inherent tendency to react to cost pressures by lowering
the sustainability quality of their offerings.” This would imply that to further a market
requires the cooperation of both the Davids, like Tesla Motors, and the Goliaths, like
Toyota and Ford.
Lastly, the topic of environmental impacts must be addressed. According to
Hawkins, Gausen and Strømman (2012), “Overall, gaps in existing environmental
assessments of EVs [electric vehicles] are significant. Given current understanding of a
transportation system including significant use of EVs it appears that in connection with
low­carbon electricity systems, BEVs [battery electric vehicles] and PHEVs [plug­in
hybrid electric vehicles] offer the potential of reductions in GHG [greenhouse gas]
emissions when compared with conventional ICEVs [internal combustion engine
vehicles], however their relative position in terms of GHG emissions when compared to
other advanced vehicle technologies such as high­efficiency ICEVs or GI­HEVs
[grid­independent hybrid electric vehicles] is less clear.” However, Tuttle and Kockelman
(2012) had a more optimistic view stating, “PEV [plug­in electric vehicle]­related
technologies have progressed sufficiently to enable the introduction of
mass­market­viable vehicles by mainstream global manufacturers. With the advent of
the Chevrolet Volt and Nissan Leaf PEVs, the industry has been set in motion and
consumers have some serious choices to make”, and “Interestingly, the introduction of
PEVs may stimulate a competitive response which may accelerate advances in
conventional powertrain efficiency, biofuels, or hydrogen fuel­cell vehicles as well. As
long as issues like energy security, air quality, trade deficits, and other concerns
continue, all such innovations bode well for the world at large.”
The idea of the electric car is not a new one. In fact, the first electric car was
developed in the 1830s (“​EV History”)​, pre­dating the Ford Model T by approximately 70
years. However, transitioning from internal combustion engines to electric vehicles is
not a step backwards, rather it is a step towards a brighter and greener future. The path
towards this future will not be easy and will require a great deal of innovation and

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research, but it will be beneficial to not only our species, but our entire planet as a
whole.
References
Chu, J. (2013, August 29). ​Study: Air pollution causes 200,000 early deaths each year
in the U.S​. ​MIT News Office​. Retrieved from
http://news.mit.edu/2013/study­air­pollution­causes­200000­early­deaths­each­ye
Ar­in­the­us­0829
Epstein, Z. (2016, April 26). ​Elon Musk says Tesla’s next car will be even cheaper than
the model 3​. ​Boy Genius Report​. Retrieved from
http://bgr.com/2016/04/26/tesla­model­4­price­elon­musk/
EV History ­ Electric Auto Association. (n.d.). Retrieved May 01, 2016, from
http://www.electricauto.org/?page=evhistory
Golson, J. (2016, March 31). ​Tesla model 3 announced: release set for 2017, price
starts at $35,000​. ​The Verge​. Retrieved from
http://www.theverge.com/2016/3/31/11335272/tesla­model­3­announced­price­re
lease­date­specs­preorder
Hawkins, T., Gausen, O., & Strømman, A. (2012). Environmental impacts of hybrid and
electric vehicles—a review. ​The International Journal of Life Cycle Assessment,
17​(8), 997­1014. Retrieved April 18, 2016, from
http://link.springer.com/article/10.1007/s11367­012­0440­9
Hockerts, K., & Wüstenhagen, R. (2010). Greening Goliaths versus emerging Davids
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entrepreneurship. ​Journal of Business Venturing,​ ​25​(5), 481­492. Retrieved April

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18, 2016, from
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f?_tid=1851553c­10d0­11e6­8379­00000aacb362&acdnat=1462239843_f09427
e7b37e93c49ab73193af201b56
Karamitsios, A. (2013, June 17). Open innovation in EVs: a case study of Tesla
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http://www.diva­portal.org/smash/get/diva2:635929/FULLTEXT01.pdf
Rimmer, M. (2014, August). Tesla Motors: intellectual property, open innovation, and
the carbon crisis. Retrieved April 18, 2016, from
https://www.law.berkeley.edu/files/Tesla_Motors_IP_Open_Innovation_and_the_
Carbon_Crisis_­_Matthew_Rimmer.pdf
Tuttle, D. P., & Kockelman, K. M. (2012). Electrified Vehicle Technology Trends,
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Research Forum​, ​21​(1), 35­51. Retrieved April 18, 2016, from
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