Consumers are starting to embrace the idea of a car without a typical internal combustion engine, but concerns about price have been a key hurdle.

Now, researchers say, consumers are closer to giving the vehicles a chance. That's the first step toward driving down price.

“It looks like the economics ...  are falling into place,” said David Cole, chairman of the Ann Arbor-based Center for Automotive Research, which organized “The Business of Plugging In” conference in Detroit this week. “Economics are going to rule.”

The consumer attitude shift represents a significant feat for the industry, which is pouring money into electric vehicle vehicle research to improve the reliability and durability of lithium-ion batteries. General Motors alone has spent more than $1 billion to develop the Chevrolet Volt, an extended-range electric vehicle to be released in November 2010.

Yet cost remains a challenge.  For example, the Volt is likely to cost close to $40,000, about double the price of the traditional hybrid Toyota Prius. (A $7,500 federal tax credit is likely to off-set the cost of electric vehicles for early adopters.)

The high price tag for electric vehicles is attributable to development challenges associated with lithium-ion battery cells and packs.

But the price of electric vehicles - while not affordable for most consumers right now - is likely to fall over time.

Alternative propulsion proponents acknowledged Wednesday at the conference that the industry must drive down the cost of lithium-ion batteries to ensure widespread adoption of electric vehicles.

Reliability matters, but consumers are more concerned about price, said Richard Curtin, director of Reuters/University of Michigan Surveys of Consumers, led by the U-M Institute for Social Research.

Some 46 percent of consumers would consider paying a $2,500 premium for a plug-in hybrid electric vehicle, according to a U-M survey released Wednesday. But just 30 percent would consider a $5,000 premium, and only 14 percent might pay a $10,000 upcharge.

Although electric vehicle technology is still prohibitively expensive, the industry may be able to breathe a sigh of relief that consumers are willing to consider the vehicles. 

“Consumers are ready to experiment with alternative technologies and transportation,” Curtin said. “That’s probably the best and first new step that any new innovation can ask for.”

Contact AnnArbor.com’s Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter and subscribe to AnnArbor.com Business Review's weekly newsletter.