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What holds back electric cars? Car dealers, says VC

Those dealer contracts have to be broken or skirted for electric cars to get to the mass market.

The cozy relationship between car dealerships and automakers will have to be changed for electric cars to take off, theorized venture capitalist Jennifer Fonstad.

A managing director at Draper Fisher Jurvetson, Fonstad said that Detroit automakers have created an environment--through discounts and volume buying--that make it tough for new, electric car companies to squeeze into the market.

"The tipping point will be breaking the Detroit model," she said at the Alternative Energy Innovations Conference in Redwood City, Calif. Tesla Motors, which DFJ invested in, is already trying to "change the way cars are bought and sold." It will sell cars through company-owned dealerships.

She has a point, to a degree. Car dealers do have tight relationships with their manufacturers. Also, oil companies have found ways, through contracts, to keep ethanol out of their service stations.

Then again, the performance and range of electric cars in the past has often been an issue. Both Ian Clifford (CEO of Zenn Motors) and Elon Musk (chairman of Tesla Motors) have both said that, and they both are advocates of electric cars. Zap (and Zenn) sell electric cars now, but they don't hit freeway speeds, for instance.

As a result of some of the limitations of electric cars, Fonstad said that auto companies will have to educate potential customers that not all electric cars will perform the same way as traditional cars. They may not go as far, so when people buy them they can't keep the endless road trip in their mind.

Nissan, which hopes to come out with a fully electric car in about five years, has already said it needs to kick off the educational process.