Electric Vehicles Getting Ready for Prime Time (TSLA, GM, NSANY, TM, F, HMC)

At the annual United Nations sessions on climate issues in Cancun, US energy secretary Steven Chu predicted that electric vehicles powered by batteries will be able to compete more effectively with petroleum-burning cars in five years or less. “[T]he batteries we do have today are soon going to get better by a factor of two,” Chu declared, according to Reuters.
There’s little question about the appeal of electric vehicles. Just look at the enthusiasm for Tesla Motors, Inc. (NASDAQ: TSLA), the Chevy Volt from General Motors Corp. (NYSE: GM), and the Leaf from Nissan Motor Co. Ltd. (OTC: NSANY), all of which are all-electric all the time. The hybrids, the Prius from Toyota Motor Corp. (NYSE: TM), the Fusion from Ford Motor Co. (NYSE: F), and the Insight from Honda Motor Co. (NYSE: HMC), have lost some of their glow, but are still viable players mainly on the basis of price. Where an all-electric car costs more than $35,000, before incentives, a hybrid typically sells for closer to $20,000. And remember, except for the high-priced Tesla Roadster, all these vehicles are compacts, which can be purchased in gasoline-powered versions beginning at less than $20,000.
If the market for electric vehicles seems crowded now, within two years it will be even more crowded. In addition to the established brands and models, new entrants from Wheego, Fisker Automotive, and Aptera Motors are expected to be on sale. But do Americans want to buy these cars?
Not so much. An October report from J.D. Power and Associates estimated that of more than 44 million car sales in 2010, fewer than 1 million would be electric vehicles. [https://a673b.bigscoots-temp.com/2010/10/27/electric-cars-could-flop/] By 2020, new car sales are expected to reach about 71 million cars, of which just 5.2 million will be electric. That’s less than 10%. A Kelley Blue Book survey found that only 7% of new car shoppers are even likely to consider buying or leasing a new electric vehicle.
What keeps buyers away is the electrics range and the availability of charging stations. In the Blue Book survey, car shoppers said they would require a range averaging 340 miles between charges before an electric vehicle would meet their needs. The highest claimed range to date is 100 miles between charges and even that will decline as the lithium-ion battery ages. Within two years, the battery’s range could decline by as much as 30%.
Secretary Chu’s optimistic view isn’t going to be enough. A doubling of battery efficiency is not going to move buyers who want more than triple the range.
The vehicles that provide the range and are not over-priced are hybrids like the Prius and the Insight. But those vehicles are losing the public relations war to the all-electrics and the plug-in hybrids.
That’s a shame, because a large fleet of hybrids would more effectively reduce carbon emissions, pollution, and petroleum consumption. The Blue Book survey discovered that more than 80% of buyers interested in buying electric cars listed reduced dependence on foreign oil, reduced pollution, and reduced emissions as reasons for their interest in electric cars. Only 37% cared about tax credits, which in this case is a proxy for price.
The US market for electric cars consists primarily of buyers who want to reduce the impact of petroleum-based consumption and pollution on the US economy, and they can afford to do pay for their beliefs. That is fine and good, but this is a relatively small group and given the state of the economy is not about to expand any time soon.
Electric vehicle makers are currently singing to the choir. Unless they can figure out a way to exceed expectations at the same time that they can reduce prices, the choir isn’t going to get any larger.
Paul Ausick