The Big EV Crapshoot
It’s tempting to look at the early bottom-line numbers and draw negative conclusions from them, and many journalists with an agenda are doing just that. Nobody wants “Obama’s pricey electric toys,” they say. But from where I’m sitting that’s premature—kind of like deciding who will win the war based on the first few battles. Sure, with 245 million cars on American roads, it’s going to take a long time to green the fleet, but the process is underway.
PricewaterhouseCoopers' Oliver Hazimeh thinks that seven to nine percent of sales by 2020 will be electric cars or plug-in hybrids, with an additional eight to ten percent regular hybrids. A 2009 report from the University of California at Berkeley predicted that electric cars would account for 64 percent of light vehicle sales by 2030, when they’d be 24 percent of the fleet. That seems very, very optimistic to me, but a lot of other reports look far too pessimistic. J.D. Power, for instance, thinks that battery cars and hybrids will be only 7.3 percent of worldwide car sales by 2020.
On Thursday, GM will report November sales for the $41,000 Chevrolet Volt, and spokesman Rob Peterson, who describes Volt sales as “solid,” tells me to expect a repeat of the record-setting month of October—about 1,200 sales, which would put 11-month sales of this pioneering plug-in hybrid at 6,200 for the year. At first available in only seven states, the Volt is now available everywhere—but getting your hands on one is still a challenge. And let’s put the numbers in perspective: In October, GM sold 946 Corvettes, and that’s a pricey specialty car has been around since 1953.
GM says it wants to sell 10,000 Volts in 2011 (and 60,000 in 2012), so it needs a killer December. But 8,000 is certainly achievable. To increase availability, GM is letting dealers sell the demonstrators—putting as many as 2,300 cars on the market before the calendar turns over. Is the report of a Volt fire (after crash testing) likely to stifle demand, especially since the National Highway Traffic Safety Administration (NHTSA) has launched a safety investigation? Some analysts think the Volt is selling to true believers and early adopters, and they’re not as likely to be affected by the fire issue. According to Peterson, “We haven’t seen any impact from the NHTSA investigation at this point. Our challenge is keeping the story factual—the focus of the investigation is on handling, storage and disposal [of battery packs] after a crash—not at a crash….” We’re not talking about Volts turning into fireballs at the scene of the accident. The pack in question caught fire weeks after a government-sponsored collision.
The $37,250 (for the popular SL model) battery electric Nissan Leaf is doing better than the Volt so far, with approximately 8,500 sales so far. October wasn’t great for Nissan, with just 849 cars sold (down 18 percent from September). Undaunted, Nissan’s Carlos Ghosn says that combined sales of Nissan and Renault EVs could total a whopping 500,000 by 2020. Steve Oldham, says Nissan is finally past the production delays from Japan’s tsunami and earthquake, and East Coast customers on the waiting list will be getting their cars starting in December. I’ve yet to see a Leaf in the wild here in Connecticut, but that’s likely to change soon.
Toyota is still the market leader for advanced-tech vehicles, wholly because the Prius hybrid is such a strong seller. Here’s an Edmunds chart showing how the automakers are faring:
We’ve got a complicated picture here, and many factors will decide whether these cars take off or not, with gas prices being the prime mover. A big spike will send buyers directly to EVs without passing go. At a U.S. average of $3.29 for a gallon of regular (and $3.57 for premium), they’re certainly not cheap now, but just as the frog doesn’t feel the water getting hotter (until he boils), we’ve come to look at every little decline from $4 as a gift from heaven. I’ve looked at long-term trends in oil pricing, and I wouldn’t bet on a return to the happy days when the gas jockey gave you change from your $10 bill. Short term, oil prices are likely to be all over the place, and everything from conflict in the Middle East to the recession affects them.
Incentives matter, too, and the $7,500 federal tax credit is safe for now. I think it’s unlikely the feds will do anything more for EVs in the current Congress. Some states are offering attractive packages, including Hawaii (with up to $4,500 cash back) and California (which recently refunded its rebate program, offering $2,500 in upfront cash). And getting to drive as a single occupant in California’s HOV lanes is a big factor, too. Here’s a state-by-state guide to incentives.
Regulation is huge, as well. The feds are demanding that auto fleets average 35.5 mpg by 2016, and 54.5 mpg by 2025. It’s possible to get there with really frugal gas engines (using start-stop, direct injection, turbo-charging, cylinder deactivation and some other neat stuff) but hybrids and battery EVs really help.
And then there's the charging networks. Although it’s likely that 80 percent or more charging will be done at home (where rates will be cheaper), some people want those public chargers in place before they buy a plug-in car. That’s kind of understandable, but it’s also a Catch-22 because property owners have been reluctant to commit to infrastructure without a significant number of cars on the road. This particular drama has yet to fully play out.
One last point: A consultant at the World Bank thinks that China will soon overtake the U.S. as the largest EV market, with 47 percent more sales by 2020. And the same study says that by that time plug-in vehicles will be 10 percent of world car sales. China’s definitely bullish on EVs, and it’s backing up its rhetoric with huge subsidies and production commitments (though not yet a national charging network).
All of this means there’s a lot of wild cards in the deck when it comes to how EVs and plug-in hybrids will fare in the marketplace. Don’t write that obit just yet.