Electric Vehicles, Thriving or Not?

01/12/2012

Some say electric vehicle acceptance is at an inflection point, whereas others say it's far from the interests of the average US car buyer, many of whom have to returned to SUVs as gas prices have stabilized.

Sales of hybrids waned last year, dropping from a measly 2.4% in 2010 to an even measlier 2.2% in 2011, according to auto market research firm, LMC Automotive.

That's largely due to a drop in Prius sales, which accounts for almost half of all hybrids sold. Sales declined 3.2% in 2011, because of manufacturing disruptions in Japan, where it's built. The tsunami and nuclear meltdown, and the floods in Thailand, also caused shortages in many car parts and a
bottleneck in batteries. Still, the Prius hit a milestone earlier in 2011 - it sold its millionth car in the US and 3 million worldwide.

But the lower gas prices go, the less people are interested in those cars, even though $3.60 for a gallon of gas can quickly drain one's wallet.

With the passage of more stringent fuel economy standards under President Obama, which require model years 2012-2016 to average 35 mpg, more conventional cars now reach 40 miles per gallon,
making the extra several thousand dollars for a hybrid less appealing.

Sales of Nissan's Leaf electric car and the Chevy Volt plug-in are falling short of expectations (about 10,000 cars have sold) and many analysts don't expect the segment to grow much as long as gas
prices remain under $4 a gallon. Nissan, however, expects sales to grow as it begins manufacturing the car and battery in Tennessee and as the Leaf becomes available in more states.

Detroit Auto Show Underway

Despite these headwinds, to meet even more stringent fuel economy standards of 52 mpg for model years 2017-2025, auto manufacturers must keep rolling out hybrids and electrics, and many are on
display at the North American International Auto Show in Detroit, which runs January 7-22.

Ford, which is taking orders for the electric Focus, is debuting the new Fusion, which comes in
all flavors: gasoline, hybrid, and plug-in hybrid.

Honda's 2013 Accord Sedan has a two-motor plug-in hybrid system that moves continuously through three modes: all-electric, gasoline-electric, and direct-drive. Also on display are the first two hybrids under its Acura brand, the ILX and NSX.

Toyota is unveiling its smaller version of the Prius, Prius C, and has another plug-in hybrid concept on display, NS4, which should go on sale in 2015. Lexus, its premium brand, unveiled a hybrid concept sports coupe.

Volkswagen has a hybrid Jetta, and BMW, Mercedes, and Volvo all have hybrids, electrics
and plug-ins on display. 

GM's Code 130R reflects what we'll see in many new cars: stop/start technology that shuts off the engine at stops and recaptures braking energy to increase mileage.

AMP Electric Vehicles  (OTCQB: AMPD), which specializes in truck conversions, is taking orders for its electric AMP Jeep Grand Cherokee, for deliveries that begin in the fall. Production of the vehicles will take place in Ohio.

Department of Energy Secretary, Steven Chu,  addressed the Detroit Economic Club on January
11 to highlight support for U.S. auto industry innovation and the DOE released this video, "Energy 101: Electric Vehicles", which showcases their benefits.

 

Toyota's New Hybrids

Toyota expects US sales of the Prius to surge by a record-breaking 60% in 2012, boosted by the smaller Prius C, which will soon be available. It will be priced under $19,000 and get 53 mpg in city driving. 

Toyota forecasts sales exceeding 220,000 now that loyal Prius owners have more choices. Toyota also added a Prius v wagon last year and is taking orders for its plug-in Prius, which will be available this spring.  Along with a revamped Camry, Toyota believes the Prius family will be its biggest drivers of U.S. sales this year.

California Leads, Of Course

There's been such strong demand that California's Air Resources Board added another $15 million to $21
million to its rebate program for this year after its budget ran dry. They had to cut the rebate, available to buyers of plug-in or electric cars, from $5000 to $2500.

The state is home to the most electric vehicle (EV) charging stations per capita, many of the EV manufacturers, and venture capital for the industry.

Tesla, for example, is ramping up manufacturing of its Model S electric sedan and is being touted as an example of the return of manufacturing to California. It's aggressively hiring - with over 200 positions open at the moment for skills ranging from engineering to sales.

Los Angeles-based EV maker CODA, which has raised $200 million in capital, is opening its first dealership in March, in San Jose, which will sell its CODA 2012 sedan. CODA plans to expand to other locations throughout the state, and Hertz will offer the car for rental as part of its Global EV plan to position it as a leader, offering a range of EVs and charging stations on a rental and car-sharing basis worldwide.

A CEO-level "EV Strategic Council" recently launched in the San Francisco Bay Area to make it the "EV Capital of the U.S., targeting 100,000 EVs in the Bay Area by 2015.

California owes its leadership position in part to supportive public policies, like it's low-carbon fuel rule, which create an environment of certainty around which companies can grow and citizens can be early adopters.

"The ecosystem for a startup is awesome in Silicon Valley because of the concentration of tech companies," says Pat Romano, CEO of California-based Coulomb Technologies, which develops EV charging networks. "Your entire supply chain and talent pool is optimized in Silicon Valley."

Benefits of EVs

Clearly, EVs will remain in the realm of early adopters for at least the next few years, but as prices come down with more advanced batteries, range improves, and charging stations become ubitquitous, many people will discover these advantages:

Most importantly, people will realize the value in protecting themselves from spikes in oil prices, and prices that will inevitably trend higher. Electricity prices will be much more stable than oil prices. Given the geo-political tensions in the world today, it's easy to imagine a looming energy war. Energy demand is rising and sources of supply are dwindling, leading to sure disputes over vital resources.

Then there's the driving experience:  EVs have a quiet ride, great acceleration and improved handling, because batteries in the base of the car lower the center of gravity. They require no oil changes, tune-ups, or trips to the gas station. And, while it's not practical yet, EV owners have the potential of making money by selling energy back to the grid in the future.  

Most importantly, the chances are high that oil will sell for over $140 a barrel during this decade. It could
even go higher, which will make owning an EV a no-brainer.


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Rona Fried, Ph.D. is CEO of SustainableBusiness.com.