Tough Sell for Electric Drive? Maybe Not.

January 22, 2012 – Vol.16 No.45

TOUGH SELL FOR ELECTRIC DRIVE? MAYBE NOT.
by Bruce Mulliken, Green Energy News

For car owners accustomed to petrol-fueled cars it’s a huge leap to switch to battery-electric drive. The initial cost is high, at least for the size or class of the vehicle. And, it won’t go very far on a tank of electricity.

Any car, electric drive or not, is a big investment. Spending a few ten’s of thousands of dollars to buy the “latest thing” in car technologies is not like buying a new smart phone for a few hundred bucks. Even for the well healed, an electric car is a serious commitment. Buying a hybrid, or an extended range electric vehicle like a Chevy Volt, is less of a leap.

Yet despite disappointing sales numbers, and flack from pundits and politicians, electric vehicles aren’t doing badly compared with the initial launch of hybrid vehicles more than a decade ago. In fact they’re doing pretty well by comparison.

In an article published by the Rocky Mountain Institute ( long an advocate for hybrid and electric cars) authors Randy Essex and Ben Holland said, “Figures this week showed that the first mass-produced electric cars in the United States, the Nissan Leaf and Chevrolet Volt, had total sales of 17,345 in 2011, the first year in which they were available. Compared with sales of 9,350 gas-electric hybrids in 2000, the first year the Honda Insight and Toyota Prius were offered in the U.S.—where total hybrid sales have now topped 2 million—17,000 might seem like a decent start for EVs.”

The article “Why So Many Critics After 17,000 EV Sales in First Year?” is, in part ,a response to an op-ed piece in the Washington Post that called for elimination of the $7500 tax credit for electric vehicles. The Post uses the $100,000 Fisker Karma as an example of being eligible for the credit, not the $32000 Nissan Leaf. The Post also doesn’t mention that hybrids received significant tax credits when they were first introduced and that credit helped build a strong market for hybrids in the US. Those hybrids have helped cut pollutants and the nation’s dependence on imported oil.

When hybrids were first introduced it was thought that they would be steppingstone, transition cars. Drivers would get used to having an electric motor under the hood, then they’d switch to all electric drive. That may turn out to be accurate with one caveat: It may take a generation to make the switch.

A survey of the next booming generation of 80 million in the US – Generation Y – revealed that “ A strong majority (59 percent) of Gen Y respondents surveyed prefer an 'electrified vehicle' over any other type of car or truck. Moreover, Gen Y consumers heavily favor hybrid gasoline-electric vehicles (57 percent) over pure battery electric vehicles (2 percent) or vehicles with a traditional gasoline-only powertrain (37 percent).”

Gen Y, which is defined by those ranging between 19 and 31, is a slightly larger group than the Baby Boomers with 79 million, or so.

The study by Deloitte also found that the cost of gasoline and fuel efficiency were reasons to buy hybrids while the extra cost of the vehicles was not a deterrent; “Gen Y consumers are drawn to hybrids for several reasons. Most notably, fuel efficiency: 89 percent of Gen Y consumers are considering buying a vehicle that gets better mileage, especially true when gasoline prices rise above $2.75 per gallon - the median price Gen Y consumers see as 'fair.' Further, 49 percent of Gen Y consumers are willing to pay an additional $300 for each mile-per-gallon of improvement they can get out of a hybrid - only $50 less than the $350 mile-per-gallon premium that Deloitte estimates a hybrid vehicle currently costs compared to an internal-combustion engine vehicle.”

Gen Y still wants its gasoline though.

“Further, the survey shows that Gen Y respondents are married to the convenience of traditional gasoline-powered automobiles, strongly preferring powertrains that do not require plug-in recharging. Even with their overall preference for hybrids, Gen Y consumers still prefer a non-plug-in hybrid by a margin of more than two-to-one over a plug-in version. “

According to projections, says Deloitte, one out of four new automobiles sold this year in the United States, and 40 percent of vehicles sold in the next 10 years, should be bought by a Gen Y consumer.

The Deloitte survey could be analyzed further. Even if only 2 percent of Gen Y’ers (also known as the Millennials) are willing to buy battery-electric vehicles, this is still a large market: 2 percent of 80 million is 1.6 million, a lot of cars and enough to build a market.

The survey from that global consulting firm also didn’t mention a possible reason for Gen Y drivers wanting hybrids over plug-in cars: Call it Plug-in-ability. As much as a public recharging infrastructure for electric vehicles is being built, the real advantage of plug-ins is the ability to plug-in at home and that means the need for a private garage or driveway.

How many Gen Y’ers own homes where they could park their plug-in for a recharge?

Data from the Urban Land Institute shows that 67 percent of Generation Y expects to own a home by 2015, with 82 percent of these owners expected to buy single-family homes: those homes most likely to have EV charging adaptable, private parking.

It’s the classic cart-before-the-horse. Two thirds of Gen Y may want to own a single family home (with a driveway and garage) but it’s not 2015 yet. Many in Gen Y are still renting, in condos, or perhaps still in college or at their parent’s home. They won’t start thinking plug-in car until they have a place to plug in.

Switching vehicle technologies may be a generational thing. It may be the totally plugged in generation – the Z Generation or Net Generation – that will be the first to fully embrace battery-electric drive. Their life is already battery powered. They’re connected by the Internet. They’ll find charging stations with smart-phones. But they’ll have to graduate from school first and find jobs second. They’ve been caught up in the global financial crisis more than any other generation. They’ll need jobs and money to buy their electric vehicles.

Links:

Deloitte
http://www.deloitte.com

Rocky Mountain Institute
“ Why So ManT Critics After 17,000 EV Sales in the First Year?”