Electric Vehicles Headed for a Big Crash

The near-term outlook for hybrid EV sales is dreary indeed and the high price tag is only part of the story.

I like electric vehicles for several reasons. Large scale deployment of EVs is the inevitable technical solution for reducing oil dependence. I like the looks and performance. My neighbor has a sedan that I openly covet. Another friend has a hybrid SUV that I thoroughly enjoy riding in - quiet, quick, very little exhaust odor. Except for the price, what’s not to like? But even if Char and I were in the market to buy a new car we’d still hesitate to buy electric, mostly because of that darned, hefty price tag. I like 'em, but not that much.

Despite all the sound and fury, hybrid electric cars didn’t make much of a dent in the market when they were first introduced, and they still don’t. The market share of hybrids peaked at 2.8 percent of new vehicle sales in 2009. In 2010 the market share went down to 2.4 percent and this year it is expected to be even less.

Not that the manufacturers haven’t tried – the number of hybrid models offered went from 17 in 2009 to 30 in 2011. You wonder how long the trend for greater variety will continue since the Toyota Prius continues to capture half the hybrid market.  GM plans to make the Chevrolet Volt available in all 50 states and still plans to sell 10,000 by the end of 2011. That goal seems odd because GM would have to sell the same number of Volts in November and December as it did in the first 10 months of the year! Guess we can expect to see even more gift-wrapped cars in the holiday TV ads.

The outlook for hybrid EV sales is dreary, but not only because of the high initial sales cost. Two other factors come into play – the first is the increasing fuel economy of conventional vehicles. A number of new conventional vehicles offer more than 40 mpg. Gasoline prices have to go up considerably for a hybrid to win on a cost basis.  

The second and related factor (speaking of dreary) is the slipping global economy with resulting falling oil prices. There has been a bubble in spot crude oil prices, but that won’t last. Some analysts expect the growing European financial crisis to drop crude oil prices to $60/barrel or even lower. That will make electric vehicles even less cost competitive with conventional.

Of course, the European blow-back will continue to impact U.S. job growth and economic stability – not encouraging for sales in general and particularly not a good sign for high ticket items.

Some consumers will buy electric vehicles to help reduce their carbon footprint. But even there, the benefits are meager, depending on the local power grid (see Electric Vehicles: Cool Technology but Not So Good For a Warming Planet Earth?)

Okay, okay, but what about the ‘driveway prestige’ that comes with owning a slick new hybrid? Or what about those who buy the newest thing so that they can have, well…the newest thing? I think we’ve already seen many of those folks in the initial sales.  That niche won’t open very far and may, in fact, already be closing.

With all the above in mind, I have to disagree with an article that was reported in Smart Energy Portal (see Utilities Hold the Key for Unlocking Electric Vehicle Adoption). Oh sure, utilities have a large part in providing the charging infrastructure. They’ll happily partner with communities participating in the $8.5 million stimulus provided through the DOE Clean Cities Initiative (who wouldn’t?). But unless electric vehicle sales go up, those charging stations could end up deserted and quiet, looking like a set from the old Twilight Zone.

Because of all these factors, the key to electric vehicle deployment is to greatly reduce the purchase cost to the consumer. That’s not happening.  So at this point, it looks to me like U.S. hybrid electric vehicle sales will stall – at least until we get past this quasi-recession that’s infected the globe.

Their time has not quite come. 

Comments

Electric Vehicles

This opinion ignores the economic benefits of EVs, both to consumers and the general public. It also totally ignores external costs associated with continued American dependence on the liquid petroleum fuel OLIGOPOLY. It's time for Americans to recognize and understand the macroeconomic realities behind "cheap oil".

First, if mass produced in the same quantities of gasoline vehicles, the capital cost of any battery electric vehicle would be much lower than current prices. Second, the operating cost would be about 1/2 that of a gasoline vehicle (@ $0.03/mile). Third, tailpipe emissions from EVs are zero. ZERO. Fourth, if PV electricity is used to charge the vehicle's batteries at home or at work, the carbon footprint is zero, save for embedded energy. Fifth, the electric vehicle of the future may well be powered by a hydrogen fuel cell with ZERO tailpipe emissions and with performance and cost that is very competitive with the current liquid petroleum-based fuels. Sixth, when electricity or hydrogen is supplied from renewable or low carbon distributed energy sources and RELEVANT performance information is fully transparent to the consumer, people will be empowered to make more responsible energy use decisions. Finally, while battery reliability, battery performance, battery life and battery replacement costs are still wild cards, so is the price and availability of dirty oil.

When the automotive sector decides to empower Americans to make cleaner, safer, more sustainable motor fuel and vehicle choices, Americans will make better choices. There are no legitimate technical or economic barriers to the automotive sector producing vehicles that will end America's total oil dependency; the barriers are cultural.

Today wholesale natural gas price is less than $0.50 per gallon. At the same time NG is abundant and readily available throughout the USA. Want fuel competition? Want to save money? Clean air? Lower carbon footprint? Replace your gasoline guzzler with natural gas; same performance. But try to buy an affordable natural gas vehicle!

Automakers refuse to mass produce electric and natural gas vehicles that would empower their customers to significantly reduce operating costs. BEVs half the cost of gasoline while NGVs save drivers more than $2 per gallon in Utah. EV and NGV capable fleets could also hedge owners against future oil price volatiility. Finally what's the value of keeping the Marines here at home and avoiding the next war in an oil-rich part of the world?

What happened?

I remember my friends VW bug in the 60’s. We drove it to Alaska and back on gravel roads (Alcan Highway) and even camped in it by taking the seats out. It got almost 40 MPG and could go almost anywhere. When we returned, we rebuilt the engine ourselves. And it was affordable for my friend who worked as a bagger in a Super Market.