Formidable Roadblocks Remain to Broad Acceptance of Electric-Drive Vehicles; Report by J.D. Power & Associates Says Growth Prospects May be 'Over-Hyped'

Formidable Roadblocks Remain to Broad Acceptance of Electric-Drive Vehicles; Report by J.D. Power & Associates Says Growth Prospects May be 'Over-Hyped'

By John O'Dell October 27, 2010

China Remains Wild Card; Clearer Government Policies, Higher Gas Prices Would Help 

By John O'Dell, Senior Editor

Stable gasoline prices, high technology costs and uneven regulatory approaches are likely to hamper global acceptance of hybrid- and battery-electric vehicles over the next decade, according to report issued this morning by analysts at J.D. Power and Associates.

But Southern California-based J.D. Power sides with those projecting more modest growth, saying that combined hybrid and BEV sales will claim just over 7 percent of the passenger vehicle market by 2020 - or 5.2 million electric-drive cars and light trucks.

Ghosn, in contrast, has repeatedly said he expects electric vehicles such as Nissan's Leaf and Renault's Fluence EV to grab a 10 percent share of worldwide light vehicle sales by then.

David Sargent, vice president of global vehicle research for J.P. Power, told us in an interview that he's seen some optimistic case studies predicting as much as a 20 percent market share for electric-drive vehicles by 2020.

The J.D. Power report is one of a growing number, though, that take into account the continuing global economic slump and its impact both on consumers' spending habits and governments' willingness to aggressively promote and incentivize expensive electric-drive technologies.

We've reported on several, including a May report by Deloitte that said 6 percent market penetration by electric-drive vehicles in the next decade would be the best-case scenario and a Dec. 18 report from Pike Research that enumerated may of the same issues Sargent and his team raise. 

The Power report, "Drive Green 2020: More Hope than Reality," says it "will be difficult to convince large numbers of consumers to switch from conventionally powered passenger vehicles to HEVs and BEVs without one or more of:

• A "significant increase in the global price of petroleum-based fuels by 2020;"
• A significant technology breakthrough that would greatly reduce advance vehicle costs;
• Coordination of government policies to encourage consumer purchases of electric-drive vehicles.

But the study found scant sign that any of those scenarios is likely to occur over the next decade.

The only potentially positive sign is China's stated desire to promote a home-grown EV industry and to become the global leader in electric vehicle technology.

The outcome is unpredictable, but pointing out that China's centralized government can move quickly and spend tremendous amounts of money on programs it wishes to push, Sargent said a vigorous EV technology industry in China would likely benefit automakers and consumers in the rest of the world.

Costs could fall, he said, if China were to begin exporting Chinese-made electric and hybrid cars and trucks  or, more likely, to export low-cost components that other nations' automakers could use in their own green vehicles.

Echoing what analysts at Edmunds.com have been arguing for years, the J.D. Power researchers said that despite what governments and environmentalists may want to happen on the green car front, it is consumers who ultimately will decide whether electric-drive vehicles are successful, and as yet there are few signs of widespread consumer acceptance.

Edmunds' research has found that fuel prices have been the largest single driver of consumer interest in hybrids (there are no retail EVs on the market yet) over the past decade, with incentives - governmental and corporate - a close second.

Indeed, our most recent tally of consumer research on Edmunds.com (right - click to enlarge) shows that as national average gas prices have lingered in the $2.50 - $2.80 range over the past 14 months, fewer than 10 percent of all vehicle research on the site has been focused on hybrids.

That's down from about 18 percent when gas prices peaked at over $4 a gallon in the summer of 2008 and despite increased publicity about electric-drive as General Motors, Nissan and Ford Motor Co. all prepare to launch EVs and extended-range plug-ins over the next few months.

J.D. Power researchers found that "based on our research of consumer attitudes toward these technologies - and barring significant changes to public policy, including tax incentives and higher fuel economy standards - we don't anticipate a mass migration to green vehicles in the coming decade," said John Humphrey, the firm's senior vice precedent for automotive operations.

Consumer concerns, according to the report, include worries about reliability of new electric-drive technologies; anxiety about the range of battery-electric vehicles, worry about the time needed to recharge EV battery packs and, most important; dissatisfaction with the so-called electric technology premium that can add thousands of dollars to the cost of a hybrid or EV over a similarly equipped conventional gasoline model.

While many people voice concern about the environment, their willingness to drive a cleaner vehicles diminishes considerably when told they will have to pay more to do so, Humphrey said.

The report cites an average cost premium of $5,000 for a conventional hybrid-drive vehicle, and battery EVs can cost even more - the upcoming Nisan Leaf is a five-seat compact priced at almost $32,000 before government incentives, and the Chevrolet Volt extended-range plug-in is a four-seat sedan that starts at just over $41,000 before incentives.

The Power report doesn't address incentives directly, but Edmunds.com analyst Ivan Drury sad that consumers are extremely price sensitive and incentives "can bring down one of the largest barriers to entry for hybrid consideration, lowering the price premium. Whether the incentives are from the government or the automakers, anything to reduce the consumer's cost will help move these vehicles."

An additional obstacle, said Humphrey, is that while many government policies see increased use of electric-drive vehicles as a means of reducing greenhouse gas emissions, many consumers understand that without widespread use of clean energy sources such as solar and hydro power, it's not clear how much emissions reduction can be achieved.

While many electric-drive advocates dispute claims that use of electricity from coal-fired pants (which account for about 52 percent of U.S. electrical generation) make rechargeable EVs as dirty or dirtier than gasoline-burning vehicles, the J.D. Power report makes it clear that not everyone agrees.

"We don't want to replace tailpipe emissions with emissions of coal- and oil-fired power plants that produce the electricity used by BEVs," Humphrey said.

J.D. Power researchers also worry that because the typical buyer for hybrids and EVs is wealthier, better educated and older than the general populace, and shows a "deep interest in technology, or [likes] to be among the early adopters of any new technology product...it is  simply not clear that HEVs and BEVs will appeal to the general population."

That could be changed if gasoline prices rise dramatically - so consumers can clearly see an economic benefit to purchasing a vehicle that would reduce or eliminate gasoline purchases.

Also needed, said Sargent, are coordinated government policies. Right now, the Power study found, some countries are pushing conventional hybrids while others are promoting battery-electrics, diesels and even hydrogen fuel-cell vehicles.

The lack of consistency makes it difficult for automakers and technology suppliers to decide on a common approach that would help bring down prices through economies of scale, he said.

Right now, the Power report says, 75 percent of the electric-drive cars and trucks it expects to be sold worldwide in 2020 - 3.9 million vehicles - are expected to be gas-and diesel-electric hybrids, with battery EVs accounting for the remainder. 

The U.S. will be the biggest market for hybrids - 1.7 million sold in 2020 - followed by Europe, 977,000; Japan, 875,000, and China with fewer than 100,000.

The order almost reverses when battery-electric sales are estimated, with Europe the leader at 742,000, followed by China at 332,000 and the U.S. and Japan at about 100,000 each.

John O'Dell:  is an AutoObserver Senior Editor. Follow @AutoObserver on Twitter.