Wednesday 26 September 2012

Slow going in the EV market

It has been a rough week for electric cars.


The Wall Street Journal reports that Tesla Motors disclosed that it needs to raise more capital because the launch of its new Model S luxury sedan is going slower than expected. A top Toyota Motor Corp. executive said vehicles powered by hydrogen fuel cells are more likely to be viable by 2020 than battery electric cars. And the Congressional Budget Office said federal tax credits that subsidize plug-in car purchases up to $7,500 aren't an effective way to reduce gasoline consumption or cut greenhouse-gas emissions.
 
These setbacks come as big car makers are gearing up to push a significant number of new hybrids, plug-in hybrids and all-electric vehicles onto the U.S. market. The question is whether the latest group of electric vehicles will offer enough features and reliability and an attractive enough price to move electric cars beyond niche status.

By the end of next year, the number of battery electric cars on the market could double to 20, and the number of hybrid models could grow to about 73 from 42 now, says Brian Wynne, president of the Electric Drive Transportation Association, a Washington, D.C., group that represents the electric-vehicle industry.
 
One reason for the product blitz is new federal rules mandating a near doubling of fleet average fuel economy by 2025. Another is the desire to connect with affluent consumers. Today's electric car owners are highly educated, relatively young (50 years old, compared with 53 for the industry on average) and affluent, with incomes that average $148,346 a year, says Strategic Vision, a market-research firm in San Diego, Calif.
 
But all the electric cars and gas-electric-hybrid models currently for sale in the U.S. have captured just 3% of total sales through the first eight months of this year. The Toyota Prius line accounts for more than half of the hybrid sales. Electric cars such as the Leaf account for barely a 10th of the market. About 1 in 10 of today's new-vehicle owners say they will consider an electric the next time they buy a car, says Strategic Vision.

Battery costs—which translate to high car prices—are at the root of the challenge the industry faces in selling these cars. At an estimated $600 per kilowatt-hour, or about $10,000 to $12,000 for a fully electric car, lithium-ion car batteries cost too much, industry executives say. A recent McKinsey & Co. study predicted costs will fall to as little as a third of current levels by 2020. Skeptics say it isn't clear the required breakthroughs will occur.

20 electric-car models could be on the market by the end of next year, double the number now available.