EVs Inch Closer to Critical Mass

One-third of Americans say they would consider buying a hybrid-electric car, and 15 percent would consider a full-electric model for their next vehicle, according to a AAA survey released in April. The interest level is unchanged from a 2012 AAA study despite a 40 percent reduction in gasoline prices over the period, the insurance agency notes.

Automakers and analysts are also ramping up expectations for an electrified future. Ford, General Motors, Mercedes, Volkswagen and Volvo are preparing to launch dozens of new hybrids and EVs in the coming years to compete against Tesla and a host of other new competitors. VW Group alone vows to introduce 30 new EVs and plug-in hybrid models across its various brands—including its Lamborghini supercar unit—by 2025, starting with an electric hatchback in 2020. Forecasting firm IHS Markit, meanwhile, predicts EVs could account for 15 to 30 percent of new vehicle sales worldwide—and more than half of the volume in regions with favorable incentive policies, such as China and Europe—by 2040. 

But before getting too charged up about such prospects, a dose of reality is in order. Last year, hybrids and EVs accounted for less than three percent of light vehicle sales in the U.S. (about the same rate as the rest of the world). Sales are trending up, albeit slowly, as new models are added—there are now more than 30 hybrids, 19 plug-in hybrids and 13 full EVs available in the U.S. Combined sales of the three types of vehicles jumped 18 percent year-over-year through April, while the overall light vehicle market was off more than two percent for the period. The surge pushed the hybrid/EV share of the market up from 2.5% last year to just over three percent this year. 

The disconnect between being open to purchasing a hybrid or EV and actually doing so can be attributed to a variety of factors, ranging from cost premiums, range anxiety, low fuel prices, more fuel-efficient traditional vehicles, an insufficient recharging infrastructure, public apathy and the power of the status quo. The good news: Progress is being made on several fronts. The new generation of EVs can travel farther between charges, with Teslas and a few other upcoming models pushing past the 300-mile threshold, and charging stations are getting faster and more plentiful. On the pricing front, the new Chevrolet Bolt, Honda Clarity and upcoming Tesla Model 3 are priced between $35,000 and $40,000 while providing a much longer range than the less expensive Nissan Leaf. But most EVs and plug-in hybrids still rely on hefty tax credits and incentives to entice buyers. 

Fuel economy was cited by 70 percent of respondents in the AAA study as a major consideration when purchasing a new vehicle. Other motivators for hybrids/EVs include concern for the environment, lower ownership costs, desire for the latest technology and access to car pool lanes. But the biggest factor that likely will determine if and when EVs move beyond niche status to achieve critical mass are fuel economy regulations. In March, President Trump put the Environmental Protection Agency’s stringent fuel economy plans under review for at least another year. Automakers maintain that the 2025 target of more than 50 mpg isn’t realistic and would hurt the U.S. economy.  

At the same time, however, other markets are moving forward with their own programs. China will require eight percent of total new-car sales to be plug-ins and EVs next year, and will increase this to 12 percent in 2020. To support the ambitious targets, China aims to have 800,000 charging stations operating in the country by the end of 2017. Automakers are scrambling to keep pace, with GM planning to introduce 10 locally produced hybrid or all-electric models in China—its largest market—by the end of the decade. Globally, GM expects to grow sales of electrified vehicles to 150,000 vehicles per year by 2020 and surpass 500,000 by 2025—and do so at a profit by making batteries lighter and less expensive. 

A decade ago GM was famously blamed for killing the electric car. But to paraphrase Mark Twain, the reports of its demise seem to have been severely misdiagnosed.