Will the mass market drive electric cars? Joan Bryna Michelson looks at the evidence

To break our dependence on gas-powered vehicles as soon as possible, electric vehicles are the leading alternative. “Electrification is a part of every automaker’s long term strategy, which is a good indication that it’s not a question of if, but rather how fast electric vehicles will go mainstream,” the Electric Drive Transportation Association (EDTA) that represents various electric drive technologies explains. But, they added, “this is an emerging industry that requires support and cooperation among policymakers and industry at all levels over the long term.”

It’s also a significant change for consumers, for whom cars play an integral role, financially and culturally, including being invested in the sense of freedom that cars and trucks provide. Alternative fuel vehicles such as electric ones, on the other hand, don’t provide that sense of “freedom.” Will it make it? What happens if I run out of “fuel”? If I break down, who can help me? What do I have to do to make it work? Therefore, there needs to be a transition. Based on an October 2009 study by the University of Michigan, hybrid vehicles are the most effective transition, which are available today.

This nationwide study found “a very high responsiveness of demand for hybrid vehicles”, and that providing high customer value is key – that is, reliability, durability and convenience, as well as fuel savings and affordability. A press release on the study states, “42 percent of consumers said there was at least some chance that they would buy a PHEV sometime in the future.” Hybrids have a gas engine and an electric motor that is powered by batteries (the gas engine typically regenerates the batteries). An electric vehicle is 100 percent electric (e.g. NEVs). Both also have regenerative braking, but the ultimate impact of that is negotiable and common in all EVs.

Ultimately, the automakers’ long term EV strategies include various vehicles not in production yet, only in development, except for low-speed neighbhourhood electric vehicles (NEVs). The first full-service electric vehicle expected out is the Chevy Volt, expected to hit showrooms in November 2010 at a sticker price of $40,000 with eligibility for a $7,500 federal tax credit. But the proof will be in the showroom as the production date, price and fuel economy have changed a number of times. It’s possible that the heavy marketing of these vehicles, the most intense of which has been for the Volt, promotes the use of electric vehicles to the mass market in a potent way. However, if the vehicle fails to meet performance expectations it could sour the public on EVs.

The University of Michigan study also validates the behavioural economics theories described in the first of this article series. “Social factors are just as important as economic factors in spurring the adoption of hybrid vehicles, and increasing social forces pushing toward the purchase of hybrids may be cheaper than using economic incentives”. People liked buying the Toyota Prius because its distinctive styling served as “badging” that its owner is socially responsible, for example. The key issues that potential customers repeatedly say are required for them to adopt electic cars are cost, convenience and performance. If the cars are perceived to be too expensive, then interest declines precipitiously (e.g. in the University of Michigan survey, at cost premiums of $5,000 and $10,000, adoption likelihood drops to 30 percent and 14 percent respectively). Fuel and environmental savings are not enough to compensate. Batteries are the big cost problem, as well as a key driver of infrastructure decisions, such as battery “swapping.” The “complexity of multiple pack configurations, for different customers, raise issues of complexity in design and operation of such battery switching stations,” according to a recent DOE/EERE report.

“Freedom” demands range and easy, ubiquitous access to recharging – at parking spaces, shopping centres, supermarkets, and rest stops. Building codes need to require it. A nascent GPS-based service that might make drivers feel in control, and thus “free”, is called Road2 and was developed by Celadon Applications. It allows you to monitor how much “fuel” the vehicle has remaining, where you will need to recharge (traveling at various speeds), and, importantly, where you can conveniently recharge along your route. In addition, we need our technicians properly trained so we have peace of mind if there’s a problem. As of February 2009, Portland (Oregon) was the number one city in the nation in terms of new hybrid sales per household, with 12.2 per 100,000 households, according to the DOE/EERE’s September 2009 report. They take a multi-pronged approach that includes infrastructure and statewide financial incentives on top of federal tax credits.

Oregon is now among leading states with respect to organised support for plug∞in vehicles” with statewide building codes in place for EV charging stations. Oregon’s Department of Transportation Office of Innovative Partnerships and Alternative Funding states that “having one common, open system for charging all types of vehicles is an important factor in making the transition successful. This effort will help gain public recognition and consumer confidence in the EV charging infrastructure by providing uniform performance and safety features throughout Oregon. Oregon is also developing an Electric Vehicle Supply Equipment installation manual for both residential and commercial sites.

Then there’s the increased demand on the grid of all these electric vehicles. These current reports show “a consistent conclusion that there is plenty of capacity to support a plausible market for many years”. The University of Michigan study validates the need for a more robust economic incentive programme, reflected in the decline of EV in purchase rates as the cost premium rose. The government tax credits are a nice boost, but the buyer still has to finance the full cost of the vehicle, which is a significant deterrent.

Prices of EVs and hybrids are driven by the battery costs, and the technology is still evolving. The $40,000 Volt is reportedly competing with cars in its class that are in the $20,000 range, even though Chevy is pricing the Volt well below cost for marketability. The Tesla sportscar, at $110,000, is clearly not a mass market vehicle purchase. Both vehicles use lithium-ion batteries, which are predominately responsible for the high cost, but as production of these batteries ramps up their cost is expected to fall. However, how these batteries perform in the long-run is still an unknown. The mass market demands performance – speed, range, smooth driving, reliability – which in EVs depends upon the battery technology and its efficiency. Industry sources point out that current incentives are based on battery size, which penalises efficiency, and they suggest rewarding “vehicle capabilities” instead, such as the amount of passengers or cargo the vehicle holds, or the speed and range (with caps), or safety tests passed.

The EDTA adds that policymakers can help by “establishing support for battery warranties and charging stations,” which will help reduce purchase prices and “overcome initial market barriers.” There is still a perception that all types of electric vehicles are unsafe and slow, but promotions emphasising the performance of current hydbrids, and the Volt, the Tesla Roadster and the new Fisker Karma sports cars hopefully will help those market barriers be overcome as well. According to the University of Michigan study, 54 percent of consumers cited “dependence on foreign oil” as the key driver for them to transition to EV’s – and this survey was conducted when gas prices were at their peak, between July and November 2008.

To transition from “gas guzzlers” to electric vehicles, we need to change “how” we drive, not just “what” we drive. We need to think before we reflexively get in our SUV to go to the market. Can we walk? Can we take a neighborhood electric vehicle? Can we bicycle? The technology absolutely needs to rise to meet consumer demands to take to the open road, but consumers also need to take responsibility for their habits. Hybrid electric vehicles don’t break old habits, nor train us to plug in our cars, since most function much like gas cars. NEV’s do train us to charge the car, at least in a 110 volt household outlet, and to think about our habits – so they are an important part of the transition.

The know-how to build EVs and the required infrastructure exists, and we are motivated to drive them, so the transition to electric vehicles should be a no-brainer. But…will we? What has to happen for the quantity of “garden-variety consumers” who buy Fords and Toyotas today to put their money and lives into an electric vehicle?

If we want to reduce our dependence on foreign oil and save the planet, we must all embrace hard choices and risks, including challenging our own assumptions and changing our own habits, and pushing our governments and private companies to do the same.

READ THE FULL ARTICLE HERE: http://www.theneweconomy.com/strategy/if-they-build-it-will-we-come