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Chevrolet Volt

Ford Focus Electric

Hyundai Sonata Hybrid

Honda CR-Z Hybrid
Despite rising sales, J.D. Powers is convinced "green" vehicles will only see slow pickup, be overcrowded

Some analysts think the electric vehicle market is ready for primetime.  Others have been less convinced.  Last October, investment firm J.D. Power and Associates, Inc. estimated that by 2020 electric vehicles (EVs) would only gain a slim 7.3 percent market share.

I. Hybrid/EV Outlook -- Not Good?

Now the firm has returned with another report, bumping its estimates slightly, but remains skeptical of hybrids, electric vehicles, and clean diesel.  

Mike VanNieuwkuyk, executive director of global vehicle research at J.D. Power and Associates states in a Detroit News interview, "Alternative powertrains face an array of challenges as they attempt to gain widespread acceptance in the market. The bottom line is that most consumers want to be green, but not if there is a significant personal cost to them."

His report estimates that by 2016, market share of hybrids and electric vehicles will remain under 10 percent.  The report's basic argument boils down to that EVs and hybrids are too expensive for customers.  It cites a recent 4,000 person U.S. survey that it conducted, which showed that a growing number of customers were concerned about the prices of electric vehicles.

The J.D. Power report also cited concerns about function as a factor slowing sales -- particularly for electric vehicles.

II. Too Expensive?

Other market research firms don't necessarily agree that the price of electrified vehicles will trump the price at the pump.  Rival research firm Deloitte LLP conducted a 1,000 person U.S. study, which found that 78 percent of people would consider purchasing an electric vehicle if gas hit $5 USD/gallon.

Subcompact cars typically start at around $11,000 USD for the cheapest non-hybrid models and around $19K USD for the cheapest hybrid models (the subcompact Honda Insight and CRZ hybrids).  Thus you're looking at a premium of around $8,000 USD.

For the mid-sized sedan market pricing starts at around $20K USD, with the cheapest hybrid being the new Hyundai Sonata at
$26,545.  In this segment you're looking at around a $6,500 USD premium.

A recent report by the U.S. Department of Energy stated that the annual cost of gas for the average family is $3,625 USD (based on a gas price of $3.61 USD/gallon).  

Assuming an average household has two cars and that the hybrid sedan would get at least 33 percent better gas mileage, a family would save approximately $600 USD annually by switching to a hybrid.  In other words, it would take approximately 7 years of ownership to break even with a compact or mid-sized hybrid.

III. Small Vehicle Sales Up

According to industry statistics in the first three months of 2011 large car sales have plunged 35 percent, while small car sales have jumped 25 percent.  Hybrid sales during the period accounted for 4.7 percent of sales, up from the average 2.6 percent in 2010.

Those numbers seem more impressive when you consider that a tax credit for hybrid vehicles expired at the end of 2010.  

It seems clear that the high price of gas this spring -- with fuel regularly hitting $4 USD/gallon -- has motivated some customers to get hybrid vehicles.

EVs from General Motors Comp. (GM) and Nissan Motor Comp. (7201) are still selling slowly due to limited distribution and volume.  Both companies hope to sell a modest 10,000 units by the year's end.  Mitsubishi Corp. (8058) just released a new EV -- but only in Hawaii to start.  Ford Motor Comp. (F), Toyota Motor Corp. (7203), and Tesla Motors Inc. (TSLA) all will release new EVs by the end of the year as well [1][2][3].

Two factors working in the favor of electrified sales is an increasing selection and government pressure on fuel efficiency.  

One of the few somewhat seemingly positive aspects of the J.D. Power report was an estimate that by the end of 2016, 159 hybrid and electric vehicle options would be available for purchase -- up substantially from the 31 available in 2009. (Of course the report casts this in a negative light as well, complaining that the market will be overcrowded.)

And the Obama administration is working with the U.S. Environmental Protection Agency (EPA) to deliver new fuel efficiency mandates for the 2017-2025 period.  It is thought that those mandates would demand fleetwide average fuel efficiency reach 62.5 mpg by 2025.  That could force automakers to try to limit the sales of non-electrified models.

IV. Clean Diesel, Where Art Thou?

A dirty little secret of the EV industry is that clean diesel vehicles can currently get as good or better mileage as most hybrids.  In the first three months of the year, 24 percent of Volkswagen AG's (VOW) sales were clean diesel vehicles.  Mazda Motor Corp. (7261) and other companies are planning to offer new diesel models over the next couple years.

Still J.D. Power is also pessimistic on clean diesel's prospects.  Mr. VanNieuwkuyk states, "Advocates of clean diesel engines tend to be some of the most vocal among consumers who tout the benefits of their chosen technology. Clean diesel technology continues to struggle not only against concerns about cost and perceived fuel availability, but also against the lingering perception that diesel is 'dirty.'"

Both with hybrid vehicles and with diesel, there seems to be a clear momentum in the U.S. Yet J.D. Power seems convinced both movements will only see slow growth at best.  It remains unclear whether the pessimism is unfounded -- or whether it knows something other analysts don't.



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RE: Can this be true...
By Brandon Hill (blog) on 4/28/2011 11:00:31 AM , Rating: 2
24 percent of diesel vehicles, it has been corrected.


RE: Can this be true...
By Brandon Hill (blog) on 4/28/2011 11:09:03 AM , Rating: 2
Edit, 24% of VW's US sales were clean diesels.


RE: Can this be true...
By YashBudini on 4/28/11, Rating: -1
RE: Can this be true...
By torpor on 4/28/2011 3:37:09 PM , Rating: 2
If you have to call a energy source, "clean", it's because it's not. A "clean" energy source is one where a lot of technology has been created to try to limit the damage use of that source causes.

Assorted disclaimers:
there is no impactless energy source, politics stinks, cars are a necessary evil, if someone told me that was wrong I wouldn't have done it


RE: Can this be true...
By tastyratz on 4/28/2011 4:52:27 PM , Rating: 1
Disagree
98 jetta tdi puts out 4.9 tons of greenhoues gas per year while the 04 civic puts out 5.3 for example in typical drive scenarios.

Clean diesel is to aid the perception of dirty diesel i.e. old diesel cars. A large part of the black smoke has to do with the ultra high sulphur content of US diesel fuel (laughable compared to other countries) and older technology predating direct injection/precision digital timing. (Injecting late in the stroke massively increases emissions as well)

"Clean" is to entice the ignorant on an otherwise perfectly clean technology compared to other modern vehicles. Why is it diesel/gas owners understand gasoline emissions of the 70s are totally different, but only those who are educated on modern diesel understand it is not the diesel cars of the 80s or the big rigs with an extremely long service life (again, old diesel tech)


RE: Can this be true...
By acsa77 on 4/29/2011 3:38:34 AM , Rating: 2
LPG + DIESEL is the solution!

Even the best filters cannot filter out the small, invisible particles which are characteristic for the modern diesel engines. And they are even more toxic than the "old", visible ones, since your lung cannot filter them.

The only efficient possibility to reduce particle emission is to inject LPG into the engine besides Diesel oil. This also reduces consumption. But this is only reasonable for big engines (>2.0l) or for enough mileage. Since you have to buy an extra tank and some electronics.


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