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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 nolisi on 4/28/2011 12:16:14 PM , Rating: 2
I'm pretty sure he never said or even implied he wants you to pay $5 for gas. If you have a quote that shows otherwise, I'd love to read it.

You want to know who wants you to pay $5 a gallon for gas- oil companies and speculators. They're the ones directly benefitting from the spike (mainly the speculators). Argue with me on that point... I beg you. It'll only make you look more foolish.

RE: Can this be true...
By Reclaimer77 on 4/28/2011 12:29:38 PM , Rating: 1
I'm pretty sure he never said or even implied he wants you to pay $5 for gas.

No just every policy and decision he makes is directly leading to it.

If you don't think Barry want's us off the petrol and into a Volt or Leaf, you're smoking crack.

You want to know who wants you to pay $5 a gallon for gas- oil companies and speculators. They're the ones directly benefitting from the spike (mainly the speculators). Argue with me on that point... I beg you

Yeah that's sorta what happens when you declare war on Libya or any mid east nation. Oh ooops, did I say declare war? I meant invade. We have billions of barrels of oil right here in the United States, a stable NON wartorn nation, yet we refuse to use it. What do you expect speculators to do exactly?? Do you even know what they do and why they are so important?

RE: Can this be true...
By Dorkyman on 4/28/2011 12:39:16 PM , Rating: 2
It has been obvious that Obama implicitly wants high oil prices in order to make alternative energy practical. He nominated his Energy guy (Chu) a few months after Chu said what was really needed was for the price of gas in the USA to be as high as in Europe.

The oil companies are not the villans here. Their profit on a $4 gallon of gas is maybe as much as $0.25. No, take a look at several other factors:

(1) a president who forbids tapping the enormous reserves of his own country while berating other countries to produce more;

(2) the amazing shift in consumption from the USA to China for oil;

(3) the unrest in the Middle East, estimated to add about 15% to the cost of a barrel of oil;

(4) the stunning drop in the value of the dollar compared to all other world currencies, courtesy of your Federal Government and directed by, ahem, your Dear Leader. This matters because oil is still priced in dollars. In other words, oil is not that expensive to other countries, just to the USA.

Hope that helps clear things up. You need to read more than just the fringe lefty websites.

RE: Can this be true...
By Dorkyman on 4/28/2011 12:40:50 PM , Rating: 2
Oops, should have caught that error before posting. "villains"

RE: Can this be true...
By Iaiken on 4/28/2011 1:30:32 PM , Rating: 2
the unrest in the Middle East, estimated to add about 15% to the cost of a barrel of oil;

Who caused that again by unnecessarily invading Iraq?

Looks like the Oil Companies pushed Britain into it.

Did you know that France was punished for not participating in the war by stripping away TotalFinaElf's oil shares in Iraq? Their pre-war share was 40%, post war they came out with only 20% (largely because of acquisitions and partnerships). Who picked up the lions share of the oil after the war? Why Shell and BP did, the same companies that pushed the British Government into supporting the Bush Administration in the first place. How quaint, but not as quaint as these memos having not made their way into the American media.

the stunning drop in the value of the dollar compared to all other world currencies, courtesy of your Federal Government

Incorrect, the control of the US currency is held not by the Federal Government, but by the Federal Reserve Bank. The FRB is a PRIVATE BANK with which the exchanges bonds for interest bearing loans. The bonds are then used to make fractional reserve loans to other banks at interest. That's right, the government is borrowing it's own money at interest so that the owners of the FRB can derive a profit off of both the government and the banks.

Contrast that versus The Bank of Canada which prints money and loans it out to the banks at interest. This facilitates trade at the same time as generating revenue for the government to support it's expenditures and programs. This also lead Canadian banks to being more conservative when it comes to giving over extending their loans because they can't simply ask the bank of Canada to drop off more money. Instead, further loans are made on the interest from other loans and the economy grows in a more natural way with far less en-masse-risk than the American economy saw.

You're barking up the wrong tree. If you want to get mad at someone, get mad at the FRB for making you (the tax payer) pay interest on the governments own money, your money. The ONLY people who benefit from this arrangement are the investors of the Federal Reserve Bank.

RE: Can this be true...
By MrTeal on 4/28/2011 1:46:59 PM , Rating: 2
Who caused that again by unnecessarily invading Iraq?

Because the region was nothing but bunnies and hugs before the invasion of Iraq?

RE: Can this be true...
By Dr of crap on 4/28/2011 12:40:12 PM , Rating: 2
Ah, but the rules, set by the govt controls, GIVE the speculators the right to drive the price of oil up.
Oil companies are just profiting from the fact that what they sell is selling for far more than what they need to sell it for to make a profit.

The oil price will fall if the investment bankers are kicked out of being able to play in the commodies futures market. Someplace that they were not intended to be, but muscled their way in.

RE: Can this be true...
By Reclaimer77 on 4/29/2011 2:22:43 AM , Rating: 2
I'm pretty sure he never said or even implied he wants you to pay $5 for gas. If you have a quote that shows otherwise, I'd love to read it.

“Somehow we have to figure out how to boost the price of gasoline to the levels in Europe,” Steven Chu told the Wall Street Journal in an interview less than six months before he became Mr. Obama’s energy secretary. Mission accomplished, Mr. Chu.

“Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket,” candidate Barack Obama said in 2008.

"I'd be pissed too, but you didn't have to go all Minority Report on his ass!" -- Jon Stewart on police raiding Gizmodo editor Jason Chen's home

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