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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 Hiawa23 on 4/28/2011 12:56:59 PM , Rating: 2
You know, other than perhaps he used more fuel in one month than he did in the other? Or he had a yearly negotiated rate that expired and the new rate is more?

Here's the answer. He, I, didn't use more fuel. It used to cost me $25 to fill up my Lancer, now it costs me $38 to $40, & I have to fill it up 4 or 5 times a month & all I do is drive that to work & home, & use the Honda for my weekend & other driving which doesn't cost me anymore than $20/month. The difference in my bill is the difference it now costs to fill the car up, not driving more. I really did not think I had to state this but I guess I did for some.


RE: Can this be true...
By MrTeal on 4/28/2011 1:23:42 PM , Rating: 2
Assuming you put the same amount in each time, that would imply that the price of gas has gone up 60% since the days when you paid $25 a tank.
http://www.gasbuddy.com/gb_retail_price_chart.aspx...

Gas has gone up about 40% since it's low last summer, but that's not unexpected. It's still lower than it was in the summer of 2008 before the recession really tanked gas prices. Using either number, gas hasn't doubled in any recent time frame. It sucks you got a big bill, but it's not because gas doubled in price over the last couple months.


RE: Can this be true...
By Hiawa23 on 4/28/2011 1:45:09 PM , Rating: 2
Gas has gone up about 40% since it's low last summer, but that's not unexpected. It's still lower than it was in the summer of 2008 before the recession really tanked gas prices. Using either number, gas hasn't doubled in any recent time frame. It sucks you got a big bill, but it's not because gas doubled in price over the last couple months.

I never said gas doubled. My difference from this month compared to the last is the difference it now costs as I have stated. I will leave it at that. Hybrids, & EV's are not the answer for most folks so my question was simple, not about my situation, I just used that as an example that I am sure many can relate to. What can anyone do to get gasoline prices down? If you have no answer other than bashing complete strangers on their driving habits or making assumptions, which seems to be the norm on these boards, then there is no point. Life will go on, It's just getting tougher for many to attain this so called american Dream which really doesn't seem to possible for most folks, especially the middle or lower class & it because of stuff like these insane prices whether it be at the pump, or store or energy, or God forbid sickness.


RE: Can this be true...
By Spuke on 4/28/2011 2:55:09 PM , Rating: 2
quote:
I never said gas doubled. My difference from this month compared to the last is the difference it now costs as I have stated.
I live in California and my gas didn't come close to doubling, even on my diesel pickup in which the fuel cost rise has been quite a bit steeper.


RE: Can this be true...
By Calin on 4/29/2011 8:12:55 AM , Rating: 2
quote:
What can anyone do to get gasoline prices down?


Increase production or decrease consumption. Decreasing production costs might help (if this leads to production increasing above consumption).
I think the world production is no longer increasing, and the demand is slowly rising due to countries like India and China slowly increasing their consumption (what do you think the effect of the small and cheap Indian cars will be?).


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