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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 Reclaimer77 on 4/29/2011 12:01:26 AM , Rating: 2
That's just a shell game. Some of the largest and most profitable corporations like GE shelter their profits off shore

So what? Their still responsible for creating jobs, growth, and wealth. Which gets taxed. If it's legal for them to shelter profits offshore, they would be idiots for NOT taking advantage of it. It's honestly not the end of the world if a few corporations don't pay the full amount of taxes they could. It's not some giant conspiracy, good grief.

I mean give me a break Jason. Is the premise of your argument that the Government actually NEEDS this ridiculous level of funding? They gross far too much in taxes already, and what they don't get they print from the treasury. In my opinion, the less the government gets the better! If you think MORE taxes are the answer, then you must think this level of Federal spending is acceptable. And I don't even know what to think about that...

On one hand you are advocating the flat tax, on the other you're making it seem like an atrocity if the Government cant gobble up every loose cent it can find from Corporations (aka the "rich").

Well I would say you're underinformed.

And I would say your class warfare tactics are getting old. They were old 10 years ago.

In your effort to justify of why the flat tax is impossible, you've unwittingly provided a terrific argument in its favor. Nice going!

Who said it's not possible? I'm not justifying anything, I'm simply telling you it wont happen and why. I learned long ago that hope was 4 letter word. Of course I'm in it's favor though.

But at the end of the day the special interests are making many a buck off your back. And your "yes guy" attitude is supporting that.

Ok how many personal attacks do you think you have to make here? Jason, we're just flapping our virtual gums here. Nothing we're typing is changing the world. I'm not supporting a damn thing that's effecting anything, relax.

You seem at least mildly intelligent. Can you honestly not see that?

Gee mildly, thanks. And no, I don't see that, because you're wrong.

Here's my problem Jason. I believe in this country and the system of government we have. No, it's not perfect. But the only way these problems of yours can be "fixed", is by turning this country into a communist state and shattering the First Amendment. So sorry, but as broken as things might be today, I know the alternatives are much worst.

And sorry if I seem apathetic, but come on, a Conservative can only read so much anti-business anti-everything-good crap on this site before he just tunes a ton of it out.

RE: Can this be true...
By Reclaimer77 on 4/29/2011 12:13:39 AM , Rating: 2
By the way, my taxes went up because Obama knowingly allowed the Bush tax cuts to expire. NOT because of some mysterious omnipotent "special interest".

RE: Can this be true...
"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer

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