Beyond First-Year Bumps, Electric Car Market Poised for Growth

By · September 22, 2011

Nissan LEAFs in Long Beach port

2011 Nissan LEAFs at Long Beach port earlier this year.

This time last year, there was a lot of anticipation about the electric car market, particularly given the imminent release of two bellwether products—the Nissan LEAF and Chevrolet Volt. In the intervening year, a lot has happened in the economy in general, and the automotive and electric vehicle market in particular. (As a point of clarification, we define “electric vehicles” to include conventional hybrids, plug-in hybrids, and battery electrics.)

Context matters, so let’s run down the major developments of the last year:

  1. The U.S. economy has had a rough year with growth slowing from the levels of late last year and early this year
  2. Japan suffered from the human and financial losses of a huge earthquake and tsunami, with particular impact upon hybrid and electric vehicles, which are mostly assembled in and/or receive key components from Japan
  3. Gas prices have increased almost one dollar over year-ago levels
  4. The framework for fuel economy regulations in the U.S. from 2016 to 2025 has been defined, with proposed regulations expected soon
  5. The launch of some new products, many from startup companies, have been delayed
  6. Sales of hybrids have trailed last year’s volumes
  7. Many observers have expressed their skepticism of the market given this shortfall

Volatility in this nascent market should not be surprising. Short-term hiccups, particularly given the factors listed above, do not mean the market segment will fail. Conversely, the plethora of new higher mileage gasoline engine options remind us that electric vehicles must meet consumer expectations for value and performance to grow to the share of market that many advocates seek.

Sales On Track

First, let’s examine the Volt and LEAF, both of which were first delivered to customers in December 2010. While volumes have been modest—U.S. sales through August totaled about 3,500 for the Volt and about 6,200 for the LEAF—these volumes are in line with expectations. Calendar year 2011 volumes are at or above our expectations of sales of these vehicles from a year ago. The ramp up of these vehicles was expected to be slow, and those plans have been met. But both vehicles are growing in availability, which will continue to improve next year as the cars move from regional to national markets. The biggest issue for these two vehicles is not the short-term, but the medium-term through 2015 and beyond. Our forecast is unchanged, with the Volt reaching 100,000 customers and the LEAF selling 75,000 in that year. While the Volt will not reach the (unrealistic) levels hoped for by G.M. CEO Dan Akerson as the vehicle was launching, improving supply and market forces should result in strong sales.

Regular hybrid volumes are down from year-ago levels, due almost entirely to a shortage of product from the Japanese earthquake. The Prius, which remains the market leader, is coming back as availability improves while the newly released Sonata is doing well. The Prius family is about to grow dramatically, with the launch of the Prius V hybrid wagon, the Prius Plug-in Hybrid, and the Prius C compact hybrid. Regular hybrids will continue to grow in both total volume and number of entries, as each of the technologies in the electric market serve a particular niche.

Just as important, the current and forthcoming fuel economy regulations will require automakers to adopt an “all-in” approach, with automakers adopting different technologies, resulting in growth of the full range of electric technologies, from hybrid to full EV. Regular hybrids will grow from just short of 300,000 this year to more than 500,000 in 2015, which will represent 55 percent of the electric segment. Full electrics and plug-in hybrids will each represent more than 200,000 sales in 2015 from volumes of approximately 15,000 in each category this year.

The growth is predicated in part on a number of new products from a variety of makers. The supposed travail of the last year has not slowed the development of new products from both established and niche companies. We expect 110 to 120 electrified products in the market in 2015—although many will be sold in low volume.

Some observers look at low-volume sales of some of the cars and take it as evidence that the entire market is not meeting expectations. However, fleet sales in low volumes were the plan all along for many of the vehicles during the early stages. Through 2015, the market will be defined by key products, namely the various versions of the Toyota Prius, the Nissan LEAF, and the Chevy Volt. In that year, our forecast includes only a limited number of vehicles with sales exceeding 10,000 annually: three pure EVs (Ford Focus Electric, Nissan LEAF, and Tesla Model S); three plug-in hybrids (Toyota Prius PHEV, Chevy Volt, and Fisker Nina); and 12 hybrid models.

Coda electric sedan

Launch of the Coda electric sedan and other new EVs from start-up companies have been delayed this year. But that shouldn't come as a surprise and doesn't indicate long-term problems for the electric car market.

The delay in product launches and/or failure of specialty automakers like BYD, Coda, and Think is not surprising given the start-up nature of the companies and the market, but more importantly is not particularly consequential with respect to the overall size of the segment since the volumes offered by these makers is modest. As the market matures, it will not be surprising if some companies fail, while others are purchased by more established automakers.

Some Bumps in Road, But Blue Skies Ahead

While the growth in the medium-term is up for debate, the longer term seems quite clear. Regulatory standards across the globe are moving towards similar mileage and emission requirements. While the automakers might protest these toughening standards, global harmonization allows for predictable levels that result in greater production volume and spreading of costs across the vehicle fleet. Moreover, global products that are more similar to one another reduce development costs and enable greater profits. The world’s leading automakers are moving in this direction, aided by significant financial investment and allocation of key personnel from both current and potential suppliers.

Is the road ahead a smooth one? Certainly not, with product cost representing perhaps the most significant unknown. The industry—and academia and government—is of course hard at work on this issue, which will heavily affect the growth rate of the market beyond 2015. Just as important is the extent to which internal combustion-based vehicles will improve their mileage, thereby defining the comparison in cost and performance for mainstream buyers—beyond the early adopters—between electric vehicles and internal combustion powered vehicles.


· Ed M (not verified) · 5 years ago

Is there any update on this story? An update would be very much appreciated since this would be a true game changer.

Wall Street Daily - DBM Enery has developed a battery-powered electric car capable of driving 450 kilometers (279 miles) on a single charge. By comparison, the Nissan Leaf has a range of 160 kilometers (99 miles) per charge and Chevrolet’s Volt, about 70 kilometers (43 miles).

DBM Energy’s new advanced battery – Kolibri – is constructed with a special lithium metal polymer. Early reports suggest this battery will cost 89% less than existing batteries and will only need to be replaced approximately every 20 years.

· · 5 years ago

"Our forecast is unchanged, with the Volt reaching 100,000 customers and the LEAF selling 75,000 in that year (2015)"

I have to say that you are very optimistic. It may come true if gas prices continue to climb. But if gas prices do not cross $5 gallon mark in 2015 I am not so optimistic. CAFE requires small cars to achieve EPA 29 mpg in 2015. They already do it today Honda Fit - 31 mpg, Ford Fiesta - 33 mpg.

So CAFE is not any help here - the only driver is the gas prices.

· Kevin (not verified) · 5 years ago

I just dont see Nissan selling 75,000 leaf cars in 1 year. Not unless the leaf becomes a line of cars, or fuel prices rise significantly. this assumes USA sales

6,000+ Leaf a month in the USA ?

to small of a market for that to happen, name other cars that come in just one model that sell 75000 per year?
dont get me wrong electric is great and I am waiting on a Leaf myself, but I dont think there are 75,000 people who will line up for one in a years time in any year in the near future.

· Samie (not verified) · 5 years ago

"Just as important is the extent to which internal combustion-based vehicles will improve their mileage, thereby defining the comparison in cost and performance for mainstream buyers—beyond the early adopters—between electric vehicles and internal combustion powered vehicles."

Great insight, though rarely mentioned or thought of by so called "experts".

I don't see mainstream adoption of plug-in ICE/Electric combo vehicles. If ICE vehicles do become more fuel efficient, that takes away an advantage of the Volt or Prius plug-in related to the premium in costs.

100% EVs will have the greatest interest and sales mid to long term. The reason for this is that there will never be a direct petroleum comparison like there is with hybrids or plug-in hybrids.

The advantage of EVs is that they offer a different "fueling" experience and provide a better driving experience compared to many hybrids or fuel efficient vehicles. Additionally, improved technology will provide more convenience factors with EVs. These are the reasons for mainstream adoption not prices at the pump or being better environmental stewards.

· · 5 years ago

Lack of product is the main reason for low EV sales. I have been waiting 521 days for my LEAF. Like thousands of others, I would have purchased a year or two ago if cars were available. I think many would purchase if they could see, touch, and test drive EVs. Telling folks they must order a product and wait years to receive is not a formula for success. Only a small percentage of committed buyers can stomach this. Until EVs are on the showroom floor for walk in prospects to buy on the spot, good market penetration will not happen.

Consumer acceptance will be shaped by experiences of early adopters. Volt and LEAF owners will act as ambassadors and salesmen to their family, friends, and coworkers. If good experiences are shared with contacts, they will influnce future EV purchases more than magazine editors or bloggers.

Operational costs will also be a major success factor. LEAF owners have posted they get 3.9 miles per kW. My local Electric Company charges about 0.06 to 0.08 cents per kWh. That means I will pay about 2 cents per mile to recharge. Compared to Todays $3.40 a gallon gas, EVs get the equavlent of 170 miles per gallon. And this is only at $3.40 a gallon. It seems that if a Camel burps in the dessert it is enough reason for the market speculators to raise the price of gas. On the other hand, my Electric Company prices have not gone up or down one penny since January 2010. Electric costs do not swing like gasoline. EVs gives us more control over our energy costs.

Humans don't always do what is logical. Sometimes we act on fear or emotions. I like knowing I will no longer be a victim of gasoline price manipulation. I will pay a premium for any vehicle that frees me from gasoline, but it is nice that my calculations show our LEAF will save us about $250 to $300 per month in fuel costs.

· Rikk (not verified) · 5 years ago

Most of the all-electric v. hybrid debate is inacurate because the data is already outdated. Battery technology, hybrid drivetrain designs and power to weight measurements (miles per charge @ a weight capacity (empty v. full) are all predicated on what has been available and tested. The Leaf is a good example. The Volt is still in the data collection phase as GM changed or revised the the function of the supplimental gasoline engine's function.
Therefore, irrespective of the economic situation, the electric and electric 1st+ hybrid vehicles are in fact product design level "0", with a pushed availaible date. With the battery technology now entering it's third generation of design, I would expect the rating for miles per charge to become far greater with the next generation of battery technology. Also, as demonstrated by Toyota, the incorporation of solar technology to enhance the charging capabilities of an electric-based vehicle, I foresee many other "marriages" of compatible technologies coming online soon. Watch the industries (auto, battery, mutally useful technologies) carefully, and with a critical "eye". The current views of 2015 may be reasonable, but the acceptable pricing of these vehicles may be too high if subsidies are lowered or withdrawn. Personally, I am waiting for the 200+ miles per charge and the establishment of an energy service grid (an outlet at every gas staion kind of thing) to make the recharge as convenient as the "fill-up" today. The oil industry will fight tooth and nail to protect it's interests in delaying the electric additions, but if the systems become inevitable, then the "gas stations" of today will quickly become the "eneergy stations" of tomorrow. The grid is there. No gas station can operate efficiently with less than industrial electric supply, so building access and monitoring of the electric "fuel" is actually a progression of what is available today. Keep your eyes open, industrial, corporate, financial and political forces can bring this progression to the public quickly, or delay it almost forever. And like all thing techniological, second generation products are always sturdier and less expensive. We simply have to wait and see.

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