Plug-in Electric Vehicle Sales Need a Shake-up

By · August 26, 2011

Although it’s only August, the electric vehicle market has the feeling of coming into the home stretch for the year. We have seen the race for plug-in electric vehicle (PEV) glory boil down to the Nissan LEAF and Chevy Volt this year, with the Volt sputtering a bit earlier than expected. We have seen numerous delays pushing new launches back months—I am looking in your direction, Coda, Fisker, Ford, and Toyota. All of this has left the PEV market feeling a bit underwhelming for 2011. Particularly when you consider that the President has given the market a goal of 1 million PEVs on the road in four and half short years—8,000 down, 992,000 sales to go.

Light-duty PEV sales to 2017

You can probably see where I am going with this. My colleague John Gartner and I recently completed the forecasts for PEVs and expect that the U.S. market will reach 667,000 PEVs sold by 2015. In fact, we anticipate that the goal of 1 million vehicles is almost slipping out of reach at this point without substantial shake up in the market in the next couple years. What do I see as the potential market shake-ups?

1. New models

So far, the only two mainstream models available compete in similar segments and have similar packaging. Market delays for competitors means lost time towards meeting this goal. In the last couple of weeks, we have seen several new model announcements a bit earlier than typical—although “typical” has been thrown out the window recently—with BMW’s i8 and i3 releases and Cadillac’s announcement of the ELR plug-in hybrid. But these are not going to be the “substantial shake-ups” that the politicians need for the market to meet their goals. So, where are the potential shake-ups? Toyota’s Prius Plug-in Hybrid, if it’s priced right, has the potential to turn many current Prius owners into plug-in owners. Ford’s multi-vehicle platform could prove a winner too, but the C-Max bodystyle is still yet to be tested in the U.S. mass market.

2. Faster production ramp-up

GM claims that the Volt is out-selling its production, which seems likely true, but then added capacity and lower production costs have to follow soon. Nissan’s Smyrna, Tennessee plant will have the capacity for 150,000 LEAFs per year, but production is not scheduled to start until late 2012 and could even be delayed into 2013. In the meantime, expect Americans to remain hungry for the LEAF as production gets allocated across the globe. (As a side note, I would bet that you can expect a facelift for the Leaf about then too, as it seems hard to believe Nissan would start a plant with tooling for a three-year-old vehicle, but stranger things have happened.) If production capacity can be increased and production costs can be lower, that would likely have a transformative affect on the availability of PEV models in the next few years.

3. Better pricing

Whether that is via government purchase incentives, lower battery costs, or good old-fashioned vehicle incentives (financing, rebates, dealer cash, etc.), the price for PEVs has to come down. Batteries are the cost drivers and are therefore held as the Holy Grail for cost reductions in PEVs. In the meantime, fixing the flawed federal purchase incentive program or reducing the price to generate interest seems the most likely short-term tools. GM recently announced that the 2012 Volt will see a price decrease of about $1,000—every little bit helps—while Nissan announced a $500-$1,000 price increase to the LEAF. The competition, specifically Toyota, seems poised to put these two on notice with significantly better pricing for what many will consider a competitive choice. (I do realize that these three vehicles are very different animals, but at the end of the day, the only thing that matters is whose dealers customers comparison shop between). Others like the $45,000 Coda Electric Sedan or $57,000 Tesla Model S will price many buyers out of the market, regardless of how good the vehicles are.

While there are a lot of challenges to launching vehicles, setting prices, and establishing production, the bottom line is that the current market is not on track to meet the political goals. And, it looks from here that the blame belongs to the supply side of the equation.

New to EVs? Start here

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