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A Renaissance for Electric Vehicles?


By Josie Garthwaite
BusinessWeek
January 16, 2009


Electric cars were in the spotlight at the North American International Auto
Show, but hybrids may be the ones to take hold in the next few years


When the Big Three auto executives drove away from Capitol Hill last month,
they left a trail of buzz about the electrification of the auto industry. GM's
plug-in hybrid Volt, which the company says will enter production in less than a
year, and Chrysler's proposed portfolio of electric vehicles assumed starring
roles in the automakers' pitch for federal aid. So it was little surprise that
this week's North American International Auto Show in Detroit kicked off with
plug-in hybrid and all-electric vehicles in the spotlight . But has the Detroit
show revealed an industry revving up for renaissance with its 2010 lineups or
stuck in neutral—years away from commercializing electric vehicle technology?

Chrysler, which introduced five electric concept vehicles this week, faces
particularly long odds, given the company's ongoing financial struggle. A
government rescue or an acquisition would have to come sooner rather than later
for those vehicles to hit showrooms. "It's as if they're just putting those in
the shop window to make themselves more attractive for sale," said Mike Omotoso,
an analyst with J.D. Power & Associates who specializes in alternative-fuel
vehicles and powertrains. "It's hard to see them developing the electric
vehicles they showed."

Hybrid Technology

So, despite all the excitement about cars such as the Chevy Volt, Cadillac
Converj, Chrysler 200C EV, and Dodge Circuit EV, hybrid technology—yes, that old
thing—is the one poised to take hold in the next couple years. Sure, the Toyota
Prius has been available in the U.S. since 2000 and in Japan for more than a
decade. But with three new hybrids, including the $18,000 Honda Insight, slated
to roll out in 2010, the Prius now faces competition—and pressure to drop
prices—like never before.

Today, hybrid technology has made its way from a sneaker lookalike that could
never haul a load of lumber into SUVs and pickup trucks. That's not to say that
Toyota can't handle the fight; the company still has first-mover's advantage.
Increased variety from competitors could open the hybrid market to a much
broader consumer base. While this could put a dent in the market shares of more
established automakers—Honda and Toyota—these companies have had time to lower
production costs.

Not so with EVs, which still occupy a luxury market niche: Silicon Valley
startup Tesla Motors's all-electric Roadster goes for $109,000, and it's second
vehicle planned for production will retail for at least $20,000 more. "It's
luxury because we have to make money," said Henrik Fisker, founder and CEO of
Fisker Automotive, whose plug-in hybrid Karma (slated to enter production this
year) will retail for at least $87,900. GM expects to lose money on the first
generation of Volts priced at $40,000 as the recession could throw a wet towel
on demand. R&D chief Larry Burns has said he expects the Volt sticker price to
drop for future generations, with profits rolling in by 2020 as production
volume increases.

Plug-in Launches

Still, EV industry observers have reason for optimism. "Everyone—government,
manufacturers, consumers—is on the same page, chomping at the same bit," said
Electric Drive Transportation Assn. spokesperson Jennifer Watts. Whereas hybrids
started out with a solitary entry (that sneaker-like Prius), then grew to two,
three, and now more than 20 models on the market, electric vehicles are coming
out in concept form (and are slated, at least, for production) at a more rapid
pace. "We've solved the desirability factor," Fisker said. "Now automakers will
want to show they're a part of it."

So what happens between now and 2020? Fisker says he thinks surviving automakers
and new startups will scramble to get electric concepts ready for 2010. A few
will follow through to production and eventually, mass-market affordability.
Fisker expects a $20,000 plug-in hybrid will be available within six years. J.D.
Power's Omotoso said plug-in launches slated for the next three to four years
are realistic. That means the age of the hybrid has arrived. If battery
technology and recharging infrastructure (not to mention favorable gas prices
and tax policies) come into place—and if automakers maintain the serious focus
they were trying to demonstrate in this year's show—the age of the EV could follow.





















 

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