Electrical Vehicles or EVs have created a flurry of activity
in the automobiles market. With the Obama Administration setting
up a target to roll out 1 million electric cars by 2015,
mega-auto companies remain on their toes to execute the mandate.
However, going by historical records and the present economic
scenario, we wonder if this frenzy for electric cars will last or
flame out like a shooting star.
Much has been said about the upsurge of EVs such as
plug-in-hybrid cars and plug-in electric cars. The slow but keen
interest in this space across the globe has made car
manufacturers sit up and take notice. This is because they are
all keen on grabbing a slice of this emerging segment.
However, what is to be noted here is nothing much has been done
on the underlying issues that continue to create roadblocks for
significant adoption of this concept. Right from the lack of
awareness among the end users, limited reach of this product
given unaffordable price tags and lack of adequate charging
station, in particular for pure electric cars compel us to hold
back our views on the growth trajectory of electric
Although the government has been taking several measures to
improve this scenario, we believe a lot is left to be desired
that leads us to a reality check.
Not just the growing awareness on fuel economy but enforcement of
several environmental protection acts also backed the use of
alternative fuel vehicles such as EVs. Environmental Protection
Agency (EPA) and Department of Transportation (DOT) have worked
together to form Federal Corporate Average Fuel Economy (CAFE)
standards in 2010. According to the new regulation, automobiles
covering model year 2012-2016 need to have fuel economy standard
of 34.1 miles per gallon.
If these standards come into action, various studies project that
green house gas emission to reduce by 950 million metric tons.
Further, fuel economy would be of 1.8 billion barrels over the
lifetime of the vehicle. Financially, market reports suggest that
average price of a new car may rise by $985 but in terms of fuel
savings, the average consumer will gain around $3,000 over the
life of a vehicle.
Electric Cars - Rise and Fall
One might think that electric cars are an emerging concept and a
product of the 21st century. But, surprisingly, this technology
dates back to the 19th century. These were invented in 1828 by
Hungarian physicist and engineer, Ányos István Jedlik. However,
developments in the genre of electric cars took a back seat after
the internal combustion engine technology came into the picture.
It wasn't until the late 1960s that the interest in electric cars
saw a revival due to environmental issues and adverse impacts of
green house gas emission associated with modern day's gas
One of the major turnarounds for electric cars was the energy
crises in the 1970s that continued for a decade due to political
volatilities in Arab countries and the Iranian revolution. It was
then that the most popular electric car model - CitiCar - was
developed and marketed by Fla.-based Sebring-Vanguard, Inc. Other
prototypes of electric cars - Electrovair and Electrovette - were
being developed by
General Motors Company
) but failed to hit the road.
Overall, these developments were short lived and failed to make
an impression in the commercial space due to several associated
drawbacks, the major being high expenses. Further, in 1970s,
Japanese automobile companies like
Toyota Motor Corp.
Honda Motor Co., Ltd.
), Mitsubishi and Mazda were gaining mass popularity given their
fuel efficiency and affordability, which affected the market for
electric cars in the U.S. and overseas.
Presently, the U.S. remains the largest market for EVs. According
to market reports, the country accounted for over 70% of the
market share in plug-in-hybrid cars sales. Further, the nation
comes a close second to Japan in terms of pure electric car sales
with over 25% market share.
The economical turmoil in 2008 and upsurge in oil prices once
again gave rise to the need for alternative fuel vehicles.
Turning over a new leaf, the auto industry geared up to develop
electric cars for the new era. In 1996, General Motors rolled out
the first-ever mass-produced electric car, GM EV1. Despite a
positive market response, the company rolled back from the market
in 1999, citing poor scale of economies.
One of the most prominent success stories in the U.S. market has
been Tesla Roadster, launched in 2008 by
Tesla Motors, Inc.
). After initial hiccups, the company gained wide popularity by
producing the fully electric sport car Tesla Roadster, followed
by the luxury Sedan, Model S.
Following this, ace auto manufacturers across the globe took up
the electric car challenge. This resulted in a wide range of EVs,
including the top selling pure electric car - Leaf - by
). Plug-in-hybrid cars like Chevrolet Volt and Toyota Prius PHV
also gained popularity.
We believe the growth rate of electric car is still at an
embryonic stage. According data available in the market, the
segment registered growth of only 0.37% in 2012, followed by
0.53% growth in its market share in the first quarter of 2013.
According to reports from Navigant Research, market share for
pure electric cars will be somewhere around 3% of the global
light-duty vehicle market by 2020.
According to studies conducted by Pike Research, the one
million mark in pure electric car sales would be reached no
sooner than 2018, which is a significant delay from the target
set by the Obama Administration. Studies also show that the U.S.
will account for only around 410, 000 pure electric cars on road
Although the auto industry has undertaken substantial measures to
popularize electric cars, its lack of enthusiasm is what is
holding it back. In Apr 2013, while launching the new Fiat 500e
electric car, Chrysler CEO Sergio Marchionne stressed the fact
that the market is not ready for the electric car revolution in
He also quoted that technology isn't a sound business
strategy, preferring natural gas as a better answer in the
current market. Further, the US Department of Energy has
estimated 250,000 electric cars to hit the road by 2015, which is
merely 0.1% of the domestic car market.
Where Does the Future Stand?
We believe that the big question is still whether electric cars
have really made an impact on consumers to establish its
presence. A big hurdle in popularizing electric cars is the price
point at which most pure electric or hybrid cars are sold.
These cars are considerably pricier than conventional internal
combustion engine cars or for that matter natural gas vehicle.
For instance, the current price for Nissan Leaf in the U.S. is
somewhere around $28,000 while the gasoline powered Nissan Versa
is around $17,000.
On average, an electric car costs almost $12,000 higher than
conventional cars as per the analysis of Congressional Budget
Office. Recent studies project that despite heavy government
subsidies, electric cars will likely become competitive with
traditional vehicles in number by 2032.
In a consumer-driven market, pricing can make or break the future
for electric cars, which we believe is mostly dependent on the
use of expensive battery technology. Currently, the market for
advanced battery manufacturing is still at a nascent stage and
with less attention from Fed and lack of proper stimulus had
resulted in poor advancement in making it more economically
Most of the impediments in establishing the electric car
market are associated with this core technology including
inconvenience in recharging, limited driving time and higher cost
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We believe cost, durability, maintenance and safety are the major
concerns associated with battery technology that needs Federal
intervention for its economic viability, especially for
utilization in electric car manufacturing. If these issues are
resolved and structural implementation of government mandates on
environmental policies are made, we foresee a smooth journey for
electrical cars. Needless to mention, an essence of emergence has
yet to be felt.