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Published on April 21st, 2010 | by Nick Chambers

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Are Electric Cars Really a Risky Business Strategy? The Big Picture Says Otherwise

As we get closer to the impending launch of the next generation of electric cars from manufacturers like Nissan, Mitsubishi, Ford, GM, Tesla and Fisker, the chorus of commentators claiming they will be a flop and are likely to never pay back their investment for the automakers that choose to build them is getting larger.

In the past couple months alone I’ve seen two rather high profile “parade rainers” — from Forbes and Ward’s Auto — come right out and say they think electric cars are an overly risky business bet which the overwhelming odds favor losing. But I don’t think these folks are looking at the big picture and they haven’t gotten their minds around the reality of our situation.

Once you take these things into consideration, EV manufacturers have nothing to worry about.

3% of 118 Million is Still A LOT

One of the most common arguments I hear is that it took hybrid cars the better part of 10 years to capture roughly 2.5-3% of the total vehicle market share in the U.S. and, using that model, it will take at least a decade for electric cars to capture that much of their own market share. A recent opinion piece in Ward’s Auto proclaimed, “So, if after a decade, [hybrids] can capture only 2.5% of the market, it seems likely EVs will have a slower growth curve. That means the EV pie will get sliced mighty thin.”

3% may not sound like much, but if we look at global statistics the picture gets better. In 2008 there were roughly 70 million vehicles sold in the world, this was down from the 79 million vehicles sold in 2007, but we’ve been hammered by a recession. Prior to 2008, the new vehicle market was growing by roughly 4% per year, with that percentage accelerating due to rapid growth in China and India. So let’s say the global new car market is around 80 million this year (2010) and we can conservatively say it will grow by 4% each year for the next decade. By 2020 there will be 118,000,000 cars sold per year. If 3% of those are EVs, that’s 3,450,000. Maybe I’m crazy, but I don’t think that a 3.5 million-vehicle-per-year market share is a losing proposition.

Plus, between now and then a bunch of EVs will be sold. The first few years it may not be more than 0.1-1% of the market share, but after that it will start to ramp up quickly. Let’s say that by 2014 it’s 1%, by 2016 it’s 2%, and by 2020 it’s 3%. Using those numbers, between now and 2020 there will likely be at least 16,000,000 EVs sold worldwide. And that’s just using the same curve that hybrids saw. How anybody could see that as a gamble, I don’t know.

But is 3% Market Share a Decade From Now a Realistic Figure?

The early years of hybrids saw relatively little in the way of worldwide government support. A decade ago we weren’t thinking about climate change or the environment. At that point the idea of running out of oil seemed like the script of a fantasy movie and the thought that gas could get anywhere near $4 a gallon in the U.S. was a joke.

For a long time, the only hybrid option was one car from Toyota. It’s only in the last few years that hybrids have started popping up all over the place and the hybrid market has been exploding. In fact, recent studies suggest that by 2020, the hybrid market share in the U.S. will be 20% of all new cars sold. If we extrapolate this to the rest of the world, it may not be 20% of all new cars sold, but it will be heck of a lot more than 3%… say 15% of all cars sold globally. That’s a growth of nearly 0.5% per year in hybrid market share over the next 10 years.

So, what are the reasons for this surge in hybrid popularity? A hedge against rising gas prices? A growing awareness of the environmental effects of driving? The knowledge that we’ll run out of oil eventually? Government incentives? All of those things play a role. If hybrids were introduced today, you can be positive that it wouldn’t take 10 years for them to account for 3% of market share, it would only take a few years. Applying this new consumer awareness and heavy government incentivization to the acceptance of EVs, it is clear that they will be accepted much more quickly than hybrids were when they were introduced a decade ago. The idea that they will only capture 3% of worldwide market share by 2020 is ridiculous. I’d put that number closer to 7%… or about 8 million EVs sold in 2020.

Clearly the American Consumer has Hybrids and Plug-ins on Their Minds

As I reported yesterday, a new poll indicates that the vast majority of Americans think that EVs and Hybrids are the way of the future. They are taking environmental considerations into account far more than ever before when making new car choices. Look, even if you don’t think climate change is real, we are going to run out of easy oil eventually. It could be as soon as NOW, or it could be in 2030.

Regardless, if we don’t start switching our gas-dependent cars off the road right now, when the time comes that demand for oil outstrips supply, we will be F@#KED people. So before you go saying that the government should not be fiddling with the market and propping up sales of cars that use less oil (or none), consider that it is a necessity for us to begin the process of weening ourselves off our addiction before we trigger a real Armageddon (none of this non-Armageddon, “Armageddon” health care foolishness we’ve been hearing about).

Range Anxiety, Limited Ranges and “Long Refueling Times” are Not Going to Have a Big Impact

In a Forbes article in February, Jerry Flint said that the Nissan LEAF would be a flop because it takes “forever” to recharge, doesn’t have the range of a gas powered car, is expensive, and isn’t as fast as a gas powered car. He also said he “guessed” it would cost about $40,000, whereas I staked my reputation on it costing between 25 and 35K. In retrospect, who do you think has the better inside line? In addition to Mr. Flint’s rather standard list of complaints, we’ve heard a lot of ruckus about how people will suffer from range anxiety.

As I’ve said before, I don’t think EV range anxiety is going to be as big of a deal as people have made it out to be. You can read my stance on that in other posts. I also don’t think that having a range of “only” a hundred miles is going to be that difficult to get around either. Certainly if you only have one car it could present problems. But if you’re like the vast majority of Americans or people living in cities, you rarely ever need to drive more than a couple dozen miles a day and you already have more than one car. Just replace one gas car with an electric and you’ll never know the difference.

Also, thinking of EVs in terms of “refueling” times is so 20th century. How many of us actually like to go to the gas station? I tend to think of having the ability to fill my car with juice at home as being MORE convenient than going to a gas station. Would you like to have to go to a station to fill up your cell phone every day? No, it’s easy plugging it in at night. Same will go for cars, it’s just that we’re so ingrained in the habit of filling up at a station that it seems like a hassle. Plus, home charging stations (240V/60 Amp) that can charge a car with a 100 mile range to 80% capacity in less than an hour are already available… and that’s only going to get better.

And the argument that EVs aren’t as fast as gas cars… please. When people usually are talking about “speed” they really mean “acceleration.” Nobody needs to go any faster than 80 mph, but they want to be able to get there quickly if needed. And in this realm EVs whip gas powered cars in droves: with 100% torque available from 0 rpm, getting up to speed is easy.

When you take all of the above into consideration, I just don’t buy the argument that EVs are a risky business strategy. The pundits and commentators who say they are haven’t taken into account the vast changes that are occurring throughout society, in the industry and in the political sphere and they also haven’t switched their mindset to the world of Gas 2.0.


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Not your traditional car guy.



  • http://solarchargeddriving.com Christof

    Nick,

    Completely agree with your analysis, especially the point about range anxiety. The vast majority of EV drivers are going to be from affluent, two-car households. That’s right, two cars, one of which (the hybrid, or PHEV ;-), if necessary, can get you from L.A. to NY in about four or five days. In fact, according to the 2000 U.S. census, 55% of American housholds had two cars.

    How/why the so-called “experts” can’t seem to see this basic fact, is beyond me. What range anxiety?

    Another thing the ‘experts’ overlook is the ‘neighbor’ factor. Once EVs are out there in the tens of thousands, and people can get them, you’ll have: a) lots of EV owners who prove, by their very everyday existence, that EVs don’t need to be charged every five minutes; b) and, more importantly, their neighbors will actually be able to go and buy an EV (they can’t right now). Many will, when they realize that all the anxiety about EVs is just, well, plain ridiculous…

  • http://solarchargeddriving.com Christof

    Nick,

    Completely agree with your analysis, especially the point about range anxiety. The vast majority of EV drivers are going to be from affluent, two-car households. That’s right, two cars, one of which (the hybrid, or PHEV ;-), if necessary, can get you from L.A. to NY in about four or five days. In fact, according to the 2000 U.S. census, 55% of American housholds had two cars.

    How/why the so-called “experts” can’t seem to see this basic fact, is beyond me. What range anxiety?

    Another thing the ‘experts’ overlook is the ‘neighbor’ factor. Once EVs are out there in the tens of thousands, and people can get them, you’ll have: a) lots of EV owners who prove, by their very everyday existence, that EVs don’t need to be charged every five minutes; b) and, more importantly, their neighbors will actually be able to go and buy an EV (they can’t right now). Many will, when they realize that all the anxiety about EVs is just, well, plain ridiculous…

  • ChuckL

    STill overlooked, intentionally perhaps, is the hit that EVs of all types will take when the low income taxpayer figures out that he is paying for someone else’s car with his taxes being used for the payments, and then raise enough hell with their representatives in congress to get the subsidies stopped.

    In my opinon it would be better to have never started the subsidies at all. Of course, if this sbsidy was in the form of a time limited corporate income tax reduction, or exemption, then the big price increase would not be nearly as big and would make a much smaller impact on sales. It might also encourage lower prices now to get greater sales.

  • ChuckL

    STill overlooked, intentionally perhaps, is the hit that EVs of all types will take when the low income taxpayer figures out that he is paying for someone else’s car with his taxes being used for the payments, and then raise enough hell with their representatives in congress to get the subsidies stopped.

    In my opinon it would be better to have never started the subsidies at all. Of course, if this sbsidy was in the form of a time limited corporate income tax reduction, or exemption, then the big price increase would not be nearly as big and would make a much smaller impact on sales. It might also encourage lower prices now to get greater sales.

  • Dave

    Nick, I totally agree. A couple years ago I parked my diesel 3/4 ton truck because the gas prices were killing me. I bought a used 2002 Honda Civic NGV. It operates in every way like your average Civic except the NG costs me 93 cents a gallon (up from .63). I get around 32 mpg. The downside is the range is limited to 160 miles. I rarely let it go past 120 miles. That means I fill up about 2-3 times a week. It’s a bit of an inconvenience but I only pay a third of what most other drivers are paying so it is totally worth it. If I could just plug in every night and start the day fresh with 100 miles in the tank that would be awesome! For long trips I still have the truck or a gasoline car. The leaf sounds like it will make a great around town/commuter car. Nissan has to sell us on what it will save us each month on our current gas commuter car. People don’t quite understand that yet. Word of mouth will be a big part of it. I also think lower maintenance costs will have a big impact on ownership costs.

  • Dave

    Nick, I totally agree. A couple years ago I parked my diesel 3/4 ton truck because the gas prices were killing me. I bought a used 2002 Honda Civic NGV. It operates in every way like your average Civic except the NG costs me 93 cents a gallon (up from .63). I get around 32 mpg. The downside is the range is limited to 160 miles. I rarely let it go past 120 miles. That means I fill up about 2-3 times a week. It’s a bit of an inconvenience but I only pay a third of what most other drivers are paying so it is totally worth it. If I could just plug in every night and start the day fresh with 100 miles in the tank that would be awesome! For long trips I still have the truck or a gasoline car. The leaf sounds like it will make a great around town/commuter car. Nissan has to sell us on what it will save us each month on our current gas commuter car. People don’t quite understand that yet. Word of mouth will be a big part of it. I also think lower maintenance costs will have a big impact on ownership costs.

  • http://rowlandwilliams.com Rowland

    I agree with the author. The same group of people are the ones decrying Global Warming as a hoax. Electric cars make sense for most of the world’s population. And once Americans get a taste of the reliability, the low cost of “fuel” and the quiet ride, look out. There’s gonna be a run on them, especially among the under 30 crowd. As for me? I’ll try not to laugh in the face of the Saudi Royal family and Exxon CEO’s. Bye, Guys.

  • http://rowlandwilliams.com Rowland

    I agree with the author. The same group of people are the ones decrying Global Warming as a hoax. Electric cars make sense for most of the world’s population. And once Americans get a taste of the reliability, the low cost of “fuel” and the quiet ride, look out. There’s gonna be a run on them, especially among the under 30 crowd. As for me? I’ll try not to laugh in the face of the Saudi Royal family and Exxon CEO’s. Bye, Guys.

  • http://www.pluginrecharge.com Mark Thomason

    Most American’s are not environmentalist and have short term memories. If gas prices fell to $1, I suspect that big SUVs & Hummers would become very popular again. Vehicles like this make our big butt look smaller. In the end, people don’t want to give up anything in their switch from ICE to EV…especially short range with long refill times.

    That said, there are two things that make this decade (2010-2019) better for EVs than the last.

    1. Advancing battery tech will eventually make the range difference irrelevant for most. Once we get past 200 mile ranges, people won’t see this as a show stopper.

    2. Gas prices. Every time gas prices spiked last decade, so did the line for a Prius. Given the INEVITABLE rise of gas prices going forward, they are the best incentive for going EV…as we’re reminded every fillup that we’re paying too much and shipping our wealth over the border.

    As American’s adopt EVs, most won’t really know that they just did the single biggest thing they can do to reduce their carbon footprint (and lower their maint cost). It will be our little secret.

  • http://www.pluginrecharge.com Mark Thomason

    Most American’s are not environmentalist and have short term memories. If gas prices fell to $1, I suspect that big SUVs & Hummers would become very popular again. Vehicles like this make our big butt look smaller. In the end, people don’t want to give up anything in their switch from ICE to EV…especially short range with long refill times.

    That said, there are two things that make this decade (2010-2019) better for EVs than the last.

    1. Advancing battery tech will eventually make the range difference irrelevant for most. Once we get past 200 mile ranges, people won’t see this as a show stopper.

    2. Gas prices. Every time gas prices spiked last decade, so did the line for a Prius. Given the INEVITABLE rise of gas prices going forward, they are the best incentive for going EV…as we’re reminded every fillup that we’re paying too much and shipping our wealth over the border.

    As American’s adopt EVs, most won’t really know that they just did the single biggest thing they can do to reduce their carbon footprint (and lower their maint cost). It will be our little secret.

  • http://hopetoprosper.com Bret

    I think the real issue for electric cars, especially for early adopters, has to do with the geographic regions. Different areas have different needs, values and buying habits.

    Here in California, we bought VWs in the ’60s, Toyotas and Hondas in the ’70s and now we buy a bunch of Priuses. I assume we are going to buy most of the Leafs and Focus BEVs, just like we buy the Teslas. We have good roads, great weather and we are environmentally conscious. This is also true for many metro areas, where it’s hip to be green.

    In places like the Midwest, they are probably going to continue buying V6 cars and big SUVs. They have freezing winters and long distances to drive. And, in the agricultural areas, they are going to continue buying V8 trucks. They need to tow and haul and an EV car isn’t going to work, down on the farm.

    So, I think it’s silly the press an analysts keep hammering on range anxiety. People like myself (a California homeowner with 2 cars and a short commute) want an EV and understand the limitations. Others may find they aren’t suitable for their needs, so they won’t buy them. And, that’s OK.

  • http://hopetoprosper.com Bret

    I think the real issue for electric cars, especially for early adopters, has to do with the geographic regions. Different areas have different needs, values and buying habits.

    Here in California, we bought VWs in the ’60s, Toyotas and Hondas in the ’70s and now we buy a bunch of Priuses. I assume we are going to buy most of the Leafs and Focus BEVs, just like we buy the Teslas. We have good roads, great weather and we are environmentally conscious. This is also true for many metro areas, where it’s hip to be green.

    In places like the Midwest, they are probably going to continue buying V6 cars and big SUVs. They have freezing winters and long distances to drive. And, in the agricultural areas, they are going to continue buying V8 trucks. They need to tow and haul and an EV car isn’t going to work, down on the farm.

    So, I think it’s silly the press an analysts keep hammering on range anxiety. People like myself (a California homeowner with 2 cars and a short commute) want an EV and understand the limitations. Others may find they aren’t suitable for their needs, so they won’t buy them. And, that’s OK.

  • htl

    nice article nick…

  • htl

    nice article nick…

  • douglas prince

    Very good article, Nick. Like you hinted, it’s going to take some education of the general public to really get them behind the EV concept. Whenever someone mentions to me how expensive they are, I always mention what you’re NOT paying for – fluid systems, exhaust systems, belts, etc – that add to the true cost of vehicle ownership. Hell, have you priced a muffler recently? Good Lord!

  • douglas prince

    Very good article, Nick. Like you hinted, it’s going to take some education of the general public to really get them behind the EV concept. Whenever someone mentions to me how expensive they are, I always mention what you’re NOT paying for – fluid systems, exhaust systems, belts, etc – that add to the true cost of vehicle ownership. Hell, have you priced a muffler recently? Good Lord!

  • Johny_balls

    Nick, what rationale human being would not buy an electric car if they can get 300 miles to a charge. These type of cars will be available by 2015 so I would then predict 50% of people wanting to own such a car.

  • Johny_balls

    Nick, what rationale human being would not buy an electric car if they can get 300 miles to a charge. These type of cars will be available by 2015 so I would then predict 50% of people wanting to own such a car.

  • http://www.surveymonkey.com/s/KRR5GPQ Efried

    “What car?” Is this really the right question?

    Peugeot and Smart are preparing for the “post property period”. Vehicles off all types – starting with PEDELECs, scooters – will be abundant and everybody will choose his/her ride upon demand from the companies mobility service offer. Engineers will solve the “my car is my castle” mantra by implementing smart individualisation and introducing instant cleaning.

  • http://www.surveymonkey.com/s/KRR5GPQ Efried

    “What car?” Is this really the right question?

    Peugeot and Smart are preparing for the “post property period”. Vehicles off all types – starting with PEDELECs, scooters – will be abundant and everybody will choose his/her ride upon demand from the companies mobility service offer. Engineers will solve the “my car is my castle” mantra by implementing smart individualisation and introducing instant cleaning.

  • George

    I think ev are a horrible idea cuz people are looking at what it’s saving you.
    The Nissan leaf is 30000 nd u don’t have hundreds of moving parts like a engine u have six things in ur electric box that will need replacing from time to time most likely have to be taken to the dealership to get charged a shitload more than an independent shop. Besides u don’t talk about how this battery will overall need replacing cuz if u own something electronic it loses it’s ability overtime to hold a charge. Also u don’t talk about a price of a lithium battery which is priced at $15000 nd that’s half the price of the car.

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