Electric car has recently become a viable alternative for the average consumer. Along with hybrid vehicles, most manufacturers offer some type of alternative fuel vehicle in their product line. The feasibility that alternative vehicles will replace combustion engines, however doesn’t appear to be happening anytime soon. This raises the question that will be explored in this paper, of whether or not electric cars are a real industry or merely greenwash for manufacturers.

History of Electric Cars

Electric vehicles are far from a new concept in transportation. In fact, the first electric carriage was built by a Scottish inventor in 1832 using a crude non-rechargeable battery (“Timeline”). Thomas Davenport is credited as having built the first electric vehicle in 1835, a small electric locomotive, and William Morrison built the first successful electric car in 1891, more than a hundred years ago (“Timeline”). The electric vehicle is not new technology, as many may believe, and in fact in 1900 28% of all automobiles were powered by electricity (“Timeline”). It wasn’t until Thomas Ford mass produced the gasoline powered Model-T that gas powered vehicles became standard changing the course of the American automotive industry (“Timeline”). By 1920, Americans desired to travel longer distances, needed cars with more horsepower and had easy access to gasoline which effectively put the electric car out of business (“Timeline”).

It wasn’t the end of the electric car but the technology necessary to produce electric vehicles capable of competing with gasoline powered cars would take another fifty years. The advantages of the electric car over gasoline powered cars have always been recognized, but it wasn’t until 1966 that Congress introduced the earliest bills recommending the use of electric vehicles to reduce pollution (“Timeline”). The 1970’s brought soaring oil prices and a growing environmental movement which encouraged the production of several hybrid and electric cars that were produced and used briefly (“Timeline”). In 1988 GM built the EV1 which was GM’s practical electric consumer vehicle, however it was speculated that this was never a serious venture by GM and the cars were eventually pulled from production (“Timeline”).

The world’s first commercially mass-produced electric vehicle, the Prius, was introduced by Toyota for the Japanese market in 1997. The U.S. market saw a few electric vehicles come on the market in the following decade however they were typically only available for lease. High gas prices in the last few years along with a change in U.S. leadership has provided more funding for electric and hybrid cars and many hybrid models have been introduced into the U.S. market. A global interest in electric and hybrid vehicles in recent years has created more funding and research for the technology, however the high cost of manufacturing the cars and limited travel range are still issues for consumers that will need to be addressed before widespread adoption of electric cars is likely to happen (“Timeline”).

III. The Electric Car Industry

The Environmental Push to Go Green

Some of the barriers to the evolving electric and hybrid vehicle industry are the same as they have always been: high manufacturing costs, lack of infrastructure (fueling stations), and limited traveling distance. The recent global mandates on lowering CO2 emissions and the U.S. And Britain’s goals for putting more electric and hybrid cars on the road have increased funding and incentives for alternative fuels in the U.S. And Europe. This has spurred all of the major automakers into adding electric or hybrid cars to their line-ups.

In September 2009 the European Union and the G8 leaders set a goal to achieve an overall 80% decarbonization by 2050 that will require a portfolio of advanced powertrains including battery-electric (BEV), plug-in hybrid electric (PHEV) and fuel-cell-electric (FCEV) vehicles, according to a detailed study by a consortium of 30 organizations, including major automotive OEMs, energy providers, oil and gas companies, and government and non-government organizations (“Major Study”). The study is titled “A portfolio of powertrains for Europe: a fact-based analysis” and compares the economics, sustainability and performance of fuel cell, battery-electric, hybrid-electric and plug-in hybrid electric vehicles in achieving the decarbonization goal (“Major Study”). The study concluded that the costs of initial start-up will ultimately marginalize with the reduction in battery and fuel cell costs, economies of scale and potentially increasing costs for fossil fuels and ICE specifications (“Major Study”).

The technologies necessary to achieve the goals set by the EU will need to be varied. Over the next 40 years, the study found, no single powertrain satisfies all key criteria for economics, performance and the environment (“Major Study”). The world is therefore likely to move from a single powertrain (ICE) to a portfolio of powertrains in which BEVs and FCEVs play a complementary role: BEVs are ideally suited to smaller cars and shorter trips; FCEVs to medium/larger cars and longer trips; with PHEVs an attractive solution for short trips or where sustainably produced biofuels are available (“Major Study”). The study also details the next steps, noting that investment cycles in energy infrastructure are long and suggesting that BEV and FCEV infrastructure and scale-up should be initiated as soon as possible in order to develop these technologies as material transportation options beyond 2020 (“Major Study”).

Infrastructure and long distance travel have long been deterrents to widespread development of the electric car however the most recent push to develop electric cars into the mainstream has seen a vast improvement in investment and support from government and private organizations. Large environmentally conscious companies are investing in the technologies and making an effort to promote the use of electric and hybrid cars. Whole Foods Market, the largest retailer of natural and organic foods, with more than 270 stores throughout North America and the UK, has installed its first Coulomb ChargePoint Networked Charging Station for Electric Vehicles (EV) (“Whole Foods”). There may be more businesses to follow suit as many companies have policies designed to lower the impact of operations on the environment, such as allowing employees to work from home a few days a week to lower carbon emissions. There is no longer just a U.S. push to be more environmentally conscious, it is a dominant policy trend for countries around the world seeking cleaner forms of energy and reduced dependence on foreign oil.

Consumers have also had a large impact on the use of energy and environmentally friendly products. The United States used significantly less coal and petroleum in 2009 than in 2008, and significantly more wind power and there was a decline in natural gas use and increases in solar, hydro and geothermal power (“Americans”). The significant decrease in coal used to produce electricity can be attributed to three factors: overall lower electricity demand; a fuel shift to natural gas; and an offset created by more wind power production (“Americans”). This trend shows that as a country the U.S. is moving towards more green energy sources, which could be beneficial to the budding electric and hybrid car industry.

Supply and Demand for Electric and Hybrid Cars

The danger inherent in building the infrastructure first and then waiting for the cars to sell is the possibility that the cars will not sell. The Obama administration’s $2.4 billion investment in the development of batteries and other electric-car technology in the United States is an enormous bet on a product that has yet to gain broad commercial success (Kornblut and Whoriskey). Major manufacturers have yet to sell electric cars in the United States and hybrids represent less than 1% of the nation’s roughly 250 million-vehicle fleet (Kornblut and Whoriskey). Even some of the U.S. companies that have received the federal grants express concerns that their capacity to build parts for electric cars is far outstripping consumers’ demand (Kornblut and Whoriskey).

Even with the government pushing and creating demand through purchasing fleet vehicles, the outlook for electric car demand is slow and uncertain. J.D. Power recently released a report forecasting that hybrid and battery electric vehicles will represent only 7.3% of global auto sales in 2020 (“J.D. Power”). According to the report, it will be difficult to convince large numbers of consumers to switch from conventionally powered passenger vehicles to hybrid-electric vehicles (HEVs) and battery-electric vehicles (BEVs) (“J.D. Power”). A consumer migration to alternative powertrain technologies will most likely require either one of the following scenarios, or some combination of these scenarios: A significant increase in the global price of petroleum-based fuels by 2020; a substantial breakthrough in green technologies that would reduce costs and improve consumer confidence; and/or a coordinated government policy to encourage consumers to purchase these vehicles (“J.D. Power”).

Consumers have a variety of concerns about HEVs and BEVs and the costs of alternative-energy vehicle were most important to consumer’s decision to purchase electric or hybrid cars (“J.D. Power”). While many consumers around the world say they are interested in HEVs and BEVs for the expected fuel savings and positive environmental impact they provide, their interest declines significantly when they learn of the price premium that comes with purchasing these vehicles (“J.D. Power”).

The J.D. Power survey is one of many forecasts that have attempt to predict what the demand for electric cars will be in the future, however forecasts have varied widely in percentages due to the uncertainty about global demand and what influences governments may have on electric and hybrid vehicle technologies and production. The price and demand for oil will also impact the alternative fuel industry, and just like the gulf oil spill, these are factors that are difficult to predict.

Global Influences

One unpredictable aspect of the 2020 outlook is how markets would be affected if more stringent and consistent legislation is adopted that supports specific technologies (“J.D. Power”). In particular, China has the ability to move quickly, invest heavily in the development of one specific propulsion technology, and mandate fuel economy or emissions standards that could favor a particular technology or require a minimum sales penetration level for vehicles with a designated technology (“J.D. Power”). Given the size and growth rate of the Chinese auto market, such a coordinated regulatory environment might allow Chinese companies to achieve economies of scale and drive down the cost of alternative-energy vehicles (“J.D. Power”). It stands to reason that if China was to choose an electric car as a preferred transportation method that automakers concerned about losing market share would move quickly to produce electric cars for the Chinese market. The same could be true if biofuels become a better technology favored by the Chinese government. It is very likely that global demand will account for the largest increase in the use and sale of electric and hybrid vehicles.

Consumer Opposition in the U.S.

Although Americans are increasingly environmentally conscious, it does not mean that the electric and hybrid car industry will not face challenges. As previously discussed one fear that keeps consumers at bay is range anxiety. Most EVs will travel 100 miles between charges, and even though statistics claim that most U.S. motorists drive less than 40 miles in their daily commutes, it is unclear whether consumers will accept the limitation (Motavalli). It may be that consumers will adjust to range limitations, but it remains a hurdle for selling electric cars in the U.S. market (Motavalli).

Although it isn’t well-publicized, few battery EVs will be available nationwide from the outset due to concerns over demand (Motavalli). The Chevrolet Volt, which also has a gas engine, will be a national car, but the initial markets are California, Michigan and Washington, D.C. (Motavalli). Although the Nissan Leaf went on a 24-city national tour, the nationwide distribution is expected to take up to two years. This is mainly due to the lack of infrastructure in place to support a larger release.

The safety of electric vehicles has been widely published; however fear of electric shock (either when charging or when the car is in an accident) is still a concern for some consumers (Motavalli).

On the positive side, image is an important component of hybrid purchasing. The Toyota Prius set an interesting precedent, because its unique styling allowed it to catch on with car buyers who wanted a green image (Motavalli). A Prius in the driveway made a statement in a way that a Honda Civic Hybrid (with identical styling to the conventional Civic) did not (Motavalli). This is actually encouraging for EV sales, since almost all of them are distinctly styled — some, such as the plane-like Aptera, radically so (Motavalli).

Tax credits for purchasing electric and hybrid vehicles are $7,500 for Federal taxes and some states also give tax credits. A separate Federal tax credit of $2,000 is available to help defer the cost of installing home charging units (Motavalli). The future of tax credits is uncertain in light of major budget deficits and spending cuts; however given the Obama Administration’s huge investments in the electric and hybrid technologies, some form of tax credit is likely to remain available to consumers.

Electric Trucks

Electric and hybrid cars may be a hard sell to consumers, but electric trucks are more likely to secure a foothold with businesses. Freightliner Custom Chassis (CNG) is putting Tesla batteries in the electric trucks it will have on the road next year (Squatriglia). Freightliner has offered CNG and hybrid electric trucks for years and it’s about to start selling a hydraulic hybrid, so electrics are the logical next step (Squatriglia).

Fleets are a perfect application for electric vehicles because they follow set routes, so range isn’t a problem (Squatriglia). They’re kept at centralized depots, making recharging easy and they’re cheaper to operate, even though the upfront cost is higher (Squatriglia). Freightliner says its electric rig will save $15,000 a year in fuel and maintenance costs (Squatriglia). Ford recognizes the advantages of the electric trucks as well, and is set to introduce the light-duty Transit Connect Electric van at the end of 2010 (Squatriglia).

Big Oil Opposition

In his famed documentary “Who Killed The Electric Car?” director Chris Paine explores the reasons that GM’s EV1 was produced and leased to consumers and subsequently declared a failure by GM due to lack of demand (www.whokilledtheelectriccar.com). GM went on to collect and destroy a majority of the vehicles angering many owners and activists. The film was made in 2006 and questions the financial motives of GM and the oil industry in the ultimate removal of the EV1 from the market. Electric vehicles of all types and manufactures are springing up all over the world just ten years later; however it brings into question how the change to electric and hybrid vehicles could be opposed by big oil and what impact that could have on the industry.

Big oil could certainly use a makeover after the Gulf oil spill and publically, at least, oil conglomerates are embracing electric and hybrid vehicles in many ways including biofuels and as suppliers of raw materials for batteries. A123 Systems, a Massachusetts-based upstart in the electric vehicle battery industry recently made a deal to buy a key material for its lithium-ion cells and batteries from ConocoPhillips Specialty Products (Garthwaite). In April 2009, Conoco joined General Electric, CMEA, Qualcomm, Sequoia, MIT and others in a $69 million dollar financing round for A123 which launched a successful $378 million dollar IPO shortly thereafter (Garthwaite). The battery maker has now invested $23 million in Fisker, striking a deal to supply battery systems for the Fisker Karma and collaborate with the startup on its next-gen vehicle (Garthwaite). Big oil is destined to find the value in supporting alternative energy while still reaping the profits of higher oil demand in the short-term. Even as industrial nations make the move to electric vehicles, it will take decades before the necessary infrastructure and supply chains are in place. The other important factor for big oil is the fact that oil is a finite resource. In fact, it is predicted that oil production will peak in 2014, so oil companies are smart to consider diversifying their product offerings (Hsu).

III. Conclusion

Whether or not consumers will finally embrace the electric car remains to be seen, but it won’t be for a lack of effort by policymakers. The environmentally friendly vehicle is making it way into the world in one form or another and technology will play the biggest role in making the electric car and hybrid car a viable alternative for the world’s gas dependent citizens.

References

“Americans Using Less Energy Overall and Using More Renewable Energy Resources.” Greencarcongress.com, 24 Aug. 2010. Web. 17 Dec. 2010.

Garthwaite, Josei. “Hey, What’s Big Oil Doing in That Electric Car?” Gigaom.com, Gigaom, 1 July 2010. Web. 17 Dec. 2010.

Hsu, Jeremy. “Peak oil production predicted for 2014.” MSNBC.com, March 12, 2010. Web. 17 Dec. 2010.

“J.D. Power forecasts hybrid- and battery-electric vehicles will represent 7.3% of global auto sales in 2020.” Greencarcongress.com, 28 Oct. 2010. Web. 16 Dec. 2010.

Kornblut, Anne E. And Peter Whoriskey. “Obama pours energy into electric-car batteries, but will it jump-start industry?” Washington Post. Washington Post, 16 July 2010. Web. 16 Dec. 2010.

“Major Study Concludes achieving EU 2050 transport decarbonization goals will require portfolio of advanced powertrains; fuel cells, battery-electric and plug-in hybrids.” Greencarcongress.com, 19 Nov. 2010. Web. 16 Dec. 2010.

Motavalli, Jim. “Seven Barriers to the Electric Car.” Bnet.com, CBS Interactive, 17 March 2010. Web. 17 Dec 2010.

Squatriglia, Chuck. “Freightliner Taps Tesla To Build an Electric Truck.” Wired.com, Conde Naste Digital, 22 March 2010. 17 Dec. 2010.

“Timeline: History of the Electric Car.” PBS.org, 30 Oct. 2009. Web. 16 Dec. 2010.

“Whole Foods Market Installs Coulomb Technologies Charging Station.” Greencarcongress.com, 12 April 2010. Web. 17 Dec. 2010.