Special Report

Survival of the Fittest

Established global auto makers, as well as start-up companies, are racing to grab a share of the battery-electric vehicle industry, but it remains unclear just how big the market might become and how many players it can accommodate.

In the U.S., President Obama champions a goal of putting 1 million electric vehicles on the nation’s roads by 2015, including BEVs, plug-in hybrid vehicles and extended-range EVs. The administration will put another $2.4 billion in grant money behind the initiative.

Assuming an annual market of 12 million units, EV sales would need to account for 1.7% of sales, or some 205,000 units, each year to meet the president’s goal, according to government estimates.

Today, EVs account for just a sliver of annual light-vehicle sales. In fact, their less complex and more affordable hybrid-electric cousins command just a 2.4% share after a decade on the market, according to Ward’s data.

The U.S. Department of Energy, which has been awarding EV makers billions of dollars over the last two years to encourage deployment of advanced-propulsion technology, thinks Obama’s target could be conservative.

Research conducted by the DOE estimates 2015 could see 1.2 million EVs on American roads, a total that does not include planned introductions by major auto makers such as Chrysler, Toyota, Mitsubishi, Honda, Hyundai, Volkswagen, Volvo and China’s BYD.

“It’s optimistic,” J.D. Power’s Mike Omotoso says of Obama’s target. “It’s a stretch-goal, sort of like (President John) Kennedy calling for a man on the moon by the end of the decade.”

J.D. Power’s forecast calls for a cumulative total of 700,000 BEVs and PHEVs by 2015.

“We think the growth will be very slow over the next five-seven years,” Omotoso says, predicting consumers would need to weather $4-a-gallon gasoline for an extended period before shifting expensive EV technology.

J.D. Power also anticipates EVs will face competition from smaller gasoline-powered vehicles that afford performance in the 40 mpg (5.9 L/100 km) range.

“We see people moving into the Ford Fiesta, the Chevy Cruze, the Hyundai Elantra,” says Omotoso, senior manager-global powertrain forecasting. “If people can get that sort of fuel economy for less than $20,000, that’s the option they choose.”

Looking at BEVs exclusively, J.D. Power sees annual U.S. sales of 100,000 units in 2020. In the same timeframe, worldwide BEV deliveries should total 1.3 million, with Europe accounting for 742,000 and China 332,000. Japan will sell about 100,000 BEVs, the firm estimates.

Major breakthroughs in green-technology cost reduction and consumer confidence, as well as coordinated government policy, are essential to EV sales growth, J.D. Power says. But the consultancy does not foresee any of those scenarios occurring within the next 10 years.

IHS Automotive sounds a similarly pessimistic tone. Looking out to 2030, IHS sees electrified powertrains comprising just 2.4% of the world’s light-vehicle fleet.

However, the consultancy is rather bullish in its battery technology outlook, forecasting a 20% improvement in affordability for every three years of commercial availability. “The battery is evolving rapidly,” Managing Director Phil Gott says.

The Center for Automotive Research in Ann Arbor, MI, and The Boston Consulting do not expect breakthroughs on battery technology or cost before 2025.

jamend@wardsauto.com