Dealers Must Understand Technology

What can auto makers do about the high cost of electric vehicles?

Well, for one thing, stop talking about it. And add a little spit and polish.

That's the advice from panel members at “The Business of Plugging In” EV conference in Detroit. They say auto makers need to inject some styling pizzazz into their battery-powered models and get consumers to focus on the advantages of EVs, rather than their several-thousand-dollar price premium.

“We're shooting ourselves in the foot by talking about cost all the time,” says Ray Lane, managing partner for venture capitalists Kleiner Perkins Caufield & Byers.

Henrik Fisker, CEO of Fisker Automotive Inc., agrees, saying price isn't a factor for those lining up to buy his company's $88,000 Karma hybrid-electric vehicle, because they see the sleek, 4-door sedan as a fully competitive luxury car.

“We're getting customers from the German brands,” he says. “And most don't see it that they're paying a premium (because it is an HEV). Most expected it to be more expensive.

“There's a lot you can do with exterior and interior design so the customer doesn't feel like he is paying a premium,” Henrik Fisker adds, saying auto makers should put more marketing emphasis on the car's exclusive features and tout the convenience of refueling via an electrical outlet.

Costs have come out of the Karma in other ways, he says. “Maybe you don't need a 32-way power seat; maybe an 18-way is enough.”

Richard Curtin, who directs consumer surveys for Reuters and the University of Michigan as a member of the university's Institute of Social Research, says his studies show a large number of consumers are willing to pay $2,500 extra for a plug-in vehicle, but not much more.

“At a $10,000 premium, there's no market,” he says. “At $2,500, one-third of households are eager to purchase.”

That $7,500 gap equals the largest tax credit the U.S. offers on EVs, Curtin says, noting that's a tax credit, not a direct cash incentive, and buyers still would have to finance the entire purchase price of the vehicle.

“(But) consumers are ready to experiment with alternative forms of transportation,” he says. “And that's the best any new technology can ask for.”

To alleviate any concerns, auto makers should copy General Motors Co.'s current ploy offering buyers 60 days to return vehicles if they are unsatisfied, says Lane. “Tell them if they don't like (their new EV), they can bring it back.”

Ford Motor Co. Chairman Bill Ford says the industry also has to do a better job training dealers to sell and service hybrids and plug-ins.

“Dealers have to understand the technology,” he says. “You don't want them steering customers to something else because they don't understand it or because (a conventional vehicle) is an easier sell.”

He admits his company didn't do a very good job with that when it launched its first Escape Hybrid in the '04 model year. “With the Fusion Hybrid, we did do enough, and it is paying off,” Bill Ford says.

Curtin's surveys show early buyers of plug-ins will be a less price-sensitive group that wants to demonstrate concern for the environment.

For the market to go beyond that depends on whether EVs turn out to be reliable transportation; there's a convenient charging infrastructure; costs decline; and gas prices rise, he says. Another factor will be how much more fuel efficiency auto makers can wring out of more conventional, less costly, powertrain technology.

“We expect a significant niche for EVs,” Curtin says. “But how big is uncertain.”