Plotting The Electrified Future: BCG Downgrades EV Penetration, Pacific Crest Offers Bear And Bull Cases

Reuters reports that Boston Consulting Group has revised its projections for EV market penetration downwards, concluding that plug-in electric vehicles (including EREV and PHEV models) will make up no more than five percent of the US market by 2020. And ironically, the recent increases in gas prices have actually driven the estimate downwards, as Xavier Mosquet, the global head of the group’s autos practice, tells The WSJ [sub]

Electric cars will undoubtedly play an increasingly large role in many countries’ plans in the decades ahead as energy independence and environmental concerns intensify, but they will gain only modest ground to 2020. Gas- and diesel-powered vehicles are improving faster than expected and will continue to dominate the global landscape.

We don’t have a copy of the report, but Reuters helps explain the situation by breaking down the costs:

Direct injection, turbo-charging and electric power steering are among the improvements in combustion engine that BCG expects to be mainstream in passenger cars worldwide.

Those changes can cut emissions of carbon dioxide, a greenhouse gas that contributes to global warming, by as much as 40 percent, BCG said. For every percentage point cut, consumers will have to pay between $50 and $60 more for the car — about half the group’s estimate of $100 three years ago.

“It’s only $2,000 to get 40 percent improvement with ICE technology,” Mosquet said. In 2009, “what we saw was the $3,000-$4,000 range, which obviously makes it more difficult for consumers. It’s achievable and it’s cheaper than expected.”

And, adds Mosquet, the $2,000 in additional ICE efficiency-boosting costs should be good for the next ten years or so of government emissions standards… only after 2020 or so will EVs become critical to complying with government standards (providing California is talked out of big ZEV mandate increases).

The BCG study’s key conclusion auto makers can hit most of the future fuel-efficiency and emissions-reduction targets that governments are imposing on the industry in the next 10 years, and do it by introducing or improving known automotive technologies. “I’m not saying it’s easy, but it’s feasible,” Mr. Mosquet said.

BCG estimated fuel-saving improvements such as electronic power-steering systems, light-weight materials and more efficient transmissions would add about $2,000 to the price of vehicles.

The need for car makers to pursue electric vehicles in the near-term is “minimal,” the study said. However, auto maker must continue to develop electric vehicles since they will “undoubtedly” play a major role in meeting 2035 to 2050 emissions, it added.

This revision puts BCG right in the middle of what appears to be an emerging consensus on EV and hybrid penetration, which puts US-market plug-in penetration at between 2.5% and a little over 5% by 2020. My favorite reference point for mapping out the hybrid and EV future: the chart at the top of this post, which maps out bear, bull and baseline cases for different electrified drivetrain concepts (courtesy: Pacific Crest). In addition to the points BCG makes about improving ICE technology, the Pacific Crest analysis shows how important stop-start (aka microhybrid) technology will become, which will also keep ICE technology efficient enough to prevent plug-ins from taking over.