Global EV Demand Stuck At 2%-4%. Unless…

Of all the persistent questions faced by the auto industry in these tumultuous times, perhaps the most pressing is: how many consumers would actually consider buying an electric car? There’s no single answer to this question, but we do have one new perspective on it today, courtesy of a study by Deloitte [ PDF] which analyzed potential EV demand around the world through some 13,000 survey respondents. The major takeaway?

The reality is that when consumers actual expectations for range, charge time, and purchase price (in every country around the world included in this study) are compared to the actual market offerings available today, no more than 2 to 4 percent of the population in any country would have their expectations met today based on a data analysis of all 13,000 individual responses to the survey.

That assessment is well in line with other studies we’ve seen, most of which estimate global EV demand at somewhere between one and five percent of the market. But because potential EV demand has a lot of moving parts, from government regulations to the state of EV technology, there’s more to the study than that conclusion alone…

One of the most unexpected lessons from the Deloitte study: you can’t rely on self-identified “early adopters” to drive the market by acting differently than “typical” consumers.

Regardless of whether they thought of themselves as potential first movers, might be willing to consider an electric vehicle, or even those that are not likely to consider an electric vehicle, their expectations for range, charge time and purchase price are extremely similar – and consistently and significantly different from what automobile manufacturers can offer today

Though the appeal of the EV’s environmental benefits vary globally, that appeal never outweighs three factors: range, price and charge time. In the conclusion, the study authors note that their work

suggests that while common consumer expectations have helped the automotive industry globalize, it also means that when it comes to alternative power train technology such as EVs, the globalized consumer will be less willing to deviate from their wellestablished expectations. What’s more, with the rapid development of new markets for automobiles in Asia and the rest of the developing world, millions of new consumers are entering the market with the same set of well-established expectations. This helps explain why the survey found that consumer expectations regarding electric vehicles were so out of line with what can be offered by manufacturers today.

The counterpoint to this argument was laid out by Shai Agassi of Project Better Place, in a recent speech given at the APEC 2011 conference, in which he argued that this influx of new drivers would place enough strain on global oil production that it makes an EV boom not only necessary but inevitable. But then, the Deloitte study doesn’t look into the kinds of services offered by Better Place, which include both battery-swapping (thus eliminating “range anxiety,” as well as an cost benefit that stems from its “end-to-end” business model, which decouples battery costs from the upfront expense of an EV. The Deloitte study implicitly leaves room for Agassi’s alternate scenario when it notes

The current collection of hybrids is better equipped to meld consumer expectations with environmental consciousness and government calls for cleaner forms of personal transportation. While manufactured costs of these dual powertrain hybrids will continue to be a significant challenge, it is expected hybrids will be much more readily adopted by consumers than pure EVs. Ultimately which technology enjoys the most success will depend on ever changing consumer expectations and preferences coupled with effective government policies… Government policy is more so than any other aspect that will likely determine the adoption rate of EVs over the next decade and beyond.

But there’s even more evidence that a Better Place-style infrastructure solution is what the EV market needs, as the study notes

It is clear from the survey that consumers’ expectations for EVs are much higher than anything manufacturers can deliver today. But consumers are also notorious for being fickle and changing their mind; and doing so fairly quickly. Electric utility infrastructure can play a significant role in electric vehicle adoption. Plentiful electric power generated through stable, dependable, clean and cost-efficient sources (and delivered over smart grids with acceptable economics for consumers), coupled with easily accessible and economical charge stations can make consumer concerns about range and charge time dramatically less – even if EV technology does not demonstrate any significant improvements over the next decade. Higher oil prices (anywhere from a 40 to 70 percent increase) would also likely lessen the concerns consumers have today about electric vehicle range, charge time, and price.

This is Agassi’s scenario: higher oil prices coupled with a smart infrastructure supported by government policies. After all, it seems unlikely that the “wait for a technological fix” scenario will deliver the desired improvements in range, cost, and charge time, as the Deloitte study notes that expecting huge declines in battery prices (which affect all of these factors) is not realistic.

But to break out of their small test markets in Israel and Denmark, Better Place needs partners to emerge from the global automakers (currently only Renault is partnered with BP). And, argues Deloitte, the automakers hold the keys to the EV’s success.

Though the tipping points may vary slightly from country to country, the study found that across the globe consumers will be less likely to consider purchasing an electric vehicle as the fuel efficiency of ICEs improves. As a result automotive manufacturers will need to carefully plan their investments to maximize sales of fuel efficient technologies consumers are willing to purchase.

Another way of putting this: with plenty of efficiency improvements to be found in the Internal Combustion Engine, automakers will continue to emphasize those technologies, in effect relegating the EV to the niche role that this study sees for it. An “end-to-end” EV servicing/infrastructure firm like Better Place might be able to significantly broaden the global appeal of EVs, but why take on a partner when you can keep trickling out ICE technology that keeps EVs from being a necessity? Agassi acknowledges this challenge by arguing that he’s asking automakers to take a gamble not unlike that made by Jeff Bezos and Amazon.com with its Kindle e-reader. Amazon had to kill off its traditional book selling business in order to take its book (and content more generally) business to a new level. And, as this study shows, the car business has plenty of incentive to not take that leap… yet. And until automakers actually try to make EVs capable of overcoming the range, cost and charge-time concerns that consumers globally share, we can expect assessments of global EV demand to continue to be as pessimistic as this one.