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

Edward Niedermeyer
by Edward Niedermeyer

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.

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  • Mazder3 Mazder3 on Jun 15, 2011

    Are there any vehicles left, besides strippo economy cars and heavy duty trucks, that still run hydrolic power steering? I thought most vehicles had EPS. My four year old Mazda has EPS. I must be tired. All I could understand in the title was penetration and be(e)r cases....

  • Type57SC Type57SC on Jun 15, 2011

    So BCG's estimate of the costs dropped by 1/3 to 1/2 for the same time period? That level of accuracy is CARB-worthy and doesn't give me much faith in the prediction.

  • 56m65711446 Well, I had a suburban auto repair shop in those days.
  • Dukeisduke Yikes - reading the recall info from NHTSA, this sounds like the Hyundai/Kia 2.4l Theta II "engine fire" recall, since it involves an engine block or oil pan "breach", so basically, throwing a rod:"Description of the Safety Risk : Engine oil and/or fuel vapor that accumulates near a sufficiently hot surface, below the combustion initiation flame speed, may ignite resulting in an under hood fire, and increasing the risk of injury. Description of the Cause :Isolated engine manufacturing issues have resulted in 2.5L HEV/PHEV engine failures involving engine block or oil pan breach. In the event of an engine block or oil pan breach, the HEV/PHEV system continues to propel the vehicle allowing the customer to continue to drive the vehicle. As the customer continues to drive after a block breach, oil and/or fuel vapor continues to be expelled and accumulates near ignition sources, primarily expected to be the exhaust system. Identification of Any Warning that can Occur :Engine failure is expected to produce loud noises (example: metal-to-metal clank) audible to the vehicle’s occupants. An engine failure will also result in a reduction in engine torque. In Owner Letters mailed to customers, Ford will advise customers to safely park and shut off the engine as promptly as possible upon hearing unexpected engine noises, after experiencing an unexpected torque reduction, or if smoke is observed emanating from the engine compartment."
  • Dukeisduke In an ideal world, cars would be inspected in the way the MoT in the UK does it, or the TÜV in Germany. But realistically, a lot of people can't afford to keep their cars to such a high standard since they need them for work, and widespread public transit isn't a thing here.I would like the inspections to stick around (I've lived in Texas all my life, and annual inspections have always been a thing), but there's so much cheating going on (and more and more people don't bother to get their cars inspected or registration renewed), so without rigorous enforcement (which is basically a cop noticing your windshield sticker is out of date, or pulling you over for an equipment violation), there's no real point anymore.
  • Zipper69 Arriving in Florida from Europe and finding ZERO inspection procedures I envisioned roads crawling with wrecks held together with baling wire, duct tape and prayer.Such proved NOT to be the case, plenty of 20-30 year old cars and trucks around but clearly "unsafe at any speed" vehicles are few and far between.Could this be because the median age here is 95, so a lot of low mileage vehicles keep entering the market as the owners expire?
  • Zipper69 At the heart of GM’s resistance to improving the safety of its fuel systems was a cost benefit analysis done by Edward Ivey which concluded that it was not cost effective for GM to spend more than $2.20 per vehicle to prevent a fire death. When deposed about his cost benefit analysis, Mr. Ivey was asked whether he could identify a more hazardous location for the fuel tank on a GM pickup than outside the frame. Mr. Ivey responded, “Well yes…You could put in on the front bumper.”