By on October 5, 2011

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 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.



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16 Comments on “Global EV Demand Stuck At 2%-4%. Unless…...”

  • avatar

    “Electronic Parts costs are unlikely to drop significantly”?

    Really? Lets see the average cost of all transistors sold in 1970 was around $1. Today the average cost of all transistors sold in 2010 is less than $0.0000001. In fact, since the 60’s the cost of a single transistor in a circuit has HALVED every 1.6 years. This is not up for debate this has been documented over and over and is a given used by Electrical Engineers all over the world.

    Electronic parts cost are not only likely to drop significantly… ALL of the evidence is that they have been and likely are to continue to do so at exponential rates.

    While battery tech has not grown as fast as electronic price/performance, it is true that since this chemistry was first commercialized in the early 90’s, the energy density of lithium-ion batteries has more than doubled.

    Berkeley National Laboratory is doing some remarkable stuff these days with Si-nanotube based anodes capable of over 2000Wh/Kg! over 10 times better than current tech…

    I guess the question is, do we want egg heads in California holding these patents or would we rather they end up in China, Japan, or Korea?

    Lets not let narrow minded thinking and a “can’t do attitude” have us replace our dependance on foreign oil for foreign battery technology.

    • 0 avatar

      Those $.0000001 transistors are also quite small; they have been shrinking in proportion to their cost, and are designed for 1-3V and current measured in microamps.

      Go look up the cost of transistors capable of managing a couple of KVA.

      Dramatic decreases in the price of any of the Volt’s unique parts are unlikly, unless there’s some awfully interesting advances in technology of the components or their manufacture.

    • 0 avatar

      And exactly how much has a 160 volt 20 amp power transistor dropped in price over, say, the last 15 years?

      Since we’re talking handling 200 kW power for a Volt’s 149 hp engine, I don’t think that a one-millionth of a penny transistor residing on on a memory chip is going to help much. Real power-handling electronic bits aren’t cheap, nor are they tiny.

  • avatar

    Ha anyone ever thought about the possibilities with standardized easily replaceable batteries for EV’s. If all EV’s were designed in such a way that the whole battery pack could be easily taken out of the car and replaced with a recharged one whenever the other was empty in something like a gas station where they constantly recharge batteries. Then the battery could be on some sort of lease, and you paid a certain price for the new battery and the recharging, helping spread the cost of the batteries, and helping the ‘range anxiety’ , all at once. If these stations were spread evenly enough it would releave strain on the power net in EV-populated neighbourhoods, we could make sure the batteries were recharged in the best way possible etc.

    And more On-topic, the only cost not guaranteed to go down is materials. Even if labor costs go up, that shouldn’t matter much as the industry gets more efficient and automated.

    • 0 avatar

      I’m pretty sure that’s the entire idea behind Project Better Place.

    • 0 avatar

      Replaceable battery packs sounds like an intriguing idea but may not be as practical as it sounds.

      How many battery packs would a single “refueling” station need to maintain and how large a building would you need for storing and recharging them? How do you rotate your stock to ensure that the customer is always getting a fully charged pack? How are you going to keep all these batteries cool while you charge them and how much will it cost you to do so? Who is going to change out the batter packs (they’re quite heavy), the high school drop out selling cigarettes at the convenience store?

      Sure, you can resolve all these issues by throwing enough money at them but when you pass those costs on to the consumer will EVs still be cheaper to operate?

      Just asking.

      • 0 avatar

        The “who” in who will replace the heavy battery is a “what”. A robot or if you prefer machine will do the replacing assembly line style.

        I’d still rather keep my own battery as I know how many miles I’ve put on it and I know I’ll charge it slower and avoid deep discharges. The only way I’ll let you swap my perfectly good battery for a marginal one that is charged is if you pay me the difference when you take my good battery the first time.

        I’m not going to subsidize other bad drivers by putting my good battery into a common pool without being compensated for my loss.

        Oh, and if you say Better Place or whatever pool will replace failing batteries and I won’t have to worry about getting stuck with a marginal battery tell me again where the nearest DeLorean dealership is, or Saturn, or even tell me how confident you are about the longevity of Chrysler dealerships?

      • 0 avatar

        Changing the battery, if designed properly, should be no problem for your convenience store kid – open a panel, turn some latches, slide out the old one, reverse with the new battery. How hard is it to change batteries on a power tool? He’s probably safer doing this than refilling your propane tank.

        All the other aspects of the swap station, however, make me question the practicality as you do.

      • 0 avatar

        dhanson, its not “your” battery, it belongs to PBP and they will swap it as often as you wish.. all you have to do is to visit a quick change station. PBP sells you “miles” per month, just like you buy “minutes” for your phone, they promise a lower cost than an equivalent diesel car.

        PBP will use robotized swap stations, takes like 3 minutes.. they have demonstrated several stations and youtube is full of videos. Each station will hold about 10-15 batteries and some stations may stock different batteries since Renault is offering a cargo van, a sedan, and a tiny city car using the same system. PBP will install a charger at your home and they expect the majority of the charging will be done at home.. battery swaps will be rare. PBP pays for the electricity used at your home charger.

      • 0 avatar

        I expect that if you opt out of the PBP program you will be able to buy your own battery.. hopefully PBP will sell used batteries pretty cheap if you dont need the best. If you opt out then you wont be able to use the quick change stations and you will be stuck with home charging.

        Nice thing about the program is that your 10 year old car will benefit from the latest 300 mile wonder battery made from noodles :)

  • avatar

    All valid points, each with its own merits. However I believe that EV demand will remain low because there currently exist excellent alternatives to EVs in the form of ICE cars (like the Mazda2, or the Hyundai Accent, the Honda Fit and even the Chevrolet Cruze).

    When the Prius of a friend needed to be in the body shop after someone had sideswiped the parked Prius, he got a Mazda2 automatic for ten days, courtesy of the other guy’s insurance company (GEICO).

    The Mazda2 and its class-competition are excellent vehicles at a very reasonable price when compared to the purchase price of a Prius or a Volt.

    The relatively low cost of these cars and the ready availability of oil and gasoline coupled with the existing infrastructure support that exists for ICE vehicles, completely blows away the competitiveness of EVs.

    EVs and Hybrids will remain niche vehicles for the foreseeable future and IMO 2%-4% is pretty darn good.

  • avatar

    The problem with extrapolating trends is that you don’t know what will come out of left field.

    For example, Germany is now the world leader in PV electrical production, and a leading producer of solar panels. Munich has yearly weather similar to Grand Rapids, MI. (GR gets a bit warmer in the summer than Munich)

    Home installations are subsidized by the govt., basically by requiring the utilities to buy the power generated at above market rates. It’s questionable whether Americans could put aside their “less govt.” attitudes to jump start a PV industry, but you never know. We seem quite willing, at the state level, to give all sorts of incentives to business.

    My point isn’t to say whether or not we should ramp up our PV industry, my point is that 30 years ago no one would have guessed Germany would be the world leader in installed systems. IOWs we don’t know what the future will be like, and extrapolating current trends may not tell us the true story.

    We don’t know how energy will be produced in the future, or what it’s cost will be. We cannot easily predict how available recharging stations will be, or how those stations will operate. Therefore we cannot really predict what % of drivers would actually purchase an EV in the future.

    • 0 avatar

      WRT to the nascent PV industry in Germany: Along with Munich, Grand Rapids and SWMI have cloudy days frequently all year long. But, just like in Bavaria, there are people who are putting up PV panels and harvesting the sun. There’s a row of them on I-96 west in Ingham or Clinton county (I think), just west of Lansing. I don’t know if this particular installation has been tax ‘incentivized’ but it’s nice to see someone taking the lead.

  • avatar

    The usual hoped-for factor to drive EV sales – fuel prices – is only a temporary sales booster.

    When US gas prices were $2.00, many people would have expected EV sales to explode if prices hit $4.00. Didn’t happen. The reason is long-term price/demand inelasticity in the market – just look at truck sales for evidence.

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