Electric cars are less than 1% of the market. Yet automakers are pushing them big time. Why?
Reporting from San Francisco — Admit it: You’ve thought about buying an electric car. If but for a fleeting moment, you considered the possibilities: Zero tailpipe emissions. No more oil changes, no more tune-ups. Cheap fuel. And it seems pretty cool.
Then, if you’re like most people, you set the idea aside.
That disconnect is apparent in the U.S., where all-electric vehicles account for less than 1% of new car sales. With gasoline prices low and stable, historically gas-guzzling pickup trucks, sport utility vehicles and crossovers are what Americans want to buy.
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Yet at the Los Angeles Auto Show, which opens to the public Friday, Porsche, Mitsubishi, Jaguar and Mini will unveil their new all-electric models or electric concept cars.
Cadillac will show off its CT6 plug-in, while Chevy will be pumping the Bolt, an all-electric sedan with a 238-mile range that starts shipping to dealers within weeks.
And electric car leader Tesla — a first-time auto show attendee — will hold a party outdoors, where its all-electric Model X will be hooked to an Airstream trailer to conjure the long-distance travel possibilities provided by Tesla’s Supercharger battery network.
So, on one hand, the market share for electric cars is minuscule. On the other, big automakers are aggressively pushing their electric cars. What gives?
“There’s the market of what the market wants, and there’s the market of what the federal government wants,” said auto industry veteran Bob Lutz, who championed the creation of the Chevy Volt extended-range hybrid while vice chairman at General Motors. “And the two markets are miles apart.”
It’s up to the automakers to pull them together. They’ll have to. Stricter government mandates on fuel economy are fast approaching. Federal regulations call for average fuel consumption for each maker’s fleets to hit 42 miles per gallon in 2020 and 54.2 by 2025.
To meet them, “Everybody is going to have to do major electrification,” Lutz said. Even if they lose money doing it.
It’s unclear what effect President-elect Donald Trump will have on environmental regulations. Lutz predicts big automakers would resist major changes on efficiency standards at this point because of the capital investments already made in meeting them. The regulations are a bit flexible depending on market demand, however, and could get looser still.
At his news conference Monday, President Obama said automakers “have seen record sales and are overachieving on the fuel efficiency standards that we set.” He also praised California for its “clean energy agenda.”
Still, the high cost of batteries means it still costs more to build an electric car than one with a traditional combustion engine. That’s a big reason the electric car market share is so low: Few consumers are willing to pay a premium, even when $7,500 in federal subsidies and other state incentives are taken into account.
To meet the mandates, carmakers calibrate how many electrics and plug-in hybrids they must sell, and set prices accordingly. A trickle of e-cars is becoming a stream as the deadline draws near.
The growing availability of electric vehicles piqued the interest of Michael Webb, a lighting architect who lives in Berkeley. Still, after test-driving a number of EVs, he hasn’t found anything that has persuaded him to ditch his boxy Toyota Scion xB.
“Electric cars are the cars of the future,” he said. He likes Tesla, but it’s out of his price range; the other choices currently on the market “are not acceptable in size or range.”
For carmakers hoping to profit from electric cars, there are signs of hope.
Battery costs are plummeting, even as power and range increase. Batteries are the most expensive part of an electric car, accounting typically for about a third of the cost.
Those costs, though, have dropped 65% over the last five years and are still headed down, according to Bloomberg New Energy Finance. Partly that’s due to greater volume and scale, but advances are being made in battery chemistry too.
More efficiency means more power, and, most important, more range. Until recently, most electric cars could travel barely more than 100 miles on a single charge. New models such as the Chevy Bolt and the upcoming Tesla Model 3 will travel 200 miles or more between charges.
That hundred more miles could make a big difference in reducing so-called range anxiety. A survey of 837 Californians conducted in August by Vrge Analytics found that 43% would consider buying or leasing an electric vehicle by 2025. If those vehicles were priced similar to combustion-engine cars and offered a range of 200 or more miles per charge, the number jumped to nearly two-thirds.
“It’s the 200-miles border which makes electric vehicles acceptable to the majority of car buyers,” said Roland Irle, co-founder of consulting firm EV Volumes, based in Sweden.
According to forecasts from Ark Invest, a Camry-quality 200-mile range electric car will cost less than a gasoline Camry by 2022.
Before Tesla, automobile executives complained that they were being forced to manufacture cars that people didn’t want to buy. Dealers, too, were reluctant to sell them because electric cars require less maintenance.
But the Tesla Model S is now the world’s bestselling luxury car model, beating out models from Mercedes, BMW, Audi and others and their gas and diesel powertrains. At least 373,000 customers have put down $1,000 deposits on the Model 3.
“I wouldn’t underestimate the influence Tesla has had on pushing the other manufacturers along,” said Colin McKerracher, head of advanced transportation research for Bloomberg New Energy Finance.
Nor would he underestimate China. Now the world’s largest motor vehicle market, China is also the world’s largest and fastest growing market for electric cars. Government incentives and mandates have created thriving demand as the country’s leaders seek to clear the notoriously foul air that hovers over its major cities.
About 134,000 all electric and plug-in hybrid cars were sold in China in the first half of this year, more than twice as many as in the U.S., and at a far faster growth rate.
Automakers from Europe, Japan, the U.S. and Korea want in to the China market, and also need to be prepared if China manages to export cheap electric cars of sufficient quality.
In the meantime, there’s talk in some countries of banning combustion engines in new cars altogether, which would give new-fuel vehicles a huge boost.
India, which made news recently as the citizens of Delhi choked on polluted air, is talking about banning new combustion-driven cars within a decade.
So are Norway, the Netherlands, Austria and Germany, motivated by concerns over global warming, according to Irle. “Nobody has done it yet, but the proposals are being taken seriously,” he said.
And then there’s Volkswagen.
The emissions cheating scandal not only will cost the company billions as it deals with a criminal investigation, it also blew up plans at VW and other German automakers to rely heavily on supposedly cleaner diesel engines to help meet clean-air and fuel-efficiency requirements.
As the diesel drama continues, Volkswagen is suddenly a great champion of electrified cars, pledging that a quarter of its sales will consist of electrics and plug-in hybrids by 2025.
“That’s the world’s biggest carmaker, and 2025 is not very far away for the auto industry,” McKerracher said.
Twitter: @russ1mitchell
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UPDATES:
4:40 p.m.: This article was updated with comments from President Obama’s news conference.
This article was originally published at 8 a.m.
