Hybrid and Plug-In Electric Vehicle Report
By Roger Rickey, Bishop & Associates Inc.

Despite the automotive industry’s expenditure of billions of dollars in research and vehicle product development, as well as government’s subsidies for hybrid and plug-in electric vehicle sales, energy-efficient vehicles remain a small percent of total vehicle sales.

Honda introduced the first mass-produced hybrid electric vehicles in 1999. Hybrid vehicles achieved approximately 0.2% of total vehicle sales by 2002, and then grew to a zenith of 2.7% in 2009. Even though the number of new hybrid models available in the U.S. has increased significantly, from 17 to 30 in 2009 and 2011, respectively,  sales of hybrid/plug-in electric vehicle have declined to a current 2011 projection of 2.1%. 

Hybrid/Plug-In Electric Vehicle Production as a Percent of Total Vehicle Sales

Of the 8.4 million U.S. vehicles sold calendar year 2011 to date, only 173,916 were hybrids; and the highly touted Chevy Volt and Nissan Leaf plug-in vehicles have achieved paltry sales of 9,428 units. 2011 hybrid sales have decreased 12% when compared to the first eight months in 2010, and the plug-in market has failed to reach 10,000 sales, which is well behind what many observers expected. Nissan has sold approximately 15,000 Leafs globally, since it was introduced last year; 7,000 were delivered to the U.S. This is far below Nissan’s Oppama, Japan, plant’s capacity of 50,000 units. Chevrolet Volt’s August production volumes were almost 2,400 vehicles. There are many more choices, but far fewer buyers.

By comparison, global August 2011 year-to-date sales for light vehicles containing conventional internal combustion engines were up by 7.5%.

California, with 24.3% of all U.S. hybrid sales registered, remains the primary market for hybrid cars. More than half of these sales were in Los Angeles. Washington, D.C. maintains the second-largest market, with 6.6% of all U.S. hybrid car sales.

U.S. hybrid and plug-in electric vehicles sales are expected to reach 1.5 million units by 2015, and grow to over 10 million electric vehicles by 2020. Unfortunately, over 100 global competitors will be competing for the U.S. hybrid and plug-in electric market by the end of 2012.

Buyer’s concerns for purchasing hybrid and plug-in electric vehicles include the higher purchase price, low driving distance between battery charges, lack of available power recharging infrastructure, and potential vehicle resale value. The purchase price for some electric vehicle models does not include ownership of the battery pack.

Nissan’s Leaf hatchback costs $35,200 before the $7,500 tax credit, and contains a lithium-ion battery pack that goes about 70 miles per charge. GM’s Volt, with a starting price of $39,145, goes about 35 miles per charge. The Prius model that will go on sale early next year will have a base price of $32,000, and will travel 15 miles on electricity before switching to its internal combustion engine, and then averaging approximately 49 mpg.

Several studies have indicated that U.S. government incentives to create a market for hybrid and plug-in electric vehicles are not a cost-effective way to reduce foreign oil consumption and tailpipe emissions. Higher oil prices, significant improvements in battery technology, and the availability of cost-effective battery recharging infrastructure will be required to offset the expense, weight, and manufacturing costs of hybrid/electric vehicles (EV).

Several companies are joining together to determine the impact that millions of EVs would have on electric-power distribution grids. Nissan is partnering with General Electric to explore whether EVs could provide residential backup power during blackouts, or to permit the electric vehicle to provide a source of energy for the home. Chrysler launched a similar investigation earlier this year using plug-in hybrid Ram pickups.

Even with the current disadvantages, hybrid/electric vehicles are expected to achieve significant growth because of increased governmental regulation requirements. In 2016, the U.S. Corporate Average Fuel Economy (CAFE) standard will be 35.5 mpg, and will reach 54.5 mpg in 2025. Europe, which has higher fuel prices and less oil subsidies, is forecast to have more electric cars than the U.S by 2020.

However, the story is different across the Pacific. China is predicted to become the world’s number one hybrid/electric vehicle producer by offering government subsidies totaling up to $19,300 per vehicle. China’s SAIC Group and GM have signed a joint venture agreement to develop electric vehicles using GM’s Chevy Volt technology. German automaker Daimler AG and China’s BYD Co. Ltd. will launch a new brand of electric cars for the Chinese market in 2013. China’s new economic five-year plan calls for 100 million electric charging stations to be in place by 2020.

Renault, in conjunction with Better Place, is developing battery exchange stations where owners of the new Renault Fluence can exchange the battery in less than five minutes.

The U.S. Energy Department will devote more of its $3 billion research budget to help install more electric vehicles on the road by shifting research dollars from clean electricity and biofuels to electric vehicles and modernization of the power grid.

To circumvent issues with current battery technologies, GE is developing sodium-based batteries, in concert with the Nissan Leaf’s lithium-ion batteries. Sodium-based batteries store a massive amount of energy but cannot be used as a sole power source because they freeze at lower temperatures.

In addition, alternative research is also being conducted to power vehicles by heavy metal Thorium, a slightly radioactive rare-earth element that is significantly more abundant than lithium. The downside is that Thorium is used as a nuclear power source.

The long-term picture for hybrid/electric vehicles indicates significant growth; however, the short- and intermediate-term picture for both profits and tooling amortization for connector manufacturers, who developed connectors specifically for these vehicles, appears to be very weak, due to the slow acceleration of this market.

Roger E. Rickey
Market Director, Automotive and Non-Auto Transportation, Bishop & Associates Inc.
Roger E. Rickey has more than 30 years experience in the automotive and electronics industries, including four years experience as plant manager with Chrysler Huntsville Electronics Division, a leading electronics manufacturer. Most recently, as president of R.E. Rickey & Associates Inc., he worked as an international management consultant with several Fortune 500 clients, including major automotive OEMs. Rickey began his career in engineering with Ford Motor Co. and was chief engineer and director of engineering with United Technologies Automotive Products Division. He holds degrees from Eastern Michigan University and Southern Illinois University, and served as an officer with the U.S. Army in Vietnam. He holds two Bronze Star Medals and an Army Commendation Medal.