Tuesday, August 03, 2010

Electric Vehicle Choices Expand

One of my basic assumptions about our energy future is that most automobiles will eventually be electrified. That's based on extensive scenario work done with my former colleagues at Texaco, Inc. in the late 1990s. Nothing I've seen since then has changed my view on that. However, vehicle electrification is not necessarily synonymous with "electric vehicle" (EV) in its common usage to connote a car powered only by electricity stored in batteries. It's a much broader category, covering all three electrification options now slated to be available to consumers by year-end: hybrids, plug-in hybrids, and "pure" EVs. It also encompasses fuel cell vehicles, though these have yet to move beyond the test-market stage. The characteristics of the three current varieties of electrified vehicles differ in important ways that will affect both their impact on our energy consumption and their success as consumer products.

With hybrids already well established and plug-in and EV models intended for the mass market about to go on sale, this is no longer just a theoretical comparison. Shortly, consumers will be assessing these cars against each other, as well as against more conventional choices, including clean diesels and ordinary gasoline-powered cars, which are becoming more energy-efficient all the time, as noted for the new-model Ford Explorer SUV. Only part of that comparison will hinge on how their drivetrains are energized. In order to achieve mass-market success, they must compete on the whole array of product attributes, since for many people cars are much more than simple transportation.

Start with hybrids, which are sometimes referred to as conventional hybrids, or even "non-plug-in hybrids", to distinguish them from other types. According to the June Hybrid Cars Dashboard at hybridcars.com, 26 hybrid models represented 2.3% of the cars sold in the US in the first half of 2010. That's down from about 2.8% last year. The Prius by itself accounted for half those sales, and it's still the archetypal hybrid for comparison purposes. Like other hybrids of this type it gets all its energy from the gasoline that's put in its tank, and it uses this fuel more efficiently than non-hybrid cars by recovering and recycling part of the energy otherwise lost through braking, and by avoiding idling. (The latter feature is pretty much all that some "mild" or stop/start hybrids do.) The EPA rates the 2010 Prius at 51 mpg city/48 mpg highway. The base model Prius has a sticker price of $22,800, and as far as I can tell it is no longer eligible for any federal purchaser tax credits.

The Chevrolet Volt is based on a different hybrid design, as a plug-in hybrid (PHEV) or more accurately a range-extended electric vehicle (REEV). It also represents a different car philosophy, presumably aimed at a different segment of the market than the Prius. This kind of hybrid gets its primary power from an external electricity source, stored in a battery pack that gives it a range of roughly 40 miles without using gasoline. At that point, and before the battery's charge is fully depleted, the car's onboard generator--a four-cylinder gasoline engine--kicks in to recharge the battery, which continues to send power to the electric motor. Actual fuel economy thus depends on how often and how far one drives with the generator running. I believe the EPA is still grappling with an appropriate methodology to represent this fairly. Of course even when driven only on battery power, it still consumes energy, and in most parts of the US that means that some fossil fuel will be burned somewhere to power it, most likely natural gas.

GM just announced the base sticker price for the Volt, and at $41,000 before tax credits this should make it pretty clear that GM had someone other than Prius buyers in mind. Having driven a pre-production Volt this winter, I'd see it competing more with the Lexus HS250 hybrid, which starts at $34,650, and with non-hybrid entry-level luxury cars like the Acura TSX ($29,310 MSRP but more like $32,410 similarly equipped.) If it lives up to its potential, the Volt could significantly broaden the appeal of hybrids in general, while also saving a lot of gasoline for its owners. Whether it will also save them money is much harder to assess, because the calculation hinges on the specifics of where and how the car would be used.

Nissan's new Leaf is a bolder, if technologically less-complex step than the Volt, because it relies entirely on grid power stored in a 24 kWh battery pack, with no back-up other than a cable and plug--or a tow-truck. At $32,780 before tax credits the stakes are also somewhat less daunting for buyers willing to risk a bit of range anxiety and some adjustments in their lifestyles. I'm not the only one who sees the Leaf aimed squarely at the green consumers who have formed the core of Prius buyers. That's important for several reasons. It reduces the substantial product launch risks for Nissan, which already has thousands of prospective buyers on its waiting list. However, if the Leaf cannibalizes existing hybrid sales, rather than dramatically broadening the electrified vehicle market, then its impact on US oil consumption and the economics behind those tax credits will look a lot less valuable to policy makers.

My skepticism about the Leaf goes a lot farther than Nissan's incredible claims concerning its equivalent miles per gallon. In the basic architecture of the Leaf I see many of the same issues that caused the launch of GM's ground-breaking EV-1 electric car to fail. Attitudes towards oil and the environment have changed significantly in the last decade, and the government is pushing recharging infrastructure much harder and with much more financial support than when the EV-1 was launched. The Leaf also benefits from not being the only plug-in vehicle coming to market, though it requires its plug, whereas the Volt merely works better with one. Fundamentally, however, I just don't know if enough Americans are ready for a car that can only go about 100 miles on a good day, and potentially a lot less than that when conditions aren't ideal. That's particularly important when we recognize that at the price points for both the Leaf and Volt their realistic market isn't first-time buyers in their early twenties for whom basic assumptions about range and refueling times might not be so ingrained. Taking advantage of the entire $7,500 federal tax credit would require an adjusted gross income of at least $55,000 for single taxpayers ($74,000 for married couples), based on last year's tax tables--and probably even higher when taking into consideration itemized deductions, dependents, and other factors. In my view, likely buyers for both cars would be solidly middle-to-upper-middle class.

Rather than making expansive predictions based on guesses about how well these new cars will do with real consumers, I will be watching the start of this grand experiment with great interest. If the Leaf catches on as well as Nissan hopes, then the trickle of other EV launches that are expected to follow could turn into a tidal wave of automotive innovation. If the Volt does better than the Leaf, despite its higher price, that could signal that consumers still value the comfort of knowing they can pull into a gas station and refuel in three minutes--rather than several hours--more than they value their independence from oil. And if both do well without eroding the sales of conventional hybrids, then that would bode well for a much more efficient vehicle fleet in the years ahead, relying on a much wider mix of energy sources than today's.

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