June 1, 2017
By Chris Malott
Electric vehicles of any kind have faced an uphill battle for acceptance for some time. The Honda Insight debuted in 1999 as the first, true mass market hybrid in the States and was discontinued in 2006. It re-debuted in 2008, and was discontinued again in 2014. Why? Lack of interest and poor sales. Most consumers are only familiar with one hybrid vehicle, the Prius. Kudos, Toyota.
Even as more hybrid models came to market, customers still largely uttered a collective, “Meh.” "Why wouldn’t you want to get better fuel economy and save money?” consumers were asked. The answer was economics. Who wants to spend thousands more up front to save money at the pump? It would take approximately seven years of ownership to make the car purchase economically viable.
In 2011, 48% of vehicle shoppers told J.D. Power that they would not consider a hybrid vehicle, with most indicating that this was due to price. But hybrid prices have come down in recent years as battery prices have lowered, so interest should be higher today, right? Nope. The percentage has gone up. Today, 73% of respondents indicate they would not consider a hybrid.
Price premiums for these models still exist, and they are daunting. Sure, hybrids are “green” and contribute to reducing our dependence on foreign oil, but consumers believe the “green” in their wallets is more important.
Let’s not ignore the fact that the internal combustion engine is more efficient than ever. One could spend $18,500 for a base Toyota Corolla which gets 31 miles per gallon (mpg) or about $25,000 to step into a base Toyota Prius with 52 mpg. It’s hard for many to justify that price differential. At 12,000 miles a year and $3 a gallon, it would take more than 12 years to recoup that difference.
How about full battery electric vehicles? In 2011, 26% of shoppers said they would consider an electric vehicle. At the time, the only electric vehicle in town was the Nissan Leaf, which had a range of about 100 miles before it needed to plug in. Why didn’t people consider an EV then? You guessed it, price.
Now consumers have so many electric vehicle options, the most noticeable of which is Tesla. Nearly every major manufacturer offers a more affordable option, so interest is higher now, right? Not quite. Just 13% of shoppers consider an electric vehicle.
What’s the deal? Is it still price? Actually, that is among the least-mentioned reasons. Today it’s the dreaded “range anxiety” alongside a perceived lack of charging stations.
The average consumer does not see any changes in the charging infrastructure. That’s meant literally. They don’t see the infrastructure. More than half (60%) of respondents claim they never notice charging stations, either in their area or when they are traveling. Just 10% notice them once a day or more. Even in California, availability of charge points is the top concern around electric vehicle ownership. California, the heartland of “green”, and consumers still don’t see the stations. For context, the U.S. Department of Energy estimates 15,993 public electric charging stations in the entire U.S., and nearly 25% of these (3,805) are in California. But few drivers seem to notice them.
So clearly something is amiss. What happened to those grandiose plans? Is the infrastructure here and we just can’t see it? To combat range anxiety from a different angle, nearly two-thirds of buyers claim that they would require their electric vehicle to have a range of at least 300 miles before needing a charge (many requiring much more than that) in order to consider the purchase. For those of us keeping score, the market currently offers only four full electric vehicles that claim a range of more than 100 miles, three more than 200, and one more than 300. So that will be a collective “thanks, but no thanks” so far.
What about Tesla? Their vehicles are sleek and sexy, and the driving range of the brand’s models seems to be growing. The hope is the new Model 3 will be a game changer when it comes out later this year as an affordable, effective electric vehicle. Shouldn’t innovation at that level create greater confidence for range-anxiety stricken buyers? Maybe, but 35% indicate that Tesla has not at all changed their perception of electric vehicle capabilities. In fact, the brand can be a bit polarizing. When typing “Tesla” into a Google search bar, the oh-so-helpful predictions include such listings as “Tesla Model 3,” “Tesla Fire” and “Tesla Workplace Conditions.” It can derail one’s research at work, that’s for sure.
So with all this seeming lack of interest, why do manufacturers even build these things? The simple answer is they have to. New regulations were enacted in 2011 requiring the auto industry to substantially increase fuel economy by model year 2025. Car companies need their fuel economy numbers to go up. Even though electric cars are not selling, the fact that they are for sale enables manufacturers to maintain a larger average fuel economy across their model lineup, thereby meeting government regulations.
Sergio Marchionne, head of Fiat Chrysler Automobiles, wasn’t kidding when he famously said of the electrified Fiat 500e, "I hope you don't buy it because every time I sell one, it costs me $14,000.” That’s rough economics.
The potential now exists for the federal government to roll back the fuel economy numbers. It might ease the pressure manufacturers feel right now, but what does it mean for the long term? Will it slow technology growth and the development of a national charging station infrastructure? As countries like China amp up their development and production, will U.S. development fall behind?
Through it all, the focus still needs to be on building a vehicle that customers want and are willing to pay for. If manufacturers lose sight of that, they’re just wasting their energy.
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Chris Malott is manager of global automotive consulting at J.D. Power. He lives close enough to work that range anxiety is not a concern, but would prefer that someone bought an EV for him…for research purposes only, of course.
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