Finally, after years of starts and stops, various types of electric vehicles are out in the market and have won early adopters. To convert this “trial” niche audience into a broader mass market, though, a number of other factors have to come into play in the next few years.
A big issue keeping would-be buyers on the sidelines is price. As I mentioned last week, EV prices range from $30,000 to $96,000. Those numbers are way out of line for consumers, who think the EV value-price tradeoff should be somewhere around $23,750, as John Gartner, research director at Pike Research, mentioned during a webinar.
Some of this sentiment was reflected in a recent Pike survey on consumer interest in EVs, particularly plug-in electric vehicles. The percentage of respondents saying they would be “extremely” or “very” interested in purchasing a PEV slipped from 48 percent in 2009 to 40 percent in 2011. Price is one of the major reasons for the decline. Gartner explained in a press release:
Price is the most significant barrier to consumer interest in electric vehicles. About two-thirds of our survey respondents who stated they would not be interested in purchasing a PEV said that they felt such a vehicle would be too expensive. Others said that they would want to wait a few years until the technology is more proven, and almost half said that a PEV would not have sufficient driving range for their needs. These are all key issues, both real and perceived, that automakers will need to address if PEVs are to move successfully out of the early adopter phase.
We know where some of this pricing conversation leads, right? Most definitely, it ties into the cost of the lithium-ion battery, a significant part of the EV's bill of materials.
Pike expects the worldwide Li-ion battery market to boom from $2 billion in 2011 to more than $14.6 billion by 2017. However, Gartner says a significant drop in battery costs is essential if the market is to undergo this kind of increase.
Battery prices — and thus car prices — are not likely to budge much this year, even though battery production is likely to outpace EV production. Nevertheless, “as manufacturing efficiencies improve and access to lithium expands, the cost of Li-ion batteries will fall by more than half by the end of the forecast period (2017),” according to Pike. And Gartner said during the webinar that consumers should start seeing the impact on list prices in 2013.
Despite uncertainty about where prices will go, manufacturers and suppliers aren't shying away from EVs' long-term potential. In fact, Gartner said many manufacturers are “beyond the point of no return” in terms of investment, because they view EVs as “critical to their future growth and development.”
You don't have to look far to see that's true. Fisker Karma showed off one of its snazzy electric cars at last week's Consumer Electronics Show in Las Vegas. This week, the Wall Street Journal reported that ABB Ltd. expects “exponential growth in demand for fast-charging technology for battery-powered vehicles in the next three years.”
If nothing else, it will be interesting to see whether these cars deliver on the promises being made.