Projections about the adoption of all-electric cars vary wildly depending on who you talk to. In his State of the Union address, President Barack Obama set a goal of having 1 million electric cars on American roads by 2015. But not everyone is so sanguine about the prospects for the penetration of all-electric cars into the U.S. market.
Barely a month after Obama's speech, a panel at Indiana University threw cold water on that prediction, citing production limitations and uncertain consumer demand as potential obstacles. From the panel's report:
The production intentions of automakers are currently insufficient to meet the 2015 goal, and even the current plans for production volume may not be met. Automakers could ramp up PEV production if consumer demand proves to be larger than expected. However, consumer demand for PEVs is quite uncertain and, barring another global spike in oil prices, may be limited to a minor percentage of new vehicle purchasers (e.g., early technology adopters and relatively affluent urban consumers interested in a "green" commuter car).
J.D. Power piled on this week, releasing a study questioning whether U.S. demand for electric cars would ever take off, noting citing a survey they conducted that found most car buyers care far more about cost considerations than environmental impact. From the survey:
Although the environmental benefits of these vehicles are recognized, they are mentioned far less frequently than saving money on fuel. For example, 75 percent of consumers who indicate they would consider a hybrid electric vehicle cite lower fuel costs as a main benefit. In contrast, only 50 percent cite 'better for the environment' as a main benefit of these vehicles.
J.D. Power's conclusion? At current gas prices, electric cars don't have much of a shot in the U.S. market.
"Alternative powertrains face an array of challenges as they attempt to gain widespread acceptance in the market," said Mike VanNieuwkuyk, executive director of global vehicle research at J.D. Power and Associates. "It is the financial issues that most often resonate with consumers, whether it is the higher price of the vehicle itself, the cost to fuel or charge the vehicle, or the fear of higher maintenance costs. The bottom line is that most consumers want to be green, but not if there is a significant personal cost to them."
I expressed similar reservations in a blog a few months ago on the pros and cons of electric cars. But J.D. Power's dismissal of electric cars' economic viability didn't go unchallenged. The Consumer Federation of America released a blistering critique of J.D. Power's study, arguing that rising gas prices and a growing roster of all-electric models make that 1-million mark a foregone conclusion:
This year, average household expenditures for gasoline are projected to exceed $2,800, which would represent the largest annual expenditure ever. "We're spending as much to drive our cars as we do for all the energy needed to run our homes," said Dr. Mark Cooper, Director of Research, CFA.
"Adopting new technologies and improving the fuel economy of passenger vehicles is the best insurance consumers will ever have against rising gasoline prices," said Jack Gillis, CFA Director of Public Affairs and author of "The Car Book."
I'm not sure whether electric vehicles will hit that 1 million mark by 2015. I have some sympathy for the CFA position, and as someone that lives and works but a few feet above sea level and fears the effects of global warming, I understand the environmental benefits of electric cars. But J.D. Power is right in that most people, by necessity, have to put cost above environmental impact on an individual basis. Most people just can't afford to pay $25,000, $30,000 or even more for a compact or subcompact car that may or may not be able to accomplish the hauling tasks they face on a daily basis because of size and range limitations.
On the other hand, I think the J.D. Power analysis underestimates the psychological impact of gas prices possibly surpassing $5 per gallon this summer. Studies have consistently shown car buyers massively overreact to the price of gasoline, happily ponying up for hybrids and other fuel-efficient vehicles over a relatively minor rise in fuel costs, and immediately trading them in for massive SUVs and sedans when fuel prices drop.
Bankrate readers and others in the frugal community may run the numbers on whether electric cars are worth the money in financial terms, but for a lot of people, buying a car is more of an emotional decision than an analytical one. Faced with gas prices of $5 and climbing, I think a lot more people than they probably make sense for will buy all-electric cars. In my experience, people have a way of affording things when they're in a panic. One thing I feel sure about is if by 2015, there are a million all-electric cars tooling around America's roads, fear over fuel costs rather than environmental concerns will likely be the reason why.
What do you think? Will Americans embrace electric cars enough to meet that 1 million-car goal by 2015? Would you buy one?