Electric cars still on board

Despite slow sales and cheap petrol, carmakers are still committed to the new technology for the long term

DETROIT • Back in 2008, with petrol prices averaging nearly US$4 a gallon, United States President Barack Obama set a goal of getting one million plug-in electric vehicles on the roads by last year. Since then, his administration has backed billions of dollars in electric vehicle subsidies for consumers and the industry.

Yet today - with petrol prices at around US$2 (S$2.88) a gallon - only about 400,000 electric cars have been sold. Last year, sales fell 6 per cent over the previous year, to about 115,000, despite the industry offering about 30 plug-in models, often at deep discounts.

Despite slow plug-in sales, the industry continues to roll out new models in response to government mandates and its own desire to create brands known for environmental innovation.

At the Detroit Auto Show last week, General Motors Co showed off its new electric Bolt EV; Ford Motor Co unveiled a new plug-in version of its Ford Fusion; and Fiat Chrysler Automobiles NV unveiled its first plug-in hybrid, a version of its new Pacifica minivan. Ford CEO Mark Fields said last week that electric vehicles "are a difficult sell at US$2 a gallon".

Plug-in vehicles accounted for fewer than 1 per cent of the 17.4 million cars and trucks sold last year, according to data from HybridCars.com and Baum & Associates, a Michigan-based market research firm. That does not include sales of more mainstream gas-electric hybrids such as the Toyota Prius. But hybrid sales also fell last year - by 15 per cent, to 384,000 - and now comprise just 2.2 per cent of all vehicle sales.

The main obstacles for electric vehicles are their high cost and short driving range. The Chevy Bolt promises a breakthrough on both fronts, with a 322km range and a price starting at about US$30,000 - after government incentives. Still, that is a steep buy-in compared to increasingly efficient gasoline- powered economy cars that can sell for less than US$20,000.

"If gasoline was US$8 a gallon, consumers would amortise the costs of an electric vehicle pretty quickly," said former GM vice- chairman Bob Lutz, who led the development of the original Chevy Volt, a pioneering plug-in hybrid. "But at US$1.50 a gallon, who is going to be willing to pay an US$8,000 or US$10,000 premium?"

Palo-Alto electric carmaker Tesla Motors has garnered praise for making high-performance, long- range sport sedans - typically selling for about US$100,000 and travelling about 400km between charges. But other carmakers have struggled to produce a more affordable car with a range longer than 160km.

Green car advocates say electric vehicles are a crucial part of the effort to reduce greenhouse gas emissions and will help wean the United States off imported oil. In the long term, they argue, oil prices are almost certain to rise again, making electric cars more viable.

The industry is moving ahead with electric car development for a number of reasons. Many states, led by California, have imposed zero-emission vehicle mandates. California has set an ambitious goal to have 1.5 million such vehicles on its roads by 2025. The state accounts for about 40 per cent of all electric car sales, but only about 120,000 of the 31 million cars on California roads as of a year ago were zero-emission vehicles.

Many carmakers worry that consumers will perceive them as technologically backward if they do not build electric cars - even if they cannot yet sell them in large numbers. The industry is also responding to an influx of state and federal cash and related mandates. The US Energy Department awarded hundreds of millions of dollars in low-cost loans to spur electric vehicle manufacturing by companies such Nissan Motor Co and Tesla.

Mr Carlos Ghosn, CEO of Nissan - which saw sales of its electric Leaf fall by 43 per cent last year - told reporters at the show that carmakers are ramping up electric vehicle offerings because of increasingly strict government mandates. "Everybody came to the conclusion that there's no way we can meet the emission regulation in the future" without selling zero-emission vehicles, he said. "This is not going to be an easy shift."

Volkswagen, still reeling from its diesel emissions crisis, has touted plans to introduce 20 more plug-in vehicles by 2020. GM chairman and CEO Mary Barra said she is convinced that customers want electric vehicles and that petrol prices will not stay low forever. "Long-term electrification is part of the solution," she said at the show.

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 23, 2016, with the headline 'Electric cars still on board'. Print Edition | Subscribe