WASHINGTON--The auto and battery industries have come up with some impressive electric vehicles. Now they're wondering how to make money on them.
Theand are at the head of a parade of plug-in and hybrid vehicles slated to come out in the next three years. At the Electric Drive Transportation Association (EDTA) conference here, auto executives said they were confident their products can deliver, but not everyone is sure how the demand for them will form.
With few plug-in vehicles actually in the market, the surrounding industry of component and charging infrastructure suppliers need to stay roughly in synch with the automakers in order to profit from this new industry, which will help bring down the costs of plug-ins for consumers.
"We're still in second gear and we want to shift into third gear but we're not sure what will happen when we do," said Tom Goesch, president of the transportation division of Indianapolis-based battery maker Ener1. "We've got to make money. We want to a profitable battery company, not just the one with the biggest plant."
A few years ago, executives from U.S. automakers complained that the domestic supply chain for supplying batteries and other electric vehicle components needed to be developed to bring down costs of vehicles. After an
Now, people here said that the industry is waiting for more vehicles to come to market to satisfy consumer demand and take up the supply of.
"We simply can't get enough to satisfy demand. We'd be doing a lot more if we had more electric vehicles, mostly for business to business [fleet] applications," said Richard Broome, senior vice president of corporate affairs at Hertz. "When we embarked on this rental business, we thought it would be a small, slow-growing retail business for early adopters. All of a sudden, we got this B2B business."
In the short term, fleet operators appear to be the surest buyers of plug-in vehicles, both sedans and medium-duty trucks, because they typically have set driving schedules amenable to charging. Companies benefit from a federal tax credit for electric vehicles, but they are also more likely than consumers to consider the operating costs from electricity as a fuel, which is cheaper than gasoline or diesel.
Chicken and egg
The picture on the infrastructure side is similar, with scheduled to be installed this year at people's homes and businesses. The EV Project, a Department of Energy effort to gather data on consumer charging patterns, expects to have 15,000 charging points installed by the end of this year, including 300 to 400 direct-current fast-charging stations from Ecotality.
But the volume of Chevy Volts and Nissan Leafs, which both started shipping a few months ago, is expected to be in the tens of thousands per year for the next two years. That puts the industry in a "chicken and egg" situation where they are putting a charging infrastructure in anticipation of more electric cars on the road, said a representative from Ecotality.
As people learn more about the benefits of electrically driven cars, sales will climb. But the sales curve will likely be bumpy over time, which is typical for new technologies, said EDTA president Brian Wynne.
"Timing this market isn't easy. With the automakers still trying to figure out what consumers will like and us trying to educate consumers on the technology, you wonder why it's hard to forecast. It's complicated," he said. "Would we be happier if there were more vehicles? Yes, that's always the case. Vehicle manufactures are being very deliberate right now to make sure consumers have a good experience. It's a little bit of an iterative process."
With the peppy acceleration of electric motors, plug-in vehicles are generally fun to drive, which is a good selling point for consumers, Wynne said. Not having to buy gasoline, using cheaper fuel, and helping the environment are other major benefits for consumers.
The upfront price of plug-ins vehicles, where about half the cost is in the batteries, will go down with higher volumes. Many battery makers have developed grid storage businesses, which helps ramp up production.
But to bring the costs down of batteries dramatically will require research and development of new battery technologies, specifically to improve on the energy density and cycle life of current lithium ion batteries, a panel of battery company executives said yesterday. Packing more stored energy in a smaller package improves range and brings down the cost of associated vehicle components.
is also a key for EV adoption. Allowing consumers to check the charge status of cars from a smart phone or the Web and to understand what they are paying for fuel will help consumers get familiar with the technology, auto industry executives said.
In the meantime, automakers and their partners are hoping the first wave of buyers have a good experience and are willing to tell their friends about it.
"The deployment [of plug-ins] is off to a good start but we're still at the early stage of where we're working with the early adopters," said Tony Posawatz, the vehicle line manager for the Chevy Volt. "We have to collectively work on making those adoption rates increase."