Hybrids the early winners in electric-car race

Electrification is coming, but the cost of batteries means that hybrids--rather than all-electrics or range-extended electrics--will be the dominant tech, experts say.

Electric vehicles are one of the top stories coming from the auto show in Detroit this week. But despite the introduction of even more electric concept cars , familiar old hybrids are projected to be the dominant form of electric vehicles.

Boston Consulting Group sought to inject some reality into the electric-car buzz even before the doors opened at the North American International Auto Show with the release of a study that concluded battery cost will keep pure EVs from taking over any time soon.

Specifically, auto makers need to lower the cost of batteries to $250 per kilowatt hour, which would mean cutting the current cost by far more than half. "Given the current technology options, we see substantial challenges to achieving this goal by 2020," wrote Xavier Mosquet of the Boston Consulting Group.

That's not to say that consumers won't like their plug-in electric cars, which can run entirely off of batteries or use a gasoline engine in combination with electric motors. A number of cars, in fact, already have a sizable fan base before even being delivered to customers, including the Tesla Model S, 2011 Nissan Leaf, 2011 Chevy Volt, the Think City , and the 2012 plug-in Toyota Prius.

But at this point, this first wave of electric vehicles will be aimed at early adopters who are eager to dramatically reduce gasoline use or want a car with prominent eco-credentials. Other likely buyers are fleet owners who have predictable driving patterns and tend to purchase based on the total cost of ownership, rather than only upfront cost.

Beyond early adopters and fleet owners, the demand for mass-produced electric vehicles is still anyone's guess. "The pragmatic majority are the folks who have to be convinced that the technology is real, that charging stations are available and it's easy to do," Mark Perry, director of product planning for Nissan Americas told Automotive News.

Government policies to protect the environment or drive investment in new technologies play a significant role in making plug-in vehicles more attractive. A person who buys a car with the battery size of the Chevy Volt, for example, can get a $7,500 tax credit.

Others argue that scaling up the car battery industry, rather than a technology breakthrough, is what's needed to achieve the targeted 50 percent cost reduction. "The majority of these battery costs can be achieved simply through optimizing design and operations across areas including production/manufacturing, supply chain, and product development," wrote Oliver Hazimeh, director of the global e-Mobility Practice at consulting company PRTM.

Meanwhile, technology improvements to gasoline engines and hybrids will continue to deliver steady improvements to fuel efficiency in the coming years, said Gerhard Schmidt, the chief technology officer of Ford research and advanced engineering.

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Ford said this week it's investing $450 million to boost its electric-vehicle manufacturing, but it has a multi-pronged strategy that includes more hybrids and further availability of its EcoBoost technology for making gasoline engines more fuel efficient.

Toyota, too, is expanding its conventional hybrids, with a goal of having a hybrid option for all its models by 2020, company executives told The Wall Street Journal.

Focusing on hybrids because of cost dovetails with many analysts market projections. Out of the 14 million electric vehicles forecast to be sold globally in 2020, Boston Consulting Group expects 11 million will be conventional hybrids, or 73 percent. The rest will be split between pure-electric vehicles or range-extended electric vehicles like the Chevy Volt or Fisker Karma.

 

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