Sunday, May 29, 2011

Factors Determining Adoption Rate of EVs

There are three key factors that will influence demand for EVs. Price, the cost of gas and range will determine the rate at which EVs are adopted. EVs with price points that are comparable to combustion engine vehicles will sell better than at current price points for EVs (in some cases they are more than twice as expensive). If gas hits $5 a gallon EVs will sell faster than if it gas were to drop below $3 a gallon. Vehicles that have a range greater than 300 miles will sell better than those with a range of 100 miles or less.

Excluding the $7,500 federal tax credit, the Volt and the Leaf, currently cost $41,000 and $32,780, respectively (both vehicles lease for $349 a month). A 2010 Deloitte report, found that more than half of the US consumers surveyed said they would not be willing to pay more for an electric vehicle than for a conventional vehicle.

The sales of EVs and hybrids have grown alongside rising gas prices. One year ago gas was $2.75 a gallon, now gas is hovering around $3.79 a gallon.

The Deloitte report found that consumers have range anxiety, (the concern that EVs have insufficient range). Almost 75 percent of those surveyed said they would need an electric vehicle to travel 300 miles on a single charge before they would consider purchasing it. However, 78 percent of those surveyed said they would buy an electric vehicle if gas hit $5 a gallon.

The Deloitte report also indicated that : “At $3 per gallon for gas, internal combustion engines are more economical to operate; the EV will not be comparable until battery costs are $600 or less per kWh, which could occur by 2014, at which time electric vehicle adoption will pick-up (assuming fuel costs remain stable).”

In April 2011, US Energy Secretary Steven Chu talked about the future of electric cars and indicated that he believes that before the end of the decade EVs will be “one-third the cost of today’s batteries but have at least three times the range.” He also said it will be possible for vehicles to travel up to 500 miles on a single charge.

In the absence of government legislation that will force significantly improved fuel efficiency, consumers will embrace EVs to the extent that they have better ranges and cost less. Climbing gas prices will also drive demand for EVs. Despite the urgency of finding alternatives to fossil fuel powered vehicles, market forces will ultimately determine the strength of demand.

© 2011, Richard Matthews. All rights reserved.

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1 comment:

Olmo said...

I totally agree with you. The more expensive Gas is, the more people will consider buying a EV. It also has a very important psychological meaning... People have fear of rising prices...

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