Consumers Still Reluctant to Plug In to Electric Vehicles, Expert Says

10/17/11Follow @XconomyDET

Last week, the Center for Automotive Research (CAR) hosted its third annual conference on electric plug-in vehicles, titled “The Business of Plugging In.” The event drew global leaders from the realms of automotives, technology, finance, government, and policy. This year’s conference was different, says Brett Smith, Co-Director of Manufacturing, Engineering and Technology for CAR, in that is was less about hype and more about overcoming challenges.

“This year, the title of the conference was more appropriate than ever before,” Smith says. “When we were planning the event, we talked about how incredibly challenging it is to create a business model for electric vehicles. For the first time, at this year’s conference we heard car companies saying, ‘It’s really hard work, and we don’t yet know the outcome, but we still feel we have some really good ideas.’ “

Smith says one reason consumers have been slow to warm up to electric vehicles is because traditional, combustion-engine vehicles are still much cheaper and increasingly more fuel efficient.

“Electric vehicles have wonderful driving attributes,” Smith says. “But when it comes down to it, it’s hard to imagine paying between $8,000 and $20,000 more for a plug-in electric vehicle when similar economy models deliver such improved fuel efficiency. We’re talking about 40 miles per gallon compared to 60 miles per gallon. To most consumers, that’s not enough of a difference to justify paying a significantly higher price.”

Smith also says that as long as gas remains relatively cheap, it makes it “very hard” for consumers to recoup, through fuel savings, the money they spend upfront to purchase an electric vehicle. “The car companies have a slide they show internally to a select group of individuals that shows the payback period for electric vehicles, and it’s not months, but years—dozens of years, in some cases,” Smith says. “At this point, it isn’t an economically viable decision for consumers. But there are many other reasons to buy electric vehicles.”

Among those, Smith says, are the social costs involved in owning a vehicle with a traditional engine, and the likelihood that cities and states will soon start taxing drivers who stick with cars that are hard on the environment.

“Car companies will continue to develop electric-vehicle technology for at least the next five to ten years,” Smith says. “This isn’t something that’s going away soon.”

Tanvir Arfi, global president of SPX Service Solutions, the Troy, MI-based division of SPX Corp., says his company has specifically gotten into the EV infrastructure market (mostly the manufacture of charging stations) specifically because the company believes electric cars aren’t going away. Arfi spoke to me on a break from the “Business of Plugging In” conference.

“I think, during the next few years, the mass adoption of EVs will happen,” Arfi says. “Our research shows that consumers make the decision to purchase an electric vehicle based on three criteria: price, how far the car can go without needing to be charged, and the level of availability of infrastructure. Our focus is on building the infrastructure.”

SPX, like many electric-vehicle suppliers, has received tax incentives and other awards from the Michigan Economic Development Corporation and the U.S. Department of Energy. Arfi also says SPX has been identified as one of a few companies in line for funding to build a national infrastructure of charging stations, should consumer demand ever require it. Government confidence aside, Arfi admits that significant demand for SPX’s products is, at the moment, mostly limited to Europe and in the fleet vehicle market.

“We are noticing a demand,” Arfi says. “The volume isn’t significant, but there is demand.”

Smith says that volume likely won’t increase unless a paradigm shift takes place. “It would take an environmental or economic catastrophe to make electric vehicles more mainstream,” Smith says. “When we look at electric vehicles, we still don’t have an energy storage option that can compete with gasoline. But if gas shot up in price, it may change the way we think of cars. It would change the paradigm.”

Sarah Schmid is the editor of Xconomy Detroit. You can reach her at 313-570-9823 or sschmid@xconomy.com. Follow @XconomyDET

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