— To Willy Morales, the little Leaf electric car sitting on the Nissan stand at this year’s Los Angeles auto show “looks like the future.”
It's “like the stuff I used to see on the Jetsons,” he said, referring to the futuristic cartoon series he loved to watch as a child.
But while Morales admits being impressed by the idea of never having to buy gasoline again, he’s far more concerned about the idea of running out of power one night with his kids in the back seat. And he isn’t alone. So-called “range anxiety” is unquestionably the biggest obstacle automakers like Nissan face as they begin to roll out a new generation of battery-electric vehicles, or BEVs.
Still, initial consumer interest in the Nissan Leaf has been strong. And General Motors reports solid demand for the new Chevrolet Volt, a plug-in hybrid that soon will hits showrooms in select U.S. markets. But George Peterson, head of the consulting firm AutoPacific, fears this initial demand reflects “greenies and early adopters.”
“Once those buyers have gotten what they want, we don’t expect sales to remain very strong,” he said.
A recent study by J.D. Power and Associates suggests that even by 2020, hybrids, plug-ins and pure electric vehicles like Nissan’s Leaf will likely account for no more than 7.3 percent of the global automotive market.
But senior J.D. Power analyst Dave Sargent said the one thing that could help kick-start the nascent market for electric propulsion — short of “a dramatic and sustained increase in gasoline prices” — is demand from corporations for electric vehicles in their fleets.
That means customers like Jeff Immelt, chairman of General Electric, which operates one of the world’s largest motor vehicle fleets. Over the next several years GE plans to convert half its vehicle fleet to battery power, including 15,000 Chevy Volts and perhaps 15,000 electric vehicles from other makers.
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While GE will undoubtedly promote the fact that it will soon be operating the world’s largest electric vehicle fleet, Immelt’s passion for battery power is anything but altruistic.
GE is one of the world’s largest suppliers of electric grid technology, and the company is a fast-growing force in solar, wind and other “green” energy sources. It’s also the largest shareholder in A123, a pioneering producer of the lithium-ion batteries used in the latest electric vehicles. Immelt calculates GE eventually could get up to 10 cents of every dollar spent on electric propulsion.
It could also save itself a bundle on operating costs for its vast fleet.
And while consumers may worry about running out of power if they have to make a run to the airport or pick up a sick child from school, fleet operators like GE (or a delivery service like UPS) have a clear understanding of how many miles each of their vehicles will clock per day — and how each mile will cost the company, said Peterson of AutoPacific.
“Fleets have lots of cars, lots of people running around on prescribed routes, and central depots where it’s easy to set up charging stations that a company can get tax credits for,” Peterson said.
Even at standard electric rates — which average about 10 cents per kilowatt hour nationwide — it costs just 2 cents a mile to run a Volt or a Leaf on battery power, barely a fifth of what it would cost to run a comparable gasoline-powered automobile.
Maintenance costs are also lower for battery cars, which don’t need tune-ups or oil changes. True, the technology costs more up front, but as volumes increase all signs point to a steady decrease in the price of lithium batteries and related hardware.
Elon Musk, CEO of battery car pioneer Tesla Motors, predicts that the cost of operating battery-run vehicles will drop from around $1,000 per kilowatt-hour to less than $350 by mid-decade.
For a vehicle like the Nissan Leaf, which has 24 kilowatt-hours of onboard batteries, that cost could add up to thousands of dollars, even if a carmaker pockets some of the savings gained by making battery cars even more competitive in the controlled environment of a corporate or government fleet.
GE is by no means alone in its drive to turn is fleet electric. Several companies have already started field-testing battery-electric passenger cars and light trucks for use in their fleets.
Azure Dynamics, which is handling the development and production of Ford’s Transit Connect Electric van, has already lined up 93 orders under its Lead Customer Program, a group that includes AT&T, Johnson Controls, Southern California Edison and the Canadian Post. The U.S. Postal Service, meanwhile, is working with Bright Automotive and could eventually replace tens of thousands of local delivery vehicles with new battery-powered models.
And there’s no shortage of electric vehicles coming to market. These days, it’s hard to find a single automaker — from luxury brands like Jaguar to mainstream automakers including Ford and Toyota — that isn’t working on some form of battery propulsion. Volvo, for example, plans to roll out a mix of hybrids, plug-ins and pure battery-electrics, said CEO Stefan Jacoby.
But Jacoby is skeptical about the potential for building any significant market volume among individual car buyers in the near term, mainly because it’s too expensive right now for a car buyer to purchase and operate an electric vehicle. The real boom, he said, “will be primarily among fleets for a considerable time.”
Others echo Jacoby’s view. Toyota’s top American executive, Jim Lentz, insists the company “want[s] to see a mix of fleet and retail” for the battery cars it's developing, such as the RAV4-EV it unveiled at this year’s Los Angeles auto show.
Meanwhile, GM’s new marketing chief, Joel Ewanick, suggests the automaker will put retail customers at the front of the line when the new Volt starts rolling into showrooms in coming weeks. In fact, Chevy is stretching out the planned GE car order so there will be enough Volts “to put in consumer hands during the first year.”
Longer-term, as those earlier adopters get what they want, however, having a customer like GE waiting with an open checkbook could keep the Volt assembly line rolling until mainstream consumer buyers like Willy Morales get over their anxieties.