Read Part 1, Part 3, Part 4, Part 5 and Part 6 of this series.
Electric drive vehicles have the potential to wean the United States off foreign oil and drive it toward an era of zero-emissions transportation, but that potential is being pushed into the more distant future by the ominous fact that most consumers aren't buying them.
Plug-in electric vehicles (PEVs), which include both battery electric and plug-in hybrid electric vehicles, make up less than 1 percent of the U.S. car market. Add in hybrids, which are selling at a much faster rate, and electrified vehicle sales are still only around 3 percent.
One of automakers' greatest concerns in meeting the Obama administration's ambitious new fuel economy standards is that consumers will continue to steer clear of alternative automobile technologies, which come at a steep price premium.
The regulation completed last month requires automakers to double the average light-duty fleet fuel economy to 54.5 mpg by 2025. The rule itself is technology-neutral, but the aggressive target pressures car companies to make and sell all types of electrified vehicles, a category that includes hybrids, plug-in electric vehicles and fuel cell vehicles.
Given how challenging these technologies are to produce and market, many automakers have asked, "If we build them, will buyers come?" Others have been more eager to get in the game.
"I get really frustrated with the automakers that say, 'We can't sell [electric vehicles]. No one will buy them,'" said Diarmuid O'Connell, vice president of corporate and business development at Tesla Motors. "The truth is that even in the darkest hour of the auto industry, one thing that our domestic automotive [original equipment manufacturers] and other OEMs were really good at is marketing and selling our vehicles.
"If you try hard enough, you can do it," he said in an interview.
More than 60 models to choose from
More than 40 hybrid vehicle models are available in the United States, and more than 20 PEVs will be available in the next two years, prompted by policies to reduce greenhouse gas emissions.
In addition to the federal fuel economy targets, automakers selling in the lucrative California market must also meet the zero-emissions vehicle, or ZEV, mandate, which requires PEVs and fuel cell vehicles to make up about 15 percent of the fleet by 2025. The state aims to have low- and zero-emissions vehicles make up 90 percent of its fleet by 2050.
John Krafcik, president and CEO of Hyundai Motor America, said in a recent speech that his company already boasts a fleet average of 37.6 mpg. Still, to meet the ZEV mandate, a third of Hyundai's sales will have to be fuel cells, battery electrics and plug-in hybrids by 2025, he said.
It took conventional hybrid vehicles 15 years to claim a solid wedge of the U.S. automotive market. PEVs could take an equally long, if not longer, time to scale up.
The price tag is a major hurdle. A survey conducted by consulting firm Pike Research found that consumers would pay $23,750 for a PEV comparable to a $20,000 gasoline-powered car. The 2012 Toyota Prius Plug-in Hybrid, Honda Fit EV and Ford Focus Electric are all well above $30,000 and still outside most consumers' budgets even with federal incentives.
Pike Research expects the cost of lithium-ion batteries -- the primary reason PEVs are so expensive -- will drop by 5 percent this year and 10 percent next year as more battery plants come online, bringing greater efficiency and more competition to drive down costs. But the firm expects the price tag on PEVs won't fall below $18,000 before the end of the decade.
PEVs also cause range anxiety, even though most American commuters drive well within their limit. Charging infrastructure is expanding, but slowly, and batteries can't recharge fast enough to compete with the quick fill-up at the gas station.
Toyota Prius soared; all-electric RAV4 sank
In the late 1990s, Toyota Motor Corp. jumped into the game with an all-electric RAV4 SUV in California. At the time, the car was marketed far more heavily than the Prius Hybrid, but the company sold and leased only 1,600 RAV4s while the Prius took off, according to Tom Stricker, vice president of technical and regulatory affairs and energy and environmental research for Toyota Motor North America.
The issues back then were range, lack of infrastructure and cost, even though the RAV4 was competitively priced. "A dozen years later, and those same issues persist," he said.
Toyota, the world's top hybrid maker, sold more than 21,000 Prius Hybrids in August, up 26 percent from July. The company expanded the Prius family this year to include the Prius C, a smaller hybrid for city use; the Prius V, a bigger one with more storage room; and the Prius Plug-In Hybrid.
Toyota is also taking a second chance on the RAV4, which features an electric drivetrain made by Tesla. The new 2012 model will be released in California this fall.
But the few hundred thousand alternative vehicles Toyota sells each year are still a drop in the bucket in the U.S. market of 14 million vehicles.
"At the end of the day, people buy their product based on value and utility for what they need, and while they may be interested and passionate about certain issues like energy security or climate change, very few customers will actually let that altruistic sense drive their purchasing decision," Stricker said.
Falling Leafs and lowered Volts
Nissan, maker of the all-electric Leaf, is arguably the most bullish on electric vehicles. Nissan CEO Carlos Ghosn has said 10 percent of sales could be electric vehicles by 2020.
The company is an industry leader, having sold 35,000 Leafs worldwide since it launched in 2010. This year, Nissan will scale up Leaf production at a new manufacturing facility in Tennessee, which should drive costs down over time. The 2012 Leaf starts at $35,200.
But the industry has a long way to go in meeting its targets. Nissan sold 685 Leafs last month, down 50 percent from last year, and looks unlikely to meet its goal to move 20,000 vehicles in the United States this year.
By comparison, the $39,145 Chevrolet Volt, an electric vehicle with gasoline backup, sold a record 2,831 units in August and more than 13,000 so far this year. However, General Motors Co. originally planned to sell 40,000 units in 2012.
"Last month was the best sales month to date. That said, it's a new technology, and I think unfortunately some of the prognostications of some of the folks who wanted the numbers to be higher earlier on have sort of created an expectation that can't be met right away," said Mike Robinson, vice president of sustainability and global regulatory affairs. "Over time, it's going to be successful. We're committed to it."
Next year, GM is rolling out another plug-in hybrid, the Cadillac ELR. It will also launch the 2013 Chevrolet Spark, the company's first all-electric vehicle, which will cost less than $13,000 for a stripped-down version.
Ford and Tesla charge on
Ford Motor Co. is also amping up electrification across its fleet. The company is launching five electrified vehicles this year: the Focus Electric, C-MAX Hybrid, C-MAX Energi plug-in hybrid, Fusion Hybrid and Fusion Energi plug-in hybrid.
By electrifying cars across its existing platform, Ford can make vehicles with different powertrains on the same assembly line. That flexibility allows the company to meet whatever consumer demand may be going forward.
Though Ford got into the game after Toyota, GM and Nissan, Pike Research predicts it will be the top PEV seller as early as 2014.
"We feel the only way to do this and make it economically viable ... is by electrifying the architecture and building the cars on the same assembly line," said Erich Merkle, U.S. sales analyst for Ford. "That really is, we think, critical to the strategy as we move into this brave new world."
Tesla Motors took the opposite approach from Ford. As a new car company, Tesla focused on creating an entirely new architecture around its electric drive system with the Model S launched in June.
Will a better product create a mass market?
Starting with the Roadster, Tesla proved battery electric vehicles could attract high-end consumers. Its newest model looks to build on this consumer sentiment but add a dose of practicality. The Model S sedan has a 320-mile range on its top-end 85 kilowatt-hour battery and features eight air bags, a panoramic sunroof and a 17-inch touch-screen control system.
But despite rave reviews for the Model S and the much-anticipated Model X all-electric SUV set to hit the market in 2014, the company is struggling to stay cash flow positive as it looks to bridge levels of scale. After the release of the Model X, as long as the company survives, Tesla plans to sell a smaller, cheaper all-electric car designed to compete as a mass-market luxury vehicle.
The external challenges of policy, charging infrastructure and pricing are real, but making more exciting cars will go a long way toward creating a mass market for electric vehicles, said Tesla's O'Connell.
"What we're doing with our Model S is totally different from what any of the manufacturers have done with their electric vehicles. They've basically taken a chassis and body system and many parts from an existing gasoline-powered vehicle and turned it into an electric vehicle," he said. "That begs a comparison."
Electric motors have great torque, which creates a strong, smooth acceleration, and tend to feature top-of-the-line electronics, including navigation, entertainment and communication systems to enable more convenient charging. The next stage for automakers should be to take the electric drivetrain as a given, and imagine a vehicle around it that optimizes everything an electric drivetrain does, O'Connell said.
"I think that making more exciting product might really change people's mindset," he said.