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Electric-Vehicle Sales Move Out of First Gear

Although sales of some models have missed expectations, electric vehicles, or EV, are a greentech success story just by showing up in significant numbers in 2011.

“Nascent, tiny but growing,” says Garvin Jabusch, chief investment officer at Green Alpha Advisors, describing the EV market currently.

John Gartner, senior analyst at boutique research firm Pike Research, says the plug-in EV market is “in its infancy” but will see 48-percent annual growth through 2017, with 1,400,000 vehicles sold worldwide by then.

GM Spark 2012
Credit: GM
GM Spark 2012

While it’s still an early adopters market, Jabusch adds that he expects sales to “slowly but steadily gather momentum for a few years” until a tipping point is reached “where they're obviously the superior value, and in many ways the superior performance option across the board.”

This year saw two plug-in EV models launch in North America and take most of headlines — the Nissan Leaf and the Chevy Volt.

The Leaf, an all-electric vehicle priced around $33,000, has sold over 6,000 units so far. The car priced

But sales of the plug-in EV and gasoline hybrid Volt sales have been less than hoped. General Motors has sold around 3,000 of the $42,000 car so far this year, after setting a 10,000-unit sales target.

Plug-in EVs run on electricity as an input fuel, unlike hybrids like the Toyota Prius, which extend the range of a gas-powered car by generating electricity on the fly.

GM says some of the launch issue centered around work on the Volt’s assembly line, but the auto maker still expects sales to rise.

“There is no demand issue; ask any dealer in a launch market," says GM’s Volt program spokesman, Rob Peterson. “This is a temporary situation.”

With a premium price tag, Pike’s Gartner says the rough economy is hurting EV sales.

But Green Alpha’s Jabusch adds that it’s the model mix available today that’s holding the sector back.

Green - Winners & Losers - A CNBC Special Report
Green - Winners & Losers - A CNBC Special Report

“Economic conditions certainly don't help, but overall the Volt suffers from being a sub-par entry into a very competitive market,” he says, citing the Volt’s relatively poor gas mileage when it burns gasoline compared to other gas-powered cars in its category.

“A good indicator of this is the secondary market,” he says. “Used sales of the Volt are already at only approximately 40 percent of retail [price] — the [hybrid] Toyota Prius is approximately 50 percent to 53 percent — reflecting poor residual value for still relatively new cars.”

He says he expects the EV market to heat up with more model launches in the next year, like a fully electric version of Toyota’s Prius and Tesla Motors S-series sedans, as well as GM’s planned Leaf sub-compact competitor, the Spark.

Pike Research estimates that 40 plug-in EV models, from most major automakers, will be on the road by 2014.

Along with greater choice, Pike’s Gartner adds that improving battery technology will continue to increase the range and lower the price of EVs in the future.

He says his firm expects battery technology, the EV’s most expensive component, to fall 40 percent in the next six years.

But he points out the price of gasoline will likely be the biggest driver of sales for electric vehicles.

With recent volatility in gas prices, and with oil prices back on an upswing, he says fuel input cost concerns points to fleet managers becoming critical purchasers of EVs.

“Fleets will be a big part of market growth,” he says. “Fleet managers are looking at cost stability. When it’s electricity, there is very little volatility.”

According to price tracking site GasBuddy.com, the average price of gas in the U.S. has risen nearly 50 percent in the last six years to around $3.60 a gallon.

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“Government estimates [of future gas prices] are pretty conservative,” he says. “Once we get to $5 a gallon, it could spur [EV] growth.” He adds that his firm is forecasting U.S. gas prices will be over $6 a gallon by 2017.

For now, electric-vehicle sales are a miniscule part of the U.S. market, less than a half-percent, says Pike’s Gartner.

“I get asked when it’s going to be a mass consumer product, like 10 percent [or auto sales]?” he says. “Don’t hold your breath —we’ll be lucky to reach that [here] by 2020.”

By contrast, 2011 Honda sales, including its flagship Civic, are about 10 percent of all U.S. auto sales to date, according to industry analysis firm Motor Intelligence.

But Green Alpha’s Jabusch says that with the number of new varied supply, from different auto makers and aimed at different auto market segments, EVs are now mainstream.

And with electricity beating gasoline costs on a per-mile basis, electric vehicles will eventually own the car market, he adds.

“When [the vehicle’s fuel] becomes cheaper than it is today and there are more and better EVs available, it will begin to look a little old-fashioned to buy a gas-burner,” he says.

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