Study: Economics must now drive EV market Fleet Owner

Study: Economics must now drive EV market

A new study by research firm J.D. Power and Associates indicates that economics and not environmental sensibilities must now take over as the primary sales focus for electric vehicles (EVs) if such vehicles are to acquire significant market share.

"Current EV owners focus on the emotional benefits of owning an electric vehicle—which are having positive effect on the environment—but the way for manufacturers to take EVs to the masses and increase sales is to address the economic equation," noted Neal Oddes, J.D. Power’s senior director of its green practice. "There still is a disconnect between the reality of the cost of an EV and the cost savings that consumers want to achieve."

According to the firm’s inaugural 2012 Electric Vehicle Ownership Experience Study – which surveyed 7,600 vehicle owners and panelists who either currently own an EV, are considering an EV for their next vehicle purchase, or shopped for an EV but ultimately decided not to purchase one – while 11% of consumers would consider an EV for its environmental benefits, 45% want to reap the economic benefits of fuel savings.

For example, current EV owners report an average monthly increase in their utility bill of just $18 to recharge their vehicle's battery—which is significantly less than the $147 that they would typically pay for gasoline during the same period of time, according to J.D. Power’s research.

Compared with sales prices for a similar gasoline-powered vehicle, the firm’s study finds that owners of “pure” EVs pay a premium of $10,000, on average, for their vehicle, while plug-in hybrid electric vehicle (PHEV) owners pay a $16,000 premium, on average. Based on annual fuel savings, it would take an average of 6.5 years for “pure” EV owners to recoup the $10,000 premium they paid at the point of purchase, while the payoff point for PHEV ownership is 11 years.

"The payback period is longer than most consumers keep their vehicle," stressed Oddes. "The bottom line is that the price has to come down, which requires a technological quantum leap to reduce the battery price. There also needs to be an improvement in the infrastructure, or the number of charging stations outside of the home. Until those two concerns are addressed, EV sales will remain flat."

On another front, Oddes pointed out that as battery technology improves, manufacturers should be able to produce more affordable EVs – thus lowering the current price premiums for EVs and PHEVs. As EVs currently account for less than 1% of new-vehicle sales in the U.S., according to data compiled by LMC Automotive, lowering the cost of ownership may help increase market share.

However, there are also other hurdles to overcome, Oddes emphasized. "There still is anxiety among consumers about the cost and lifespan of EV batteries, the infrastructure needed to charge EVs and the vehicle's driving range," he said. "Automakers need to continue to address these issues and educate consumers about the benefits of EV technologies in order to gain momentum in the marketplace."

He also added that driving range and the availability of charging stations remain two top concerns among consumers considering an EV, with 12% of potential EV buyers worried about the driving range. However, current EV owners indicate their average daily commute totals only 34 miles, which is well within the range of a fully-charged EV, Oddes said.

The size of the vehicle is the second-most-frequently cited reason for rejecting an EV, according to J.D. Power’s study. Consumers considering an EV look more frequently for a midsize sedan than any other size vehicle, yet currently most of the EVs being produced are in the small vehicle segments. In addition to price and vehicle size, concerns with reliability of EVs rounds out the top three rejection reasons.

Yet Oddes pointed out that the payoff for automakers is that once they get consumers to buy an EV, they tend to retain them as customers. Overall, 82.5% of owners indicate they "definitely will" or "probably will" buy another EV from the same brand, compared to the 49.8% average retention among owners of all vehicle types.  

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