How electric cars got stuck in first gear

Electric cars are hitting showrooms, but people aren’t buying

Stuck in first gear

Rick Bowmer/AP

On a recent autumn day, employees of Tesla wheeled their latest electrified creation, the Model S sedan, into the concourse of a bank tower in downtown Toronto. Over the lunch hour, a handful of curious passersby ogled the dark-red vehicle’s sleek lines, leather interior and giant touch-screen monitor.

The Model S is the second production vehicle built by the Silicon Valley-based carmaker founded by American entrepreneur Elon Musk. Its first effort, the US$109,000 Roadster, was launched in 2008 and immediately grabbed eyeballs—not only because it was the first production vehicle to use lithium-ion batteries like those found in laptops, but because it looked car-magazine cool and was capable of zero to 60 mph in as little as 3.7 seconds. Tesla, which has yet to turn a profit, built and sold only 1,800 Roadsters, but that was hardly the point. “We needed to build a proof of concept that put itself on the map pretty quickly,” says Ricardo Reyes, a Tesla spokesperson.

Mission accomplished—sort of. With Tesla leading the way and governments throwing money at “green” industries, electric cars have gone from auto-show concept vehicles to production models, seemingly overnight. There’s only one problem: consumers have so far shown little interest in vehicles that are perceived as expensive, time-consuming to recharge and having a limited driving range. “The buzz around electric cars in the marketplace is far greater than what’s actually being purchased,” says Michelle Krebs, a senior analyst for the car website Edmunds.com. “Electric cars are not catching on.”

Krebs, who appears in the documentary Revenge of the Electric Car—a sequel to Who Killed the Electric Car?, which explored GM’s decision to recall and destroy its fleet of electric EV1 cars in 2003—points to sales data that showed just 21,394 “advanced drive” vehicles (which also includes hybrids and diesels) sold in the key U.S. market in October. That’s down 12 per cent from the previous year. Meanwhile, sales of conventional gas-powered cars and trucks were up 7.4 per cent during the same period, suggesting that a bevy of smaller, more fuel-efficient models are blunting demand for alternative powertrains at current gas prices.

It’s potentially bad news for carmakers like GM, which spent more than US$1 billion on the development of its plug-in hybrid Volt (the car runs on electricity but can switch to a gas-powered generator when the battery is depleted). Despite positive reviews, it now looks doubtful that GM will realize its 2011 sales target of 10,000 Volts, a number it has stubbornly refused to revise, even though since January it has moved just 5,544 of the cars, which each cost $41,545 before incentives. By contrast, GM’s gasoline-powered Chevrolet Cruze ($15,495) has outsold the Volt by roughly 20 to one, globally.

GM has suggested it’s a problem of supply, not demand. It recently gave U.S. dealers permission to sell their demo models, which were supposed to remain on showroom floors to attract customers. Adria MacKenzie, a spokesperson for GM’s Canadian arm, says GM has sold about 200 Volts in Canada, and another 111 have been pre-sold and are now en route to dealers. “We are building as many Volts as possible to keep up with consumer demand,” MacKenzie says. “These sales numbers are in line with our expectations.”

Perhaps. But it’s difficult to see how the situation will improve as GM’s competitors rush into the space. In addition to Tesla, Nissan-Renault offers an all-electric car, called the Leaf—17,000 of which have been sold around the world. Ford Motor Co. has as many as five electrified vehicles in the works, while Chrysler-Fiat is planning an electric version of the Fiat 500. Mitsubishi and BMW both have electric cars coming, too.

It’s shaping up to be a sequel to the “if we build it they will buy it” approach that nearly cratered the auto industry during the last recession—only this time it’s pricey electric cars instead of cheap-to-make gas-guzzling trucks that are taking centre stage. Though having a high-tech electric car in the lineup makes for good “green” marketing and helps automakers satisfy stringent fuel economy standards, analysts note electric cars aren’t cheap to develop. At some point, consumers need to do more than just marvel at them.

Yet recent studies show a chasm between what consumers expect from an electric car and what engineers are actually able to deliver at an affordable price. A Deloitte survey of 13,000 consumers in 17 countries found that only 63 per cent of Americans would be satisfied with being able to drive 480 km before a car’s battery pack was depleted, and that nearly 60 per cent of U.S. respondents wanted a car that could be recharged in about two hours. By contrast, the Nissan Leaf advertises a range of just 160 km (closer to 117 km in “real world” driving conditions), and can take up to eight hours to achieve a full charge using a special charging station that can be installed in a garage and runs off a 240-volt circuit. The Leaf can also plug into standard 120-volt outlets, but the charging time is twice as long. A third option is 480-volt “fast-chargers,” which would ideally be made available along highways or rest stops, and which are capable of achieving an 80 per cent charge in about 30 minutes. As for the range issue, Nissan has pointed to study after study that shows most commuters drive less than 80 km per day. But that assumes people buy cars based on what they need—a fallacy exposed by the enduring popularity of vehicles like the Ford Mustang or anything made by Hummer.

Tesla believes it can solve the consumer psychology part of the puzzle. Its Model S has been described as the first electric vehicle that’s neither too expensive (the base model will be just over $49,000 after government incentives) nor too limiting (it has a range of 260 km, which can be boosted to 480 km with an extra battery pack that adds $20,000 to the purchase price). It has also embarked on a unique retail model by putting some 20 stores in high-end malls across North America, with the first Canadian store to open in a “premium Toronto mall” next year. The idea is to educate consumers about the technology and let them play around with it (there are cars nearby for test drives). If it sounds like the approach used by another Silicon Valley company—the one known for its iPhones and iPads—it’s no coincidence. Tesla’s retail strategy is being led by former Apple retail guru George Blankenship. “Apple stores are a place where people can go if they want to purchase a product, but also just sort of want to experience it and play around,” says Reyes. “That’s the same sort of feel we’re going with for our stores.”

Even so, the industry faces huge hurdles that may prove impossible to overcome—even if gas prices creep higher. They range from a lack of charging infrastructure to the slow pace of innovation in battery technology. And questions remain about whether electric cars can be mass-produced at a profit. Manufacturers depend heavily on government subsidies, including the kinds of loans now being reviewed as part of a wider White House probe in the wake of the scandal surrounding bankrupt solar panel maker Solyndra.

While the cost of building electric cars is bound to come down as the technology matures, critics point out that many of the materials needed to produce electric cars, including lithium and rare earth metals, are actually far less abundant than oil. “We’re at the very pioneering stage of this,” Krebs says. “We’re just getting electric vehicles out on the roads and we don’t know what consumer acceptance will be. But the big challenge is whether it can work as a business model.”

In Toronto, the Tesla display continues to draw curious looks. Though Tesla says it has orders for all 6,500 of the vehicles that will be built next year, it’s still a drop in the bucket for an industry that sold 11.7 million cars and light trucks in 2010 in the U.S. alone. It’s too soon to say whether the electric car will be killed off this time around, but if it is, it will be because consumers—not Detroit or some shady lobby group—pulled the trigger.

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How electric cars got stuck in first gear

  1. I want the Tesla S but can’t yet justify $50K for 150mile range.  Even though that would cover me 3 days for my daily commute it’s still on my option list. The Volt’s concept is awesome. It’s range would have me fulling up on gas 2x a month (WOW!!)  But it’s so UGLY. I’m trying to see it GM will allow Cadillac the okay for it’s hybrid coupe, built off the Volts technology. At least it will look cool, but i’m sure it will sticker around $55-$60K. The minute i can snag a model S new, with a 250-300miles range and keep me around $40K, then it’s a no brainer.

  2. I want one, really bad. The problems, as yet unresolved, that are holding me back are:

    1. The cars need to cost in the $10,000-$15,000 range for a nice entry-level vehicle.
    2. The range of a charge needs to be extended to at least 400-500 km of continuous driving, or about a full day, if in the city.
    3. The cars need to be capable of being fully recharged after no longer than it takes to drink an espresso. You can’t expect anyone on a road trip to wait around for hours for a recharge.
    4. Recharging facilities must be as plentiful as gasoline fuelling stations. How else can one take a drive into the mountains and expect to be able to get back home?

    • 1) Tesla has plans to introduce a lower-cost electric car a few years down the line. Should be about 30K. I trust Tesla will make it look better than a Volt.
      2) Battery range is predicted to improve about 5% per year at the same cost, I believe.
      3) There is a limit to how fast you can charge, I think Tesla’s own 480V DC fast charge is the best at about 30 minutes. Time for your espresso and scone.
      4) California is ahead of the curve on recharging. California highways will be first online, the rest of the country will surely follow. Walgreens has committed to putting charge stations at their stores. Expect other stores that would like affluent people to spend 1+ hours shopping there (so… most stores I’m guessing) to follow suit.

      Not mentioned anywhere in this debbie downer of an article is how the Model S is going to be better than any gas burner. Better as in better handling, faster, more room, more tech, cheaper to operate, cheaper to maintain, zero emissions.

      People need to vote with their wallet. Elon is the man, and his cars kick ass…. you can bet I’m in line to get one.

      • And what do you mean by ‘zero emissions’?  Not zero emissions, I presume.

    • As to #1, I know of NO nice ICE entry level vehicles for $10 to $15 thousand. What world do you live in?

  3. Consumer indifference can be summed up in two words:

    Uneconomical and inconvenient.

    Meanwhile…China’s rare earth metals production (of which supplies 94% of the world’s consumption) is an unmitigated environmental disaster. I guess as long as it’s not CO2 the environmental movement will simply turn a blind eye to this.

    • They said much the same thing to the people that left the horse and buggy at home, and bought a car.

      PS Ontario has rare earth metals….so do many other places

    • Many EV’s including the Tesla Model S and the Nissan Leaf don’t even use rare earth metals. There is a lot of anti plug-in FUD out there, and there will be I imagine as long as oil companies rake in their multi-billion profits every year selling their nasty sludge to the mindless oil addicts we have become, but don’t believe everything you read.

  4. Over looked is consumer support (repairs, parts, etc) Also there is a reluctance to invest into unproven models lest one be stuck with a lemon. Also, some advertised data on how well these cars deal with “winter” might go along way in assisting sales outside of the warmer, drier southern states.

  5. Full disclosure, I sell the LEAF. 

    I’ve been driving an EV for 9 years now, some 99,000 miles, and powering it with kWh I generate from the sunlight falling on my roof. My original EV, a Toyota RAV4 EV, was a great workhorse. It never needed maintenance, always worked perfectly and never gave me a bit of trouble. I sold it after 8.5 years and 91,000 miles for $18,000. I now drive a LEAF and love it. It’s very quick and quiet as a mouse. I have sold about 150 of them here in the LA region, and every one of my customers loves their EV. 

    About 30% of EV drivers use solar to generate their electricity, so they are zero pollution well-to-wheels. We keep all of our money local, too. When you buy gas, most of your money leaves the country, and about 90% leaves your local community. This concentration of oil wealth drives a lot of the strife we have in the world, from wars in the middle east to corruption in Washington D.C.

    The demand for EVs still exceeds supply, so the low sales figures only show production capacity, not demand.

    • Finally a post with some intelligence and quality information.  The misinformation about EV’s is so abundant it’s amazing.  I drive a leaf and it’s the most amazing car on the road in my opinion.  Not sexy no, but superbly comfortable, and it will take your breath away if you put it in normal drive mode.  You can hear a pin drop as you cruise in complete comfort and warmth with 5 star safety.  Maintenance?  What is that? – OK – you do need to check your tire pressure once in a while.  Convenience?  Well let’s put it this way – would you rather be jockeying around in some sticky gas station trying get your tank full and leaving with a bad taste in your mouth knowing that you just got ripped off – or how about driving into your garage after passing up the gas station crowd and simply plug your vehicle in and walk inside your house?  Oh – by the way – the charge for that will be about a buck and will take from 4-6 hours.

    • Thank-you for the personal experience but it still doesn’t address the growing concern here that too much of the “drive green” technology fails to consider the effects of salt exposure from 3-4 months yearly of winter driving.  What are the battery efficiency concerns is in colder climates due to higher electrical needs of heaters, fans, defrosters etc.

    • Cradle-to-grave is the real ‘green’ test of technology, not well-to-wheels.  The manufacturing of and disposal of electric vehicles is not trivial, economically or environmentally, even if the fuel does come from renewable energy.  Since we already have a burgeoning electricity problem, it seems foolish to build electric cars before we have a clean, reliable electric grid. 

      And LA is very different from Canada.  I have concerns about that electric car being functional when it’s been parked outside overnight when it’s forty below.  What’s their range like when it’s that cold?  How will they heat the interior?  I don’t believe it has been addressed.  

      • The manufacturing of LiIon batteries is much less damaging to the environment than the extraction of oil. Plus, once the batteries are made, they’ll have a 8-12 year life powering the car, then utilities will purchase them for energy storage for a few more years. After that, they’ll be recycled and the lithium will be used in new batteries. This recycled lithium will also become a domestic source since it was purchased from the original mining country well over a decade prior.

        The heater in the LEAF is very good, however, it does take a bit of energy, probably around 10-15%, so expect to have a slightly shorter range when using it. I can’t speak to its operation in 40 below temps, but those are exceedingly rare in most of the world.

  6. As much as the US Federal Government subsidizes sold electric vehicles, it subsidizes petroleum and its products even more. The price of gasoline will go up, its not a matter of “if” “but “when”. Thirdly, while there may be less lithium than oil in the ground right now, its used to store energy and is not consumed, the same cannot be said for oil and there will be a day sooner rather than later when rare earth metals will be abundant in comparison to oil.

  7. “It’s too soon to say whether the electric car will be killed off this
    time around, but if it is, it will be because consumers—not Detroit or
    some shady lobby group—pulled the trigger.”

    Of course the continued anti plug-in FUD would have played an important part in the lack of market acceptation of EV’s. That ranges from Top Gear associating EV’s with images of cars being pushed to countless articles like this spreading the myths of peak lithium and rare rare earth metals (that aren’t actually rare, nor used in cars like the Model S and the Leaf) and never fail to tie EV subsidies to the Solyndra debacle.

    So before blaming the consumer let’s find out who is behind all that!

  8. Plug-in hybrid is the way to go

    Still waiting to trade in my 2006 Prius, which I have had no problems with (even at minus 10C), and fuel up only once a month.

    Also want to turf my 2003 gas guzzling RAV4. Why isn’t there a hybrid version??

  9.  “many of the materials needed to produce electric cars,
    including lithium and rare earth metals, are actually far less abundant than

    Oil is so abundant we burn it!  

    Lithium and rare earth metals are recyclable. In
    50 years we will regret having consumed our easy oil while lithium will be repeatedly
    reprocessed for new uses.   

  10. Electric only make sense in the city IMO, but then it is their price obviously, should they sell for below $20000 we will see more of them Im sure. Anyway would I buy one? Not as long as there will be cheaper Diesels available (okaynot so many in Canada currently…quite surprising considering the relative low price o Diesel in Canada, it is about comparable to most Europea countries, but in Europe Diesels have ca 50% Market share, while in Canada maybe 2%? But obviously there are only 11 Diesels available in Canada now…so maybe there should be different incentives: ban of all non-Diesel SUV’s, and on the other hand only encouage Electric Cars if they do not cost mnore than 20% of a comparable car in the same Class (e.g. a Cruze vs. the Volt). But why would anyone want to buy a “Tesla or a “Fisker” karam? Not only are those cars overpriced, but also hideous, especially the Fisker one.

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