“Forecasts, after all, aren't really meant to be crystal balls. They're meant to give depth and meaning to assumptions about future risks and rewards. Thus they should be analyzed based on their assumptions more than anything else.” –Sam Jaffe, research manager, IDC Energy Insight
Even as mass-produced electric vehicles (EVs) such as Nissan’s LEAF and Chevrolet’s Volt begin entering the market (albeit in small numbers at the moment), the debate continues to rage as to whether all-electric and even partial-electric vehicles are going to make any headway with the average retail car buyer, much less fleets.
A variety of surveys on this topic paint very different outcomes for EV sales in the U.S.; some forecast success, while others project tougher going … if not outright failure.
[Speaking of electric cars … here’s an overview of the new $41,000 Chevy Volt that can go 40 miles on one charge. However, this four door EV – reviewed by Kelley Blue Book – that also has a small gasoline engine for re-charging the onboard batteries that helps extend its range to 300 miles.]
Sam Jaffe, research manager for consulting firm IDC Energy Insight, has been watching this “war of EV forecasts” as he terms it and talked about it in a really good post on his blog this week, which you can read in full here.
It should be noted that Jaffe (at right) is in the thick of the EV forecast “battle” as well. IDC’s analysis predicts that will be some 930,000 plug-in EVs or “PEVs” sold throughout the world by 2015, which corresponds to about 1.3% of global car sales for that year.
Through 2020, IDC projects three different scenarios for PEV sales taking shape, based on consumer and fleet reaction to the capabilities of these vehicles: conservative (1.7 million cars or 2.4% of global 2020 vehicle sales), moderate (4 million cars or 5.7%) and aggressive (10 million or 14%).
The key with any such forecast, however, lies in the assumptions underlying the research, Jaffe stressed to me by phone. And those “assumptions” of fleet and consumer attitudes and concerns regard EVs can inadvertently skew forecasts into positive or negative outlooks if you’re not careful.
“On the fleet side, there are important advantages and disadvantages to incorporate into one’s research when it comes to EVs,” he explained to me. “On the positive side, there’s the ‘total cost or ownership’ or ‘TCO’ to consider. Fleet buyers as a whole as far more interested in this metric: how much savings does an EV produce in terms of lower fuel costs and less maintenance.”
That’s a critical metric Sandeep Kar (at left), global program manager-commercial vehicle research for Frost & Sullivan, discovered in his own research on this topic.
According to the firm’s Strategic Analysis of the North American and European Electric Truck, Van and Bus Markets study, by 2016, some 64,817 Class 2-3 light-duty EVs should be sold, in North America predominantly (3.5 tons or less GVW) configured as parcel delivery vans, small shuttle buses, etc. By contrast, only 26,635 medium-duty EVs (between 3.5 and 16 tons GVW) and 565 heavy-duty EVs (16 ton GVW or greater) are expected to be built and sold that same year.
Kar explained that 2016 may be the “inflection point” for commercial EV sales if purchase price, range, and life cycle cost demands are met. “That cost of ownership is the crucial factor,” he said. “Our polling of fleet managers indicates 63% are focused on the total ownership cost, not the initial purchase price. So if the ROI can be fully realized, fleets would adopt these vehicles.”
IDC’s Jaffe added that fleets are now making “strategic” purchases of EVs to see if they deliver on cost savings without sacrificing expected capability. So far, Jaffe noted, it’s been a mostly positive experience for fleets.
The downside, of course, is that if EVs don’t meet the expected criteria in terms of savings and capability, fleets won’t accept them. “Retail consumers may experience ‘range anxiety’ but fleet’s don’t. For them, it’s a purely bottom line decision. If an EV can’t deliver the expected range, they don’t buy them; period.”
[Here’s a year-old clip with experts from Booz Allen Hamilton and J.D. Power explaining the challenges and opportunities facing the EV market in the future – analysis that’s still valid today, I must say.]
Another key factor is how vehicle manufacturers ultimately incorporate EV systems into their products. IDC’s Jaffe explained to me that the typical “cut and dried” cost comparison between EVs and purely petroleum fueled vehicles doesn’t necessarily represent what may occur in the future.
“Obviously, if you sit a gasoline-powered car and an EV side-by-side, with the EV costing $5,000 more, retail consumers will go with the gasoline vehicle,” he said. “But that may not necessarily be how EV technology gets presented in the market down the road.”
For starters, if fuel prices start rising again – and they are expected to – that strict cost comparison may swing to the EVs favor. And automakers might also start incorporating EV technology into all of their vehicles to achieve fuel savings if fuel costs were to rise, making them “base components” much the way antilock braking systems (ABS) are today.
“Within 10 years of its introduction, ABS is now standard equipment on all vehicles – it’s gained 100% market penetration,” Jaffe noted. “That’s due to a convergence of government regulation and production cost issues. The same scenario could play out for EVs, in terms of environmental regulations combined with fuel cost issues.”
The real key, he pointed out, will be manufacturing “scale.” If EV systems deliver significant fuel savings and then are produced in high enough volumes to help lower their overall cost, more and more cars and trucks on the lighter side the scale may be built with them.
That’s a big “if” of course – again, another assumption considered within the forecasting crystal ball. Yet it is something that needs to be considered as the roadmap for EVs continues to be navigated.