EVs face slow but steady slog

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Electric vehicles are still in their infancy, and while we've seen some recent model introductions, consumer demand has so far been modest. While we can expect no more than modest demand in the foreseeable future, we can also expect OEMs to intensify investment, fully appreciating what is at stake in a very competitive industry.” –Gary Silberg, national automotive industry leader with consulting firm KPMG LLP

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The good news about electric vehicles (EVs) these days is that OEMs large and small are still making investments in this alternative form of propulsion.

The bad news – if it can called that – is that EVs are still projected to be adopted very, very slowly by consumers both in the U.S. and worldwide.

A recent poll of 200 global automotive industry executives by consulting firm KPMG LLP (a report given the unsurprising title of Global Automotive Executive Survey 2012) revealed that nearly two-thirds (65%) of them don't expect electrified vehicles – including all-electric and various hybrid models – to exceed 15% of global annual auto sales before 2025.

Executives in the U.S. and Western Europe are even less sanguine about that adoption rate, projecting EVs will only account for 6% to 10% percent of global annual auto sales by 2025.

[Below, by the way, is a detailed look at the all-electric Nissan Leaf. While it’s not a truck, it will give you some ideas as to how OEMs are trying to make EVs as efficient and as easy to use by the everyday motorist as possible.]

Still, despite what can only charitably called “modest sales projections” for EVs at best over the next 15 years, automotive executives polled by KPMG survey still indicate they plan to invest “significantly” in a wide range of EV technologies. Over the next two years, for example, those investments are expected to focus on several key areas:

• 83% plan to increase investment in electric motor production;

• 81% predict higher investments in battery technology;

• 76% expect increased investment in power electronics EVs;

• 65% predict increased investment in fuel cell technology, which relies on hydrogen to generate electricity.

Additionally, executives told KPMG that they expect hybrid fuel systems, battery electric power and fuel cell electric power will be the alternative propulsion technologies to attract the most auto industry investment over the next five years.

[On a related tangent, here’s a neat look at some of the pre-production work that went into building the Chevrolet Volt, a unique EV that’s had some ups and downs in the market of late.]

“What's interesting is that automakers are placing bets across the board, and large bets at that, because no one knows which technology will ultimately win the day with consumers,” noted Gary Silberg, KPMG’s national automotive industry leader.

“In last year’s survey, execs told us it would be more than five years before the industry is able to offer an electric vehicle that is as affordable as traditional fuel vehicles for mainstream buyers,” he said. “It will be interesting to see how consumer adoption progresses as automakers discover ways to offer these electrified cars at better price points and the infrastructure for these vehicles becomes more robust and accommodating.”

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When asked to name the electrified propulsion technology that will attract the most consumer demand until 2025, auto executives were as mixed as their projected investments, Silberg added.

In fact, the variation in response rates between fuel cell electric vehicles (20%), battery electrified vehicles (16%), full hybrids (22%), plug-in hybrids (21%), and battery electrified vehicles with range extender (18%) was ever so slight, he pointed out.

“The industry faces a tough decision about whether to place more trust and resources in fuel cell or battery vehicle concepts, and these results show that it's way too early to call right now,” Silberg stressed. “Clearly hybrids, whether plug-in or full, are more mature and have more market presence, but this battle for the dominant technology platform will continue for years to come.”

It’s also important to note another finding in this survey: despite all the investment and energy being focused on electric platforms, 61% of automotive executives polled by KPMG said optimization or “downsizing” of internal combustion engines still offers greater efficiency and carbon dioxide (CO2) reduction potential than any electric vehicle technology based on the current energy mix.

Considering the U.S. fuel efficiency mandates the automotive industry must meet in the not-so-distant future, EV investments could eventually feel a pinch. We’ll just have to see how that works out in the months and years ahead.

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