Reports of EV death premature
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December 03, 2012 12:00 AM

Reports of EV death premature

Automakers say they need them for CAFE

Mark Rechtin
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    BMW i3 Concept

    LOS ANGELES -- Electric vehicles and plug-in hybrids were just a fad, right? A now-faded dream from 2009.

    Sales have fallen short of targets, most EV makers are struggling and a key battery manufacturer is on the ropes. Even mighty Toyota, the hybrid leader, says it's backing away from pure electrics and plug-in hybrids.

    So why did so many executives at the Los Angeles Auto Show last week sound so optimistic (OK, some guardedly optimistic) about prospects for EVs? Toyota may be hedging its bets, but most rivals say their EV plans remain in high gear.

    EVs are "inevitable," said Chrysler U.S. sales boss Reid Bigland at the debut of the Fiat 500e here.

    Nissan Division General Manager Al Castignetti added: "No carmaker makes 54.5 miles per gallon without alternative-fuel vehicles. Direct-injection engines are not going to get you there."

    Cost, range and infrastructure remain big hurdles. But with corporate average fuel economy and state emissions regulations looming, EVs are becoming an integral part of most green-car strategies, executives here said.

    "The way the CAFE and regulatory environment is, in order to be compliant, most if not all OEMs will need some form of electrification in their product portfolio," Bigland said.

    And it's not just about complying with fuel economy and emissions regulations. Nissan's push to make the Leaf EV a mass-market vehicle has spurred other automakers to act.

    Though Nissan CEO Carlos Ghosn says the Leaf won't hit its U.S. and global sales targets this year, he remains "very comfortable in the potential for at least 500,000 cars a year [globally]. We don't think that we overinvested in this."

    Fiat unveiled an electric version of the 500 minicar, the 500e, at the L.A. show.

    Toyota executives are not convinced. The RAV4 EV, co-developed with Tesla Motors, will be limited to 2,600 total U.S. sales and leases over the next three years. And the Scion iQ EV -- initially planned for a large rollout -- has been scaled back to a handful of leases to municipalities and utilities.

    Instead, Toyota is focusing on hydrogen fuel-cell technology as an alternative to EVs.

    "Electric vehicles play a role in our future products, but their role will be limited until cost, range and infrastructure issues can be improved," said Jim Lentz, CEO of Toyota Motor Sales. "They have a long way to go.

    "We can add more value and reduce our carbon footprint better by selling 200,000 Priuses than by selling 5,000 or 2,000 or 1,000 electrics," he said.

    But Toyota is being "shortsighted," says Steve Center, vice president of American Honda's Environmental Business Development Office.

    "All the technologies are intertwined," he said. "I don't know when the breakthrough will happen, but you have to be expecting it. You can't be standing on the sidelines."

    Still, Honda's target for its Fit EV is more pessimistic than Toyota's for the RAV4 EV; Honda expects just 1,100 Fits to be leased over the next three years.

    General Motors also is taking a different path from Toyota, emphasizing plug-in hybrids, such as the Chevrolet Volt, and EVs such as the just-unveiled Chevrolet Spark EV. Much of GM's lineup also will receive eAssist mild-hybrid technology.

    "We have every intention of maintaining our leadership position in plugged-in vehicles," product chief Mary Barra said last month.

    EV maker Tesla didn't have a booth at the auto show, but Diarmuid O'Connell, the company's head of business development, was in Los Angeles to meet with potential technology partners, including Toyota.

    O'Connell says the first-generation Toyota Prius struggled to find market acceptance, but the refined second generation arrived just in time for a gasoline-price spike, and sales took off. He thinks the same will hold true for EVs.

    "EV adoption is exceeding that of hybrid adoption in the first couple years," he said. "I don't think anyone is really trying that hard. You have to have the stones to make that bet."

    Through October, sales of plug-in hybrids and battery electric vehicles have roughly tripled to 38,345 from a year earlier. Those numbers are still a fraction of the overall vehicle market, and when the Leaf is removed from the equation, pure-electric vehicle sales are in the low thousands. But once production of the Tesla Model S hits its stride that figure should jump.

    "A lot more batteries are being made, which will help drive down future costs and allow for greater range," according to a recent report by the Union of Concerned Scientists.

    C.J. O'Donnell, Ford's director of marketing for electrified vehicles, said 25 percent of the company's alternative-fuel vehicle production in 2013 will be EVs or plug-in hybrids.

    At the show, BMW unveiled a three-door concept version of its i3 EV that goes on sale in late 2013. Mercedes-Benz introduced the Smart EV -- just the beginning of EVs in the pipeline, says Steve Cannon, CEO of Mercedes-Benz USA.

    "We're still going ahead full-speed," he says. "But it's for a market that's not quite ready for electric vehicles in the volumes that are required by the OEMs to make it a real business proposition.

    "Sure, some people will make that lifestyle choice, but it's not enough to create the scale all manufacturers need. It's going to be a long haul," Cannon says.

    Dealers also must market EVs differently from traditional cars, says Nissan's Castignetti. He admits Nissan erred by "selling Leafs like Altimas."

    With the return to grass-roots marketing of the Leaf in recent months, sales have begun to improve -- shooting up to 1,600 units in both October and November.

    "Range anxiety" remains an issue. The Leaf's range is 73 miles. But Castignetti says consumers will appreciate EVs a lot more when the real-world range for pure electric vehicles hits 150 miles.

    Mike Colias, Bradford Wernle, Larry P. Vellequette and Jim Henry contributed to this report

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