PORTLAND, Ore. -- General Motors is rolling out its newest electrified vehicle in two of the most eco-friendly states. But the newcomer will have to make its way in a market that is becoming more crowded, confusing and cutthroat.
Last month's launch of the Chevrolet Spark EV in California and Oregon came with none of the fanfare of late 2010, when GM's top brass rolled out the Chevrolet Volt plug-in hybrid touting an eventual nationwide retail footprint and bold sales projections.
Stubbornly tepid demand for EVs poses a challenge to GM's strategy of putting plug-in cars, rather than conventional hybrids, at the center of its electrification efforts. The entry of the nation's largest automaker into the EV fray also raises the prospect of further price erosion in that niche, as more automakers vie for a seemingly limited number of buyers.
"The difficult thing is that it's a small, slow-growing market that a lot of players are moving into," Cristi Landy, marketing director for Chevy's small and electrified vehicles, said in an interview last week at a Spark EV media drive here. "I think you're going to see some adjustments or course corrections."
There have been plenty already. Ford this month slashed $4,000 from the price of the Focus Electric. That followed Nissan's $6,400 price cut on its electric Leaf in February, to $29,650, including shipping. The move in part prodded GM last month to offer a cash rebate of $4,000 on the 2013 Volt.
U.S. sales of EVs and plug-in hybrids totaled 41,447 units this year through June. By comparison, Dodge sold 44,949 Dart compact sedans.
GM and other automakers need to develop EVs to meet California's environmental regulations, which require that zero-emission vehicles account for 15.4 percent of the state's new-car sales by the 2025 model year. GM gets some credit for Volt sales under California's regulations, but not enough to meet the requirements. Nine other states have adopted similar requirements.
Automotive analyst Alan Baum says the Spark EV is "clearly a compliance car" that GM developed to meet zero-emission mandates. But he says the quality of the car and other recent EVs, such as Chrysler Group's Fiat 500e, show that automakers have faith that there will be organic consumer demand one day.
"Once EV technology and infrastructure improves and there's more natural demand, they'll be ready," Baum says. "You can't just flip a switch."
Executives say initial Spark EV production at a plant in South Korea will be modest, without citing numbers. U.S. distribution could expand beyond California and Oregon, but executives wouldn't hint at possible future markets. The car will go on sale in Korea this fall and in some European markets in the spring.
Building on the Volt's technological success, GM has based its electrification efforts largely on plug-in vehicles. It's also betting on mild hybrids that use a small battery to assist the gasoline engine under certain conditions. For now, conventional hybrid technology, which Toyota's Prius has made the top-selling form of electrification, is absent from GM's portfolio.
GM executives insist that the Spark EV isn't a regulatory play. They're seeking to differentiate it from rivals by touting its driving attributes rather than making a purely environmental pitch. GM says the car's 400 pounds-feet of torque is the highest in the segment, and the 7.6-second 0 to 60 mph time beats all of its nonluxury rivals.
GM believes EVs eventually will gain traction and wants to be prepared with the right products, says Sam Basile, GM's executive chief engineer for minicars and vehicles for emerging markets.
GM executives believe that in the Volt, they have the ideal technology to bridge consumers to a day when EVs are capable of longer ranges at lower prices. The plug-in car has a gasoline-powered generator on board that can recharge the battery and extend its range to 382 miles.
The problem is that many consumers don't understand the difference between a Volt and an EV such as the Leaf or Spark EV, Landy says. That's been a constant frustration for GM executives, who point to the Volt's top rating on Consumer Reports' owner-satisfaction survey.
"It would be one thing if people said: 'Nobody wants it. The dogs aren't eating the dog food,'" Landy says. "It's quite the opposite. It's harder than anyone expected from a communications and consumer-education standpoint."