Electric Cars

Let’s dip back a few years for a quick history lesson. It’s 2010, and various business prognosticators are confidently predicting that the number of electric cars sold in the United States in 2013 will be ~200,000 vehicles.

And in 2015, electric auto sales will reach ~280,000 units.

What really happened?

In 2013 total electric car sales in the United States were fewer than 97,000. In 2015, the figure was higher – all of 119,000 units.

It’s worse than even these statistics show. The auto industry’s own expert predictions were off by miles. In 2011, Nissan CEO Carlos Ghosn predicted that his company would have more than 1.5 million Renault-Nissan electric vehicles on the road.

That forecast turned out to be about 80% too high.

More recent sales forecasts for electric cars are much more realistic. As has become quite clear, many consumers aren’t particularly interested in shifting to a newer technology of automobile if they have to pay substantially more for the technology up-front – despite the promise of lower vehicle operating expenses over time.

Even more telling, a recent McKinsey survey found that of today’s electric car owners, only about half of respondents indicated that they would purchase one again. Ouch.

So, what we now have are projections that electric vehicles won’t reach 4% of the U.S. automotive market until 2023 at the earliest. That’s about a decade later than those first forecasts envisioned reaching that penetration level.

Is it all that surprising, actually? If we’re being honest, we have to acknowledge that the most lucrative markets for electric vehicles are in highly prosperous, population-dense urban areas with strict gasoline emissions standards – the very definition of a “limited market” (think San Francisco or Boston).

Thinking about the next technological advancement in this sector, the industry’s newest “bright shiny thing” is self-driving cars – also referred to as the classier-sounding “autonomous vehicle.” But it appears that this sector may be facing similar dynamics that made electric vehicles the “fizzled sizzle” they turned out to be.

Consider the challenges that autonomous vehicles face that threaten to dampen marketplace acceptance of these products – at least in the short- and medium-term:

The regulatory and legal ramifications of autonomous vehicles are even more daunting than those affecting electric cars. For starters, try assigning liability for car crashes.
Autonomous vehicles require sophisticated mapping and data analytics to operate properly. The United States is a big country. Put those two factors together and it’s easy to see what kind of a challenge it will be to get these vehicles on the road in any major way.
How about resistance from powerful groups that have a vested interest in the status quo? Of the ~3.5 million commercial truck drivers in the United States, I wonder how many are in favor of self-driving vehicles?

Not every new technology operates in a similar environment, and for this reason some new-fangled products don’t have such a long gestation and ramp-up period. Take the smartphone, which took all of ten years to go from “what’s that?” to “who doesn’t own one?”

But there’s quite a difference, actually. Smartphones were a sea change from what people typically considered a mobile phone, with oodles of added utility and capabilities that were never even part of the equation before.

By contrast, consumers know what it’s like to have a car, and even self-driving cars won’t be doing anything particularly “new.” Just doing it differently.

At this juncture, McKinsey is predicting that autonomous cars will reach ~15% of U.S. automobile sales by the year 2030.

Maybe that’s correct … maybe not. But my guess is, if McKinsey’s prediction turns out to be off, it’ll be because it was too robust.

Let’s face it: This hasn’t been a very good year for environmental and clean energy initiatives. First it was the Solyndra debacle — a saga that appears to be never-ending.

Next were the reports of “global warmists” getting caught fabricating documents in an attempt to deflect attention away from the steadily mounting data that’s making global warming no longer the “consensus view” in the scientific community.

And now we have a damning report about Tesla Motors’ vaunted Roadster electric vehicles, the darling of the clean car crowd.

It turns out that most of the Roadster models sold into the market suffer from severe design flaws that can essentially destroy the value of the car. If the vehicle’s battery becomes totally discharged, the car becomes completely immobile; the vehicle won’t start, and it can’t even be pushed down the street.

The only remedy for hapless Roadster owners? Tesla will cheerfully replace the battery system … for a cool $40,000. And the owners will have to pay the entire bill, too, because Tesla’s warranty policy does not cover car damage due to battery failure.

That is correct: For those who purchase a Roadster, when it comes to battery-related repairs there’s no warranty … no insurance available from outside carriers … and no payment plan.

[To be fair, Tesla does offer a $12,000 “battery replacement program” for cars whose batteries are more than seven years old. Of course, that figure doesn’t begin to cover the ~$32,000 battery replacement cost plus ~$8,000 in labor charges.]

Some auto industry wags have started to call the Roadster by another name – the “Brickster.” That’s because when the car is immobilized due to the death of the battery, it becomes completely inoperable — basically thousands of pounds of dead weight.

Owners who face the misfortune of a full battery discharge will come to find out that conventional towing won’t work because the car’s wheels won’t even turn. Instead, they’ll have to figure out a way to lift the entire vehicle onto a flatbed truck for towing and repair … in the process spending additional hundreds (or thousands) of dollars in towing fees.

And lest people think that the battery depletion occurs only because of stupidity on owners’ part in forgetting to plug their vehicle in … not so fast. In some instances cars were plugged in but the electrical charge wasn’t strong enough to charge the battery, perhaps because an extension cord was too long.

And considering the hefty ~$109,000 sticker price of a Roadster, it’s disappointing to discover that the vehicle’s battery can become fully discharged in as little as one week’s time. Good luck with that if you find yourself stuck somewhere that’s not in close proximity to an electrical power source.

And for people parking their Roadster at the airport lot during a family vacation … better just hope that the charging mechanism is working properly. Either that, or have someone check up on your vehicle several times during your trip, lest your vacation ends up costing you an additional forty-grand.

The Tesla cautionary tale is yet another example of the disconnect that exists between the promise of clean energy and the practical challenges of turning it into reality.

To begin with, at ~$109,000 a pop, how many consumers can even afford the cost of a Roadster? And how many people who could afford the vehicle will actually plan to sink their hard-earned cash into a product that possesses such fatal design flaws? Even gas pump prices of $7 or $8 per gallon won’t change that dynamic.

Tesla has sold only ~2,500 Roadsters so far. But its aggressive plans call for manufacturing ~25,000 of its new Model S Roadsters by the end of 2013.

The company’s optimistic forecasts are based on the belief that the Model S’s lower price tag of ~$50,000 will attract a new and larger crop of consumers.

But I wonder if that will actually happen. After all, the sticker price remains high … and the “battery bricking” issue will only become more apparent to consumers as more Roadster vehicles end up on the highway.

Time will tell whether the Tesla Roadster’s fortunes will soar to new heights … or sink under its own (dead)weight. Maybe it’s worth making a $40,000 bet on the outcome.