Managing EV Expectations

Managing EV Expectations

Posted on

Tue, 02/19/2013 - 4:50pm

by Brett Williams

On January 31st, the Department of Energy (DOE) unveiled a blueprint for its EV Everywhere Grand Challenge, an initiative with the goal to make plug-in electric vehicles (PEVs[1]) “as affordable for the average American family as today’s gasoline-powered vehicles within the next 10 years.” The blueprint incorporated feedback from workshops with invited experts—including myself and Luskin Center Director JR DeShazo. It includes goals for batteries, electric-drive systems, vehicle lightweighting, climate control, and recharging infrastructure, as well as education and policy measures.

Absent from the blueprint is mention of President Obama’s 2011 call for 1 million PEVs to be on U.S. roads by 2015. A widely carried Reuter’s piece emphasized that omission, choosing to frame the blueprint story in terms of 1) DOE easing away from its goal and 2) “weaker than expected” demand for PEVs.

 

1) Stretch goals and expectations

The Reuters piece is one in an array of characterizations that can paint a confusing and contradictory picture of EV progress. Is the government backing off from optimistic goals? Or is an increasingly sophisticated understanding of a maturing product requiring an evolving response? Here, as with California’s Zero Emission Vehicle regulations, the answer is probably “a little bit of both.”

The DOE has a storied history of Nobel Laureates and technology development. But EV Everywhere is a different kind of initiative that puts the agency in perhaps unfamiliar territory, that of innovation and adoption. EVs are at a stage where policymakers, automakers, and EV advocates might do well to take some cues from business-development types. As Michael Schrage cautioned, successful innovation “…isn’t just about managing technical breakthroughs, it’s about managing people’s expectations. Always. Credibly aligning technical progress with past promises is the central challenge confronting most innovators.” These waters are rarely successfully navigated by innovators, policy or otherwise. It places the burden back on us as consumers to think more like successful innovators, who “don’t believe the hype” but “don’t ignore it either.”

Goals, projections, and announcements, oh my!

Formalized in early 2011 for the State of the Union, DOE explicitly acknowledged the “1 million in 2015” goal as ambitious, indicating high PEV costs and consumer unfamiliarity were hurdles needing to be addressed.

Nevertheless, the agency did try to justify the goal using announcements about automaker plans for PEVs. Unfortunately, such announcements and their coverage are inherently uncertain and ambiguous. Details, when available, must be viewed in the context of ongoing development, strategic positioning, and fundraising.

 

2) Reality check: are PEV sales “weak”?

More generally, uncontextualized repetition of PEV numbers over several years have created poorly managed expectations about adoption relative to unlikely levels. To recalibrate, where does the U.S. stand with PEV commercialization? Is it good or bad? And where are we heading?

Where are we?

Compiling data from hybridcars.com and other sources, Figure 1 shows U.S. consumers purchased roughly 76,000 PEVs from December 2010 through January 2013. This includes 13 models, but not certain private-company models such as the Tesla Roadster or Fisker Karma.

Figure 1: Cumulative U.S. Light-Duty PEV Sales

Over 40% of these vehicles are Chevy Volts and a quarter Nissan LEAFs. Nearly one-fifth are Prius Plug-ins, released in March 2012. Overall, 64% of PEVs are plug-in hybrids (PHEVs) and 36% are all-electrics (BEVs). This fleet contains over 1.4 million kilowatt-hours of lithium-ion batteries and provides a sales-weighted, EPA-rated average of over 97 mpg-equivalent when operating in electric mode.

Is that good or bad?

It is too soon to tell whether the PEV story is a success or not. Even 76,000 PEVs does not a sustainable market make, and automakers undoubtedly want to sell many more. However, despite political pushback, the Chevy Volt is “outselling half of all cars on the market today.” And though the comparison spans a decade of differences, Figure 2 also shows the first 3 years of PEV sales (2010–2012) outpaced the first 3 years of conventional hybrid sales (1999–2001).

The latter point is striking because PEVs are generally more expensive, are less well understood by consumers, and require greater effort to incorporate into daily life than do hybrids. These forces make it reasonable for PEV adoption to lag hybrids, which did not reach 1 million vehicles for nearly a decade.

Figure 2: U.S. Hybrid and PEV Sales

Where are we heading?

Automakers have announced plans to sell over twenty new models in 2013 and 2014. Taken with a grain of salt, these plans present an increasing opportunity for consumers to find a PEV of their liking. It took hybrids over 5 years to exceed 50,000 in sales per year, but once they did, the 1-million-vehicle mark was less than 4 years away. PEVs are off to an early relative lead, indicating a 2015 or 2016 goal is not out of the question, if for different reasons than conceived in early 2011. But without the support of programs, like EV Everywhere, to lower their cost and facilitate their adoption and use, it would not be unexpected for PEV commercialization to take some time—steady progress rather than a weak early showing.

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U.S. PEVs will soon number in the 100,000s. How we each feel about their progress is probably largely a matter of expectations, which may not have been carefully managed to date. What do you think?



[1] Unfortunately, the acronyms used to describe electric vehicles are confusing and inconsistently applied. The term PEV clarifies the inclusion of both all-battery and plug-in-hybrid EVs. “EV” is likewise properly an umbrella term, ambiguously either including conventional hybrids and fuel-cell EVs (if referring to electric drive) or equivalent to PEV (if referring to electric fuel). But EV is also often confusingly used synonymously with BEV due to a legacy of use from the 1990s, when BEVs were the only major EV type.