The Curious Lack of Demand for Electric Vehicles

United States automakers are gearing up efforts to produce more fuel-efficient and alternative vehicles, including hybrids and electric vehicles. Fuel prices have risen on average 21.8% in the last year due to instability in the Middle East and Japan and other factors; crude prices now hover around $100 a barrel and prices are predicted to remain unstable. The federal government is pushing for more fuel efficiency through new emissions standards and subsidies to automakers as well as consumers. In August of 2009, $2.4 billion of stimulus money was allocated for the development of electric vehicles, and the Obama administration has a stated goal of 1 million electric vehicles on the road by 2015. In addition, new fuel emissions standards will require new vehicle averages of 35.5 miles per gallon by 2016, an increase of 10 mpg over current standards.

Automakers Scrambling to Make More Electric Vehicles

Automakers are scrambling to comply. Two new electric vehicles are on the market – Nissan’s Leaf and GM’s Chevy Volt. Chrysler is working on a hydraulic hybrid minivan developed in partnership with the EPA. Ford is pushing their new “Eco-Boost” engine technology, and other car companies are continuing to expand their hybrid and fuel-efficiency vehicle lines.

Where is consumer demand?
Hybrid vehicles only account for 2.0% -2.5% of vehicle sales. And sales of the Leaf and Volt have been disappointing. A study in late 2010 by J.D. Power and Associates found that electric cars are still too costly for consumers’ tastes and that demand is unlikely to change much for another decade. On average, a fuel-efficient hybrid will cost an additional $5,000 over traditional internal combustion engine vehicles. The study predicted that by 2020 only 7.3% would be hybrid or battery-operated vehicles. The study reported that consumers are also worried about the range of electric vehicles which need to be recharged at least every 50 miles. Gas prices are not yet high enough to force consumers to consider alternatives and drivers also have concerns about the reliability of the new technology. Some simply dislike the look or design of the vehicles and don't want to give up their massive SUVs.

Other Market Influences

There are other issues as well. Debate abounds about whether electric cars will reduce carbon emissions sufficiently if coal-fired plants are providing the electricity used to power the vehicles. Also, at least one of these “electric” cars, the Volt, still utilizes a gasoline engine to help maintain the charge and the fine print reveals that 25-50 miles is the expected range in moderate conditions. Additionally, there is the question of how to dispose of depleted battery packs and the impact of those on the environment.

Despite tax credit incentives of as much as $7500 and possibly more in the future, consumers are still wary of this technology. It remains to be seen whether concerns over cost and practicality can be overcome enough to spur demand the way automakers, the government and environmentalists would like. While the current low demand makes the EV market a little shaky, rising gas prices and increasing environmental concerns do seem to be picking up the pace. Many consumers prefer electric to gasoline when given a choice. A recovering economy should help consumers afford the cars they prefer, and probably sooner than J.D. Power and Associates thinks.

Jessica Bosari writes for CarInsuranceQuotesComparison.com. The site works to educate consumers so that they can make informed decisions when they compare car insurance quotes.