Future shocks for EV makers

23:31, May 22 2012

Timing is a big deal in the automotive industry. If you don't have a player in the sectors that are firing, you're threatened not only with poor profits but with extinction. The opposite is also true: getting into a sector that's new, where there are significant technology costs and few sales, is fraught with danger. Development costs may never be recouped, and sluggish sales may mean a hit is taken on every unit sold. If protracted, the result may also be terminal.

That's what is happening in the electric vehicle (EV) world currently, and also with players in the small but growing range-extending hybrid class. Even the bigger players are struggling. GM recently called a temporary halt to production of its range-extending Volt. That's the car that comedian and car nut Jay Leno famously drove for a year without having to put any fuel in the tank. The Volt can do around 80km on a single battery charge without having to kick-start its petrol engine, which acts only as a battery charger.

GM is a keen player but has a patchy history in the EV area. It produced a pure electric vehicle, the EV1, back in the 90s but at that time battery technology was in its infancy and the project was controversially canned, with all but a few of the cars in circulation crushed. It sparked a fascinating 2006 documentary, Who Killed the Electric Car? The same director has just released a new doco entitled Revenge of the Electric Car.

Anyhow, GM has sales and oversupply problems with the Volt, which is expensive. It failed to reach the budgeted sales target of 10,000 vehicles in the United States in its first year. And then battery fires led to an NHTSA investigation.

Pity, as the Volt is the next logical step in the hybrid evolutionary chain, as is the forthcoming Prius plug-in hybrid. Toyota always saw its petrol-electric hybrids, which run primarily on gas but use electric power to bolster performance and to propel the car for short bursts on EV power alone, as the stepping stone between conventional (internal combustion engine) cars and pure EVs. While Toyota hybrids like the Prius  cost little more than a regular car the same size, plug-in hybrids and range extenders use larger, more sophisticated batteries and are therefore much more expensive than conventional cars of similar size.

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It's not just plug-in hybrids like Volt that are battling head winds. Tesla, the maker of pure EVs, is facing an issue with freezing battery packs when they are left in a low state of charge for extended periods. When the battery pack fully discharges it needs replacing. The cost? A cool US$40,000, and because this is a "user error", it is not covered by warranty. New fail-safe systems, including a "deep sleep" mode, should mean this is no longer a problem.

Some electric car makers, like Think Global and Aptera, have hit the skids. Fisker, a maker of premium plug-in hybrids, is also said to be struggling. And that trouble stems primarily from the cost of lithium-ion batteries. EVs cost at least twice the price of a similar sized conventional car, and often have real-world touring ranges of just 100km. This is the reason makers of EVs, like Mitsubishi, are marketing their wares primarily to green corporates. Moreover, conventional cars are increasingly economical, making more expensive alternatives even harder to justify.

As fuel prices stabilise or continue to rise, those making hybrid petrol-electrics which use smaller, less expensive battery packs are set to continue to take a small bite of total market share (around 5 per cent of Toyota sales here; 2.5 per cent of the overall market in the US). But until fuel prices skyrocket or battery technology becomes more affordable, or both, pure EVs won't gain any real mass market traction.

Holden's Volt is due to launch here later in the year for around $75k (based on indicative Australian pricing) and Nissan's Leaf EV, current holder of the World Car of the Year title, will go on sale here in July for $69,600. The only other production electric car available locally is Mitsubishi's iMiEV costing $59,990.

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