Will Electric Cars Live Up to the Hype?

Will it be remembered as a landmark? Or as just a tiny footnote?

News that Nissan has started mass production of its all-electric Leaf in Japan could go down in history as the day that the car as we know it changed forever. Or it could be relegated to a footnote, the beginning of an industrywide misadventure with a technology that never quite reaches mass acceptance.

Which will it be? There are a lot of reasons to think that electric cars like the Leaf represent the future of the automobile. But there are also reasons to think that the hype won't be matched by the reality.

A big investment in an uncertain future
As Toyota's (NYSE: TM  ) experience with its hybrid Prius proves, consumers are willing to embrace new auto propulsion technologies if they're packaged in a way that fits their established habits. Like other hybrids, the Prius has a complex electrical drive system and funky brakes that help recharge its batteries, but for the most part, living with it is like living with any other car. It has a normal-sounding engine under the hood, it runs on gasoline, and every few months you get the oil changed.

The technology may be novel, in other words, but the experience mostly isn't.

Contrast that with the experience awaiting Leaf owners: There's no conventional engine at all, just an electric motor. It needs to be recharged frequently -- if you come home tired after a long day at work and forget to plug it in, you might not be going anywhere tomorrow. Its range will probably vary quite a bit from day to day: A little zestful driving (or a cold snap) could mean the difference between a relaxed detour and a white-knuckled please-let-me-make-it-home drive.

Still, I don't think Nissan will have too much trouble selling the 20,000 or so Leafs it hopes to bring to the U.S. next year. Preproduction models made available to the media have received solid reviews, and with 20,000 "reservations" for the car already made, the company's chances of a successful launch look good.

Defining "success" carefully
Success, of course, is relative. Having 20,000 new electric cars on U.S. roads might seem like a big deal, but in terms of total U.S. vehicle sales, it's a drop in the bucket. It's expected that automakers will sell close to 12 million new cars and trucks here this year, and that's actually a low number by recent historical standards.

But Nissan, and the other manufacturers like Ford (NYSE: F  ) that are gearing up to launch EVs, are understandably treading carefully here. It takes several years and hundreds of millions of dollars to develop a totally new vehicle and bring it to market. It's a huge commitment, and manufacturers are reluctant to make that commitment to a technology when there's no proven market for it.

Contrast EVs with hybrids, which over the last decade have become part of the automotive mainstream. Toyota's success showed the way, Honda (NYSE: HMC  ) and Ford have had them for years now, and nearly all manufacturers have come to embrace the technology. Even Porsche has said that it will offer a hybrid version of every one of its models before too long, and Ferrari is planning hybrids as well.

Purely electric-powered cars are still a different story. Until the Leaf, Tesla Motors (Nasdaq: TSLA  ) was arguably the technology's most visible proponent, but with sales of fewer than 2,000 cars to date, the Silicon Valley automaker's impact has been more heard about than seen. Tesla hopes to change that with its upcoming Model S sedan, but even if the Model S is a success, its sales numbers seem likely to be in the same range as Nissan's projections for the Leaf.

And while Tesla's management talks a good game, that's still a huge "if."

A boondoggle in the making?
Auto suppliers like Magna International (NYSE: MGA  ) and Johnson Controls (NYSE: JCI  ) have placed heavy bets on an electrified automotive future, investing millions in efforts to mass-produce lithium-ion batteries and other electric-auto components. Hybrids will absorb some of that capacity, but how much? A J.D. Power study released this week suggested that hybrids and EVs combined might still represent less than 10% of the global auto market by 2020.

That's not exactly a revolutionary number. Like I said, I don't think Nissan will have too much trouble selling 20,000 Leafs next year. But the company expects to be able to produce as many as 500,000 a year by the end of 2012.

What do you think? Will the Leaf (or any all-electric car) ever sell in those kinds of numbers? Scroll down to leave a comment and let me know.

Ford may be wading slowly into the electrified future, but its latest blowout quarter shows it's selling plenty of cars in the here and now.

Fool contributor John Rosevear owns shares of Ford, which is a Motley Fool Stock Advisor pick. You can try Stock Advisor or any of our Foolish newsletter services free for 30 days, with no obligation. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 28, 2010, at 3:46 PM, ScottishPete wrote:

    I live in a small town and don't drive more than two to three miles from home for weeks at a time. My office before I retired was 7/10 mile from my home. Switching drivers like me to pure electric cars would leave gasoline for those traveling long distances, creating a more balanced energy diet for our too foreign oil-dependent country.

  • Report this Comment On October 28, 2010, at 7:39 PM, homesteadblogger wrote:

    Cars won't be able to run on gas once the world's oil fields have been depleted. That won't be any time soon, of course, but the rules of supply and demand dictate that gas prices eventually go higher. The price per gallon will become too prohibitive for the average consumer, long before the supply has dried up. The internal combustion engine is doomed in the long run.

  • Report this Comment On October 28, 2010, at 7:41 PM, baldheadeddork wrote:

    I'm between skeptical and bearish on pure electrics because the range limitations are going to make them impractical as primary vehicles for most buyers.

    But I'm bullish on hybrids, especially plug-in hybrids in the style of the Volt and the Fisker Karma, if it ever reaches production. They will have the range and the flexibility to still get you to work if you forget to plug it in. But when you do plug in you can recharge for the equivalent of 60-75 cents per gallon compared against a car that gets 30mpg combined, That's a compelling argument now when gas is $3 a gallon, but when oil returns to $140 a barrel and gas goes north of $4, the perceived savings of a plug in hybrid are going motivate a lot of people to buy them. That is the future.

    I think the JD Powers number is way too conservative. If we really are post peak-oil, 20% by 2020 is going to be the low end of the spectrum, I think.

  • Report this Comment On October 28, 2010, at 11:18 PM, hsr0601 wrote:

    The yellow and purple Audi A2 car took around seven hours to complete the 600-kilometre (372-mile) stretch, even had the heating on.

    Driver Mirko Hannemann, the chief of DBM Energy, drove the distance at 90 km/h (55 miles per hour) on average, had the heat on and was able to whisk around a few more miles in the city. When the A2 electric finished, it still had 18% of the initial electric charge in the battery.

     

    It has a lithium-metal-polymer battery. DBM Energy, the company that built the battery and electric motors into the Audi A2, said the battery would function for 500,000 kilometres.

     

    A representative of the car said the Audi still featured all the usual creature comforts such as power steering, air-conditioning and even heated seats as well, so it was not like the car was especially made for long distance record attempts

     

    The German engineers said their car was special because the battery was not installed inside the luggage area, but under the luggage area, meaning the full interior space of the car was still available

     

    The battery, based on what DBM Energy calls the KOLIBRI AlphaPolymer Technology, comes with 97 percent efficiency and can be charged at virtually every socket. Plugged into a high-voltage direct-current source, the battery can be fully loaded within 6 minutes

    The young inventor couldn't give an exact price for his battery -- he said that was dependent on scaling effects -- but vowed it wouldn't just be more powerful, but in the end also cheaper than conventional lithium ion batteries.

     

    What's more important, the technology which made the trip possible is available today.

     

    German Economics Minister Rainer Bruederle, who subsidized the drive, said it showed electric cars are not utopian but really work.

  • Report this Comment On October 29, 2010, at 10:39 AM, TMFMarlowe wrote:

    @baldheadeddork, I'm with you on that JD Power number -- it sounds crazy-conservative to me. I need to take a closer look at their analysis. More on that next week, most likely.

    John Rosevear

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