Is It Too Soon to Bury the Electric Car?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Decade after decade of false starts have finally brought us close to everyday electric cars. General Motors (NYSE: GM  ) and Nissan both rolled out plug-in electrics late in 2010, and Ford (NYSE: F  ) is now taking reservations on a plug-in version of its Focus hatchback. Monthly EV sales accelerated quickly last year but soon reached a plateau, and there are troubling signs that interest -- at least for the short term -- might be on the wane. Just 603 Volts and 676 Leafs left the lots last month, significantly lower than December's sales.

Why isn't the electric car catching on? Is it technology or infrastructure? There are reasons to ding batteries and charging stations, and I've already covered both. But there seems little wrong with the technology for moderate use, and early adopters have been vehemently supportive of the driving experience. Maybe a skeptical public is just zapped by the hype over electric that's been too much, too ambitious, and too soon.

Feeding the beast
EV hype has had major ups and downs since the Volt and Leaf were first announced. It's interesting to see various projections organized chronologically:

  • July 1, 2010: Volt Marketing Director Tony DiSalle confirms plans to produce 10,000 Volts for the U.S. in 2011, and 30,000 in 2012. The 2012 estimate was soon raised to 45,000.
  • Sept. 24, 2010: Nissan announces 20,000 U.S. reservations for the Leaf.
  • Nov. 16, 2010: Renault-Nissan CEO Carlos Ghosn projects sales of 500,000 Leafs per year within three years.
  • Jan. 21, 2011: Bloomberg reports that GM CEO Dan Akerson plans to increase the Volt's production capacity to 120,000 in 2012.
  • Jan. 25, 2011: President Obama calls on America to put a million electric vehicles on the road by 2015.
  • June 1, 2011: Nissan VP Al Castiganetti expects to sell 10,000 to 12,000 Leafs in the U.S. by year's end. This projection is accurate; 9,674 sold last year.
  • Nov. 4, 2011: Despite selling only 5,000 Volts to this point, Akerson appears on CNBC to reiterate 2010's projection of 45,000 Volts.
  • Feb. 1, 2012: January's sales totals come in.
  • Feb. 3, 2012: Chevrolet VP Alan Batey abandons earlier production estimates of 45,000 Volts, stating that GM would instead "balance supply and demand."

It's a bit dispiriting to see GM wave the white flag so early. Though battery fires created a public-relations black eye, the Volt was declared safe earlier this year. GM has been pushing "the car America had to build" in a media blitz ahead of retrofits that allow solo California drivers to use the Volt in carpool lanes.

But let's be realistic. To sell 45,000 Volts for the full year, GM would need to move more than 4,000 per month. Its largest monthly sales total was just over 1,500, and that came only last month.

Charting the future
Rather than just talk about the sales of Volts and Leafs, I've put together a few charts that better explain what's going on. Here's how each model's performed since the start of 2011:

Source: Monthly manufacturer sales reports.

Source: Monthly manufacturer sales reports.

Commentators will point to a fast leveling-off of sales after an early spike. But with so little data to go on, we're left with little more than a first year beset by production problems, political imbroglios, and unfortunate fires. To see how things progressed over the year, I charted cumulative sales for both models since the start of 2011:

Sources: Monthly manufacturer sales reports and author's calculations.

Sources: Monthly manufacturer sales reports and author's calculations.

The situation seems to look better from this perspective, with steadily increasing sales and a flattening growth curve. Speaking of growth curves, I extrapolated various future sales estimates, based on a few different variables in the current numbers:

Sources: Monthly manufacturer sales reports and author's calculations.

Under the first two assumptions, the average sales of two time periods (either from the beginning of 2011 or the six-month period beginning with August 2011) were added to current totals on a monthly basis until the end of 2015. The third assumption simply expected each month to generate 5% more EV sales than the month preceding it. No scenario comes close to meeting President Obama's goal.

Of course, the Volt and Leaf won't be the only EVs in 2015. Ford will have the all-electric Focus and a Fusion Energi plug-in hybrid, which (like the Volt) will be able to run on gasoline after depleting its battery. Toyota (NYSE: TM  ) is also rolling out a plug-in Prius this year, and Tesla's (Nasdaq: TSLA  ) highly anticipated Model S is coming in the summer. Does this imminent influx of competition remind you of another recent auto trend? Remember, the Prius wasn't the only hybrid on the road for long.

Source: U.S. Department of Energy.

Source: U.S. Department of Energy.

A few conclusions
Here's what I've learned through crunching these numbers:

  • The Volt and the Leaf combined have nearly double the first-year sales of the Honda (NYSE: HMC  ) Insight and Toyota Prius, the only two hybrids available in 2000.
  • More EV models will be sold in 2011 -- two years into major EV adoption -- than were sold until 2005, a full six years into the hybrid adoption curve.
  • If EV adoption is anything like the hybrid situation, we're more likely to see about 366,000 EVs on the roads at the end of 2015.
  • There were only 197,000 total hybrids at the same point in the adoption curve.
  • As many hybrids sold in 2005 as were sold in all prior years combined.
  • It's still really early in the EV adoption curve, and monthly data isn't enough.

Are EVs the solution to all our problems? No, but they're a step in the right direction. Predictions that aim for the moon and miss don't help, but politicians and executives are both known to exaggerate. Don't expect an EV revolution by 2015 -- but if hybrids are any guide, the five years that come after will be the real game-changers. EVs and hybrids are hardly cut from the same cloth, so the parallels won't be exact. But the early numbers aren't as dire as you might think, especially if you ignore unrealistic predictions and take a longer view.

If you're looking for a different way to invest in tomorrow's technology today, check out The Motley Fool's brand-new free report, "Discover the Next Rule-Breaking Multibagger." This company doesn't need big predictions, because it's already experiencing explosive growth. Find out more, download your free report now.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights.

The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Ford, General Motors, and Tesla Motors and creating a synthetic long position in Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

Read/Post Comments (4) | Recommend This Article (5)

Comments from our Foolish Readers

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 February 08, 2012, at 2:17 AM, racgolface1 wrote:

    I have to seriously question the last graph portraying hybrid sales. 2,000,000 hybrid sales per month for 2010 sounds quite high given worldwide vehicle sales approaching 80 million vehicles for 2010. That translates into 30% for all vehicles worldwide.

  • Report this Comment On February 08, 2012, at 2:57 AM, XMFBiggles wrote:

    @ racgolface -

    The last graph represents cumulative hybrid sales to date. I apologize for the mistake in graph labeling. It should read "cumulative sales" and not "sales per month". I agree that 2 million hybrid sales per month would be ridiculously high.

    Hope that cleared it up.

    - Alex

  • Report this Comment On February 08, 2012, at 11:58 AM, KingOfPizza wrote:

    It's not just enough to make an electric car; the electric car has to be comparable in price and performance to a similar fossil-fueled car. I live in Denver and would love to buy a Leaf, but the Leaf would never get me more than 10 miles into the mountains.

  • Report this Comment On February 08, 2012, at 3:30 PM, rosenauj wrote:

    Great article! EVs are here to stay this time around. Perfect point of comparison with Hybrids.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1775596, ~/Articles/ArticleHandler.aspx, 10/26/2016 1:57:54 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
DOW 18,169.27 -53.76 -0.30%
S&P 500 2,143.16 -8.17 -0.38%
NASD 5,283.40 -26.43 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 4:01 PM
GM $31.60 Down -1.38 -4.18%
General Motors CAPS Rating: ***
TSLA $202.34 Down -0.42 -0.21%
Tesla Motors CAPS Rating: **
F $11.85 Down -0.19 -1.58%
Ford CAPS Rating: ****
HMC $29.92 Up +0.23 +0.77%
Honda Motor CAPS Rating: ****
TM $115.25 Down -0.20 -0.17%
Toyota Motor CAPS Rating: ***