The trend is clear: Hybrids and electric vehicles are the future of the automobile.
Or are they?
There's certainly been lots of activity on that front recently: Nissan's new Leaf, General Motors'
There's just one problem. Consumer interest in hybrids and electrics may be declining.
The secret to Ford's (and GM's) green success
A Bloomberg report on Tuesday got right to the point: Nearly a quarter of the hybrids sold by Ford and GM since President Barack Obama took office were sold to -- wait for it -- the U.S. government.
Surprised? Some of that was part of the economic stimulus package, but the majority was funded, as Bloomberg put it, by "selling older cars in the government fleet," or as part of the General Services Administration's ordinary course of business.
That's not a knock on Ford or GM, of course. The Obama administration, like governments around the world, obviously wants to support and encourage the adoption of green vehicles. They aren't alone: General Electric
There's more: Electricity wholesaler NRG Energy
It's clear why all of these institutions want to see lots of electric cars on the road. But does anyone else?
A chicken-and-egg problem
As Fool April Taylor put it recently, electrics and hybrids represent something of a chicken-and-egg problem. Electric cars and hybrids are more expensive than their conventionally powered counterparts, and at least in the case of electrics, they're very much a limited, unproven technology. Nissan's Leaf has a maximum range of around 100 miles -- and that's if traffic, weather, and the driver's right foot all cooperate in just the right way.
What's more, the infrastructure we take for granted with gas-powered cars just hasn't arrived yet, which limits their flexibility in real-world use. You might be able to drive your electric over the river and through the woods to grandma's house -- but I hope you're up for a long visit, because it could take eight hours or more to recharge your car using the outlet in her garage.
Hybrids don't have the range limitation of all-electric cars, but they share the cost and weight problems to some extent. You're essentially paying for a car with two entire drivetrains. But as the mileage of conventionally powered cars improves -- Ford's upcoming Focus, a car roughly the size of a Prius but several thousand dollars cheaper, is expected to have an EPA highway rating around 40 miles per gallon -- the cost, weight, and potential long-term maintenance headaches of a hybrid get harder to justify.
The assumption, probably valid, is that costs (and weight) will come down, range will go up, and recharging infrastructure will get built as sales of these vehicles increase. But consumer sales of hybrids are set to decline for the third straight year, despite gas prices that would have seemed shocking just a few years ago.
Long story short, there are lots of new models coming to market just as buyers seem to be turning away. Is this a debacle in the making?
I hope you're not in a hurry
Industry-watcher J.D. Power expects that just less than a million hybrids and electrics will be sold around the world this year. That's a mere 2.2% of the nearly 45 million passenger vehicle sales expected, and while J.D. Power expects that percentage to rise, they project it'll still be only 7.3% of the total in 2020.
What could accelerate that? More aggressive government policies in major markets like the U.S. or China might help, but such policies (at least here) seem likely to be unpopular -- unless there's a major oil crisis.
That's the fear that has driven much of the industry's recent expansion, of course. Another oil shock seems inevitable, but how the timing of such a shock will play out with the huge investments being made in electric-car technology today remains to be seen. And as Ford CEO Alan Mulally said recently, this technology only makes sense as a long-term proposition if it can stand on its own without government intervention. Ford's somewhat tentative approach to automotive electrification reflects that view, which seems like a prudent one.
What do you think? Are electric cars arriving in the nick of time? Or is this an expensive fad that's likely to fade? Scroll down to leave a comment and let me know.
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Fool contributor John Rosevear owns shares of Ford, which is a Motley Fool Stock Advisor recommendation. You can try Stock Advisor or any of our Foolish newsletter services free for 30 days. 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.
