Who Will Save EV Sales? Call In The Fleets

Nissan recently cut off preliminary registrations for its new Leaf battery-electric vehicle. With 20,000 potential buyers plunking down $99 just to get in line for the Leaf, the maker is confident it will more than exceed its first-year sales target.

General Motors, meanwhile, is looking for ways to ramp up production of the Chevrolet Volt plug-in hybrid. Despite the higher price tag, GM is confident Volt will win over plenty of early adopters and enviro-activists.

It's anything but certain that consumer demand for EVs will keep up, especially after early adopters are served.
But what then? It's really no surprise that these two well-reviewed products will meet their initial sales goals. But what about the second year – and beyond?

By mid-decade, Nissan and its French alliance partner Renault plan to ramp up production capacity to 550,000 battery cars a year, worldwide. GM will also boost output of the Volt, the similar Opel Ampera, and other extended-range electric vehicles to follow. Indeed, various industry reports suggest that by 2015, there could be more than three-dozen advanced propulsion models on the market – a term that includes plug-in hybrids, extended-range electric vehicles and battery electric vehicles – with global capacity surging well into the millions.

Yet it's anything but certain that consumer demand will keep up, especially after those initial buyers are satisfied. True, a survey by Consumer Reports found that 39% of American motorists are now ready to consider a hybrid or some even more advanced model next time they're in the market. But it's one thing to look at a battery car and another to actually pay the premium.

A recent study by J.D. Power and Associates projects that even by 2020, battery vehicles will make up just 7% of the global new car market. And Power's figures include relatively conventional hybrids, as well as plug-ins, E-REVs and BEVs.

The problem is convincing consumers that battery technology is worth it. And that won't be easy, considering both the cost and limitations of electric propulsion. Surprisingly, the technology may be an easier sell to the fleet buyers that make up a substantial portion of the automotive market.

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Paul A. Eisenstein is Publisher of TheDetroitBureau.com, and a 30-year veteran of the automotive beat. His editorials bring his unique perspective and deep understanding of the auto world to Autoblog readers on a regular basis.

General Electric recently signaled the potential in this column on the sales charts when CEO Jeff Immelt announced plans to purchase "tens of thousands" of electric vehicles for the industrial giant's global sales and service fleet. With details expected to follow in a matter of weeks, it would be the largest purchase of battery cars in history.

Now, don't think Immelt is just being altruistic. GE is one of the world's largest suppliers of just about everything electrical, from conventional power grid systems to wind and solar generation technology. It is looking to become a major player in EV charging stations and is the largest single shareholder in A123, a major supplier of vehicular lithium-ion batteries.

Fleet operators know precisely what their needs are, usually down to the penny and mile. Emotions seldom weigh in.
During a speech in London, Immelt suggested General Electric believes it could eventually capture as much as 10% of the money spent on the drive to electric propulsion. But even if you ignore that part of the equation, GE has discovered other advantages to battery power, as have a growing number of other fleet operators.

As Nissan and GM have shown, ad nauseum, the vast majority of Americans actually could live quite nicely with electric propulsion, thank you. Roughly two-thirds of us drive less than 40 miles a day, about what the Volt's battery pack can deliver, and 95% of the U.S. population drives less than 100 miles a day, according to government data, within the range of the Leaf.

"But consumers aren't always rational about what they buy. Emotions weigh in heavily," suggested a former senior GM executive who is now working in the battery car field. Asking not to be identified by name, he said it will likely be difficult to move into the retail mainstream without significant improvements to battery range and cost. "But the fleet market is another matter entirely."

There, operators know precisely what their needs are, usually down to the penny and mile. Emotions seldom weigh in – unless they have a financial payoff, like being able to promote your company's green bona fides. From medical sales firms to global shipping companies, most of their vehicles fall within the daily usage range that today's battery vehicles can meet.

Steady fleet demand will help prop up the costly R&D and development programs needed for better EVs in the future.
Yes, there's a price premium, but it can quickly be compensated for by the reduced operating costs of an electric vehicle – even at 10 cents a kilowatt hour, about 2 cents per mile for a Volt or Leaf compared with 10 to 12 cents for a comparable, gasoline-powered automobile. Drive 80 miles a day, five days a week and you're saving thousands of dollars annually on fuel alone. And battery cars promise significantly reduced maintenance costs, as well, at least during the period their lithium-ion packs are under warranty, 8 years and 100,000 miles for Volt and Leaf.

Toss in federal and other incentives and the savings can be enormous. No wonder there's a growing list of potential fleet buyers looking at the new crop of battery cars, and not just those who have a vested stake in promoting the technology.

Now, many folks like to look down their noses on fleet sales. But there are fleets and then there are fleets. The low-profit daily rental companies aren't going to be a big factor in demand, except when a company like Nissan decides to divert a few cars to Hertz to help expose buyers to its new technology. Corporate fleets certainly drive a hard bargain, but they can still provide plenty of profits to an automaker selling them thousands of cars at a time.

And that relatively steady demand would help prop up the costly R&D and product development programs needed to make even better electric vehicles in the future – the ones that finally meet consumer needs and expectations.

Paul A. Eisenstein is Publisher of TheDetroitBureau.com, and a 30-year veteran of the automotive beat. His editorials bring his unique perspective and deep understanding of the auto world to Autoblog readers on a regular basis.

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