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Electric Car Glut on the Way?

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Plug-in cars have barely made a dent in the global vehicle fleet, and automakers have yet to launch their first real entries into the race for a mainstream electric car. When carmakers do start selling those models — late next year and beyond — they for the most part plan to take their time ramping up, easing into the market with regional rollouts and leases to government or corporate fleets. But, according to some industry observers, we’re on the verge of a global glut of plug-in cars. Huh?

According to J.D. Power and Associates powertrain analyst Mike Omotoso, “There is a strong possibility of an EV glut” within the next decade for the simple fact that government and environmental groups may want electric cars more than the general public does — at least at current vehicle and fuel prices. He told us today, “As much as we all want clean air for ourselves and our children, when gas is cheap we tend to buy large vehicles without too much concern for the environment.” When drivers started showing more interest in smaller, more fuel-efficient vehicles last summer, it wasn’t their environmental conscience talking, he said. When gas cost $4 per gallon, “People were thinking with their wallets.”

“There might be an EV bubble growing in the next five to seven years,” Omotoso said, as automakers and suppliers race to take advantage of stimulus funds for plug-in cars and batteries, and then start to push still-costly electric vehicles onto the market. That bubble “will then pop when consumers balk at the $40,000-plus price tag for a small EV and $50K+ for a midsize or large EV.”

The U.S. government has allocated billions of dollars in federal funds to help auto companies build out production capacity of plug-in vehicles and component technology, and other governments are taking similar measures. But Omosoto said it’s uncertain there will be enough demand to meet that new capacity.

According to MIT engineering professor Daniel Roos, who studies the international auto industry and heads up the university’s transportation technology and policy program, the glut could be global. Referring to potential challenges for General Motors’ (s GM) planned extended-range electric Chevy Volt, Roos tells the Washington Post (buried deep in an extensive feature about the Volt and former frontman Bob Lutz), “There’s already an enormous amount of competition and perhaps a global overcapacity.”

Of course, it’s not just outside observers, advocates and policymakers that are calibrating supply and demand for plug-in vehicles. Automakers themselves certainly don’t want to be caught with a glut. But as Bill Ford, executive chairman of Ford Motor(s F), said at the Fortune Brainstorm Green conference earlier this year, “Our ability to forecast has been just horrible.” He said regulations — such as a gas tax hike — are needed to help shore up demand for more fuel-efficient and alternative-fuel vehicles. “If prices are gyrating wildly,” he said at the conference, it becomes extremely difficult to know whether the company is planning the right vehicle or technology. “Hopefully suppliers and car manufacturers will plan carefully to avoid the glut,” Omotoso said, “but I’m not counting on it.”

At this point, the big prize for automakers under pressure to produce more innovative, cleaner cars may be just launching a viable plug-in vehicle. But not too far down the road, we may be seeing a race for ICE-parity (competitive costs with internal combustion engine vehicles) in the auto industry growing as intense as the race for grid parity (competitive pricing with the fossil-fuel powered electric grid) has become in the solar industry. The silver lining? Rising demand in response to dropping prices, and strides that make the survivors more competitive than ever on the larger market — although not without years of difficult margins.

8 Responses to “Electric Car Glut on the Way?”

  1. davem5321

    I have had a PHEV conversion in my Prius for 2 years. Here are some of the answers to your quesitons.
    1) The history on the Prius battery replacement is that the batteries don’t wear out. Toyota did a great job of building a system that has excellent battery managment. On the rare occasion that a replacement battery is needed you can easily find one from a junk yard at a very reasonable price.
    2) If the replacement batteries for a PHEV is made from the LiFePO4 technology, these batteries will last a long time as well.
    3) The reports I have read as indicating that the LiFePO4 batteries will easily last 10 years. However making it to 15 years may be pushing it.

  2. I am behind electric vehicles all the way. I do have some questions though:

    • Since, as indicated in an earlier post, the Prius has been out on the market for 12 years, is there any hisotry on replacement battery cost?
    • Or better yet, can anyone tell me how much a replacement battery is for a plug-in hybrid which requires a larger battery?
    • Do we know what the life of a plug-in hybrid’s battery pack will be?
    • Do we have to replace it during the life of the car or will it last 15+ years?
    • If I run the car for 15 years and then try to trade it in on a new electric, is there any residual value in a plug-in hybrid with a spent battery?
    • How will leases work for the plug-in hybrid?
    • Will auto manufacturers be able to offer leases on a vehicle with little to no residual value at the end of the term?
    • Will they need to pass on additional charges or fees to make their off-lease vehicle marketable?

    I wonder what Toyota is experiencing with the portion of their hybrid fleet that needs new batteries?

  3. My sentiments as well,

    How could anyone say there may be a glut of EV/PHEV’s in the next 5-7 years. Production levels even over this time frame will still be small. For example, Toyota only just hit the one million mark for the Prius hybrid, which has been out now for 12 years.

    The real glut already exists right now with SUVs/cars running on ICE engines.

    Until Americans and the rest of the world are given another choice on how to fuel their vehicle, we’ll never know if this potential glut scenario will play out. My prediction is that the opposite will happen. I think everyone will be scrambling for a PHEV/EV. Look at the Prius. Right now as we speak, it’s the best selling car in Japan.

    With the fed tax credit up to $7500, possible local tax credite (here in Oregon, they’re moving towards a $3,500 credit) and a possible cash for clunkers program, a $50K PHEV or EV could actually cost much less. Isn’t $40k or less doable for mainstream America, knowing that there’s also a fuel cost savings of around $1000 or more per year.

    Lastly, all this talk about the environment and cheap gas prices being the biggest factors in consumers’ minds when choosing whether to buy an ICE or PHEV/EV, think about our nation’s effort to stimulate our local economy. If you buy a PHEV/EV, you will be fueling that vehicle with power generated by American resources and jobs, not by oil from Nigeria, Venezuela, Saudi Arabia, and Iraq.

  4. Let me assure J.D. Power & Associates…

    As soon as a main stream auto company delivers an electric drive train pug-in vehicle that seats four or more (where I don’t void my warranty by installing my own battery), I will be buying it.

    Game changers I’m currently watching:
    ZENN second generation highway capable electric car.
    EEStor high capacity quick charge capacitor type batteries.
    Magna’s purchase of Opel and intent to build Ampera in North America.

    As for the “infrastructure” I would need, it already exist; There is a wall plug in my garage. Did everyone stay away from the internet back in 2001 because less than 1% of the world’s population had access to a internet accessible computer?

    Peak-Oil has been reached. Do you really believe that gas prices will remain “stable” for the lifetime of a new car bought today?

  5. I echo Paul. Trying to accurately predict the uptake of EVs is fruitless. Two things that WILL influence uptake of PEVs and EVs are: 1)good widespread infrastructure for recharging (which should be incentivized), and 2) high petroleum fuel prices (gas/petrol/diesel). Those that are concerned should look at what can be done to upgrade 1.

  6. Another twit predicting the end of EVs before they’ve even hit the streets.

    Seriously, J.D. Power and Associates and the rest of the ‘analyst’ industry need to get a proper jobs. They belong with all the Wall Street losers who delude themselves that they can predict the future….. 10 years out… LOL

    These clowns need a night at the dog track to witness idiots routinely prove that you can’t predict 10 second into the future let alone 10 years!