10 Electric Vehicle Trends to Watch in 2012

David Fessler
by David Fessler, Energy & Infrastructure Strategist, The Oxford Club

10 Electric Vehicle Trends to Watch in 2012

by David Fessler, Investment U Senior Analyst

Thursday, December 22, 2011

Yesterday, after nearly a year of waiting, I finally got to order my Nissan LEAF. It's the first affordable, plug-in electric vehicle (PEV) available to the masses. The Chevy Volt, while touted as an EV, is really a plug-in hybrid electric vehicle (PHEV). It still has a gas tank, an engine and an exhaust system.

I should receive my LEAF next March or April. It'll be the first one in my area, and one of the first in Pennsylvania.

In about a week or so, my "oil well" should be producing "oil" to fuel my LEAF. Translated, my 10-kilowatt (kW) solar panel array should be live, and connected to the grid.

The system has been finished for over two weeks, but I'm still not connected to the grid. My local power company is in no particular hurry to switch my service over and connect the panels.

I'm not surprised. Solar and wind power, and electric vehicles (EVs), have been less than enthusiastically received by the general public, and even less so by the electric utilities.

They have to manage the additional supply delivered by a solar field or wind generator. They also have the opposite problem when EV owners plug in their cars for charging.

Why all the kicking and screaming? In large part, it's due to something called the human "normalcy bias." The idea is that humans will keep doing something the same way, over and over, until they get hit on the side of the head with a two-by-four.

Buying and driving a gasoline-powered car is something most adults have done their entire lives. We know nothing else, nor have we even had a choice... until now.

I'm trying to avoid the two-by-four. You see, I think oil prices are headed up, and much faster than anyone realizes. When the oil price tipping point is reached, EVs will all of a sudden make all the sense in the world.

Many automobile companies are, rightly or wrongly, anticipating this tipping point. They're in the midst of designing and introducing more and more EV models.

While Nissan beat all others to the punch with an affordable PEV (I'm excluding the $98,000-plus Tesla Roadster here), consumers will shortly have a wide variety of makes and models to choose from.

In 2012, Ford is coming out with the Focus EV all-electric. Toyota's adding a plug to its popular Prius Hybrid. Tesla is working on a cheaper EV sedan, dubbed the Model S, and Volvo is introducing the all-electric V-70. There are more coming right behind them.

EVs for Dummies... and the Rest of Us

One of the biggest hurdles faced by EV manufacturers is educating the consumer, and it will be their focus in 2012, according to Pike Research, LLC. Few understand the difference between a PEV and a PHEV.

Maintenance costs for PEVs are drastically reduced when compared to an internal combustion engine (ICE)-powered vehicle. There are no oil changes. Brakes and rotors last over 100,000 miles. There's no emissions testing, because there's no tailpipe. PHEV owners still have to contend with all these things, since their cars still have ICEs.

In relatively short order, both China and Japan will zoom past the adoption of both EVs and vehicle-to-grid (V2G) technology. V2G gives EV owners the ability to allow utilities to use their battery pack as a source of energy when connected to its charging station.

10 EV Trends to Watch in 2012

Pike Research LLC, the leading clean-tech market intelligence research organization, recently published a white paper entitled Electric Vehicles: Ten Predictions for 2012. It's forecasting the global EV market to reach 250,000 vehicles worldwide next year.

Here's a synopsis of their predictions:

#1 The global availability and increasing sales of EVs will put an end to the "Are they for real?" speculation.

Pike believes 2012 will be the transitional year for EVs, as more models become available, and even more are announced.

#2 Car sharing services will expand the market for EVs and hybrids.

Right now, at least 10 car-sharing services are offering EVs to rent. Car sharing appeals to younger, environmentally conscious urban dwellers. Avis and Hertz are the most recognizable names, and more are jumping on this hot trend all the time.

#3 Battery production will get ahead of vehicle production.

Numerous battery companies have factories geared up to produce more batteries than manufacturers can use. Delayed model launches and slow consumer acceptance will likely result in battery prices dropping faster than expected (good news). Some manufacturers are directing excess capacity towards the grid energy storage market, also in its nascent stages.

#4 Road tax legislation in the United States that will require PEV owner contributions will fail.

Right now, PEV owners who bypass the gas station won't be paying any road use taxes, which are part of every gallon of gas purchased. A number of state bills that would force owners to pay a vehicle miles traveled (VMT) tax have died on the vine.

A yearly fee based on average miles driven will ultimately be the tax that will pass.

#5 The Asia-Pacific region will become the early leader in vehicle-to-grid (V2G).

Since EV penetration will be highest here before anywhere else, V2G will be implemented here first, and quickly dominate the market. The unreliability of the grid in this region will be greatly improved with the use of V2G technology.

#6 PEV prices will continue to disappoint many consumers.

Early adopters will pay more. The battery glut, if it shows up at all, won't be reflected in EV prices before 2013 or 2014. Early adopters will pay for the huge investment that EV companies made in assembly lines and battery and motor technology.

Ultimately, we could see prices in the low $20,000 range, but that target is a few years out.

#7 Third-party EV charging companies will dominate public charging sales.

Grocery stores, drug stores and other commercial establishments looking to attract EV owners have two choices. They can purchase and maintain the charging equipment themselves, set the fee structure, or give the power away free in order to attract customers.

The alternative is to have a third party install and maintain it. Pike feels this will be the more attractive of the two. Wal-Mart, Icon Parking Group and Simon Property Group (large mall owner) are all opting for the third-party route.

#8 Germany, South Korea and Japan will see the most progress towards the commercialization of fuel cell vehicles (FCVs) in 2012.

According to Pike, 2015 marks the start of the commercial rollout of FCVs. But it won't be here in the United States. The Department of Energy's shift away from FCVs towards EVs leaves some uncertainty in their adoption here.

#9 Employers will begin to purchase EV chargers in large numbers.

Companies who want to attract young professionals with EVs will begin to install them in large numbers. Already Google, Adobe, SAP and others have installed dozens at their U.S. facilities. 2012 will see hundreds of other global companies following their lead.

Sales in North America could exceed 5,000 units, while the Asia Pacific region could hit 18,000, according to Pike's report.

#10 EVs will begin to function as home appliances.

Pike reports that many automakers are adopting the HomePlug Green PHY communications standard. This will allow information about the EV to be passed over the power line to other smart-grid enabled devices, insuring they don't all turn on at the same time.

In summary, 2012 looks to be a big transitional year for EVs worldwide. We'll take a look next year and see how many of Pike's predictions have come to pass.

From an investment standpoint, charging station manufacturers like AeroVironment, Inc. (Nasdaq: AVAV) are still the single best way to play the growing EV market. Their business should really start to accelerate in 2012.

Good Investing,

David Fessler

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