Electric Cars.....There's no demand for 'em

[Drag]

Car and Driver Magazine Article

Patrick Bedard

The buyers have spoken: Forget electric cars.
BY PATRICK BEDARD
January 2004


Now for the rest of a story that began way back in April 1990. That's when General Motors unveiled an electric car and promised for-sale versions in showrooms. Smoggy California went into ecstasy.

But no good deed goes unpunished. The state's clean-air regulators couldn't let themselves be one-upped by—horrors!—an automaker, so they issued a mandate within months compelling all major car companies to sell electric vehicles by 1998.

Over the next 10 years, GM invested something north of $1.5 billion and built about 1000 EV1 two-seaters. A handful of customers were wildly enthusiastic. Everyone else sat on their checkbooks. EV1s stacked up in inventory. The sub-tepid demand became a joke around the industry.

In 1999, GM ended EV1 production with no plans to replace it. The company said folks didn't want cars that must spend more time on a charger than on the road. California responded to common sense as it usually does—it shot the messenger. It accused GM of killing in the cradle an air-pollution solution the state desperately needed. GM's environmental credibility took more dents.

The California Air Resources Board is used to getting its own way, but mandating a pet idea that's technically impossible is regulatory suicide, and agreement is pretty much universal now that battery EVs aren't ready for prime time. So last year CARB grabbed a face-saving escape from its own hubris; the new Zero-Emission Vehicle rule says automakers must build hydrogen fuel-cell electrics instead, and sets a starting date soon enough to keep the green lobby pacified.

Inquiring minds still wonder, however, who was right: GM, when it said there were no customers for battery EVs, or CARB and the Green Car Institute and the rest of the knee-jerk enviros, when they loudly insisted for years that demand was huge?

Toyota, I'm now convinced, has the answer. Ernest Bastien, head of the company's Vehicle Operations Group, showed me the results of a very careful study it had done of buyers who actually bought cars. Polls that ask folks, "Would you buy a . . . ?" are a dime a Dumpsterful. In California, where everyone talks like a Sierra Clubber, it's a no-brainer to say yes when asked about an EV. But when real customers put down their own cash, you'd better listen.

By 2001 Toyota had lots of real-world experience with green cars. Starting in 1998, it offered the RAV4 EV to fleet customers. This was a battery-powered electric with a range of 80 to 100 miles between charges. More than 1000 were on the road.

The Prius hybrid had been moving smartly through normal retail dealers since July 2000. In fact, the launch of that car is a fascinating story on its own. Supply was limited at first, and the U.S. is vast. Toyota wanted to start with the people "who want them most," Bastien said. But who are they?

Actually, this is the universal puzzle of marketing. The salesmanship can't kick in until you identify the prospects. Give old-dog Toyota credit for a new trick here—the Prius was offered on the Internet only. Contrary to years of practiced car selling, the dealers had no Prius stock for the first 18 months. Once an order was placed on the Web site, the buyer went to the dealer to work out the details, and back later to take delivery. But tire kickers need not apply.

No problem—18,000 cars were sold in the first 18 months. And contrary to Toyota's normal selling pattern, which sees heaviest demand in the Southeast, Prius sales were strongest in California. Had the company sent out the new hybrid according to the usual distribution pattern, dealer stock would have been collecting dust in Florida and Georgia, signaling back to Toyota headquarters that the Prius was a leper on the lots.

Back to the marketing puzzle. While the sellers blindly search, the prospects always know exactly who they are, and the Internet allows them to quickly connect with products they want, no matter how obscure. Toyota decided to test EV demand by offering the RAV4 EV through the Prius-proven channel.

This would be a California-only program involving 25 specially trained dealers around the state. Test drives would be available once the purchaser made a tentative commitment on the Internet. Toyota did plenty of advertising and promotion around the state, and nationally—everything from bus-shelter posters and outdoor billboards to TV spots—to let the public know the car was coming. Lease price, after certain tax credits, matched the $329 a month for the Prius (no profit here, given that Jim Olson, Toyota's senior vice-president, had already stated that the manufacturer's cost of such a car would be "more than $100,000").

Toyota tried to do right what other EV sellers had done wrong. First, the RAV4 was a real SUV with practically the same interior space as the gasoline version, not some tightly packaged two-seater of limited usefulness. The charger was included in the price, and a professional installing company was ready to go (the customer had to pay for installation). As opposed to the lease-only EV1, buyers could own a RAV4 EV; list price was $42,000 before tax incentives.

One more detail: Toyota gave dealers a reason to push the electric car by boosting the profit margin on the RAV4 EV to $2000 above the Prius.

What happened? Sales were feeble, only 47 cars in the first two weeks, just eight percent of what the Prius had done after its launch. And then they slumped: 213 EVs over six months compared with 3262 for the Prius.

EV enthusiasts have always talked of huge pent-up demand. Nope. More ominous still, in a follow-up study of the first 120 buyers, 87 responded, and 19 of them had bought the RAV4 EV to replace an EV they had been driving previously. Also significant, 40 of those buyers did not consider another model. That suggests loyalty, yes, but also a tiny cadre of true believers, and not much interest in the broader market. Worse yet, sales had dropped to about six per week after four months and leveled off there.

Green rapture didn't translate into EV sales. Ground zero for Sierra Clubbers is Berkeley, California, and Toyota of Berkeley had been the top Prius seller in the first six months, more than 100 cars, with San Francisco Toyota just behind. Each of them sold fewer than 10 RAV4 EVs in the same period.

Toyota concluded, as had GM before it, that there was no possibility of developing a profitable business with electric cars and ended the program after six months.

Battery electric cars are simply not going to happen for a very sensible reason: Customers don't want them.

Yes, this is my truck. No, I will NOT help you move.

[Drag]

Car and Driver Magazine Article

Patrick Bedard

The buyers have spoken: Forget electric cars.
BY PATRICK BEDARD
January 2004


Now for the rest of a story that began way back in April 1990. That's when General Motors unveiled an electric car and promised for-sale versions in showrooms. Smoggy California went into ecstasy.

But no good deed goes unpunished. The state's clean-air regulators couldn't let themselves be one-upped by—horrors!—an automaker, so they issued a mandate within months compelling all major car companies to sell electric vehicles by 1998.

Over the next 10 years, GM invested something north of $1.5 billion and built about 1000 EV1 two-seaters. A handful of customers were wildly enthusiastic. Everyone else sat on their checkbooks. EV1s stacked up in inventory. The sub-tepid demand became a joke around the industry.

In 1999, GM ended EV1 production with no plans to replace it. The company said folks didn't want cars that must spend more time on a charger than on the road. California responded to common sense as it usually does—it shot the messenger. It accused GM of killing in the cradle an air-pollution solution the state desperately needed. GM's environmental credibility took more dents.

The California Air Resources Board is used to getting its own way, but mandating a pet idea that's technically impossible is regulatory suicide, and agreement is pretty much universal now that battery EVs aren't ready for prime time. So last year CARB grabbed a face-saving escape from its own hubris; the new Zero-Emission Vehicle rule says automakers must build hydrogen fuel-cell electrics instead, and sets a starting date soon enough to keep the green lobby pacified.

Inquiring minds still wonder, however, who was right: GM, when it said there were no customers for battery EVs, or CARB and the Green Car Institute and the rest of the knee-jerk enviros, when they loudly insisted for years that demand was huge?

Toyota, I'm now convinced, has the answer. Ernest Bastien, head of the company's Vehicle Operations Group, showed me the results of a very careful study it had done of buyers who actually bought cars. Polls that ask folks, "Would you buy a . . . ?" are a dime a Dumpsterful. In California, where everyone talks like a Sierra Clubber, it's a no-brainer to say yes when asked about an EV. But when real customers put down their own cash, you'd better listen.

By 2001 Toyota had lots of real-world experience with green cars. Starting in 1998, it offered the RAV4 EV to fleet customers. This was a battery-powered electric with a range of 80 to 100 miles between charges. More than 1000 were on the road.

The Prius hybrid had been moving smartly through normal retail dealers since July 2000. In fact, the launch of that car is a fascinating story on its own. Supply was limited at first, and the U.S. is vast. Toyota wanted to start with the people "who want them most," Bastien said. But who are they?

Actually, this is the universal puzzle of marketing. The salesmanship can't kick in until you identify the prospects. Give old-dog Toyota credit for a new trick here—the Prius was offered on the Internet only. Contrary to years of practiced car selling, the dealers had no Prius stock for the first 18 months. Once an order was placed on the Web site, the buyer went to the dealer to work out the details, and back later to take delivery. But tire kickers need not apply.

No problem—18,000 cars were sold in the first 18 months. And contrary to Toyota's normal selling pattern, which sees heaviest demand in the Southeast, Prius sales were strongest in California. Had the company sent out the new hybrid according to the usual distribution pattern, dealer stock would have been collecting dust in Florida and Georgia, signaling back to Toyota headquarters that the Prius was a leper on the lots.

Back to the marketing puzzle. While the sellers blindly search, the prospects always know exactly who they are, and the Internet allows them to quickly connect with products they want, no matter how obscure. Toyota decided to test EV demand by offering the RAV4 EV through the Prius-proven channel.

This would be a California-only program involving 25 specially trained dealers around the state. Test drives would be available once the purchaser made a tentative commitment on the Internet. Toyota did plenty of advertising and promotion around the state, and nationally—everything from bus-shelter posters and outdoor billboards to TV spots—to let the public know the car was coming. Lease price, after certain tax credits, matched the $329 a month for the Prius (no profit here, given that Jim Olson, Toyota's senior vice-president, had already stated that the manufacturer's cost of such a car would be "more than $100,000").

Toyota tried to do right what other EV sellers had done wrong. First, the RAV4 was a real SUV with practically the same interior space as the gasoline version, not some tightly packaged two-seater of limited usefulness. The charger was included in the price, and a professional installing company was ready to go (the customer had to pay for installation). As opposed to the lease-only EV1, buyers could own a RAV4 EV; list price was $42,000 before tax incentives.

One more detail: Toyota gave dealers a reason to push the electric car by boosting the profit margin on the RAV4 EV to $2000 above the Prius.

What happened? Sales were feeble, only 47 cars in the first two weeks, just eight percent of what the Prius had done after its launch. And then they slumped: 213 EVs over six months compared with 3262 for the Prius.

EV enthusiasts have always talked of huge pent-up demand. Nope. More ominous still, in a follow-up study of the first 120 buyers, 87 responded, and 19 of them had bought the RAV4 EV to replace an EV they had been driving previously. Also significant, 40 of those buyers did not consider another model. That suggests loyalty, yes, but also a tiny cadre of true believers, and not much interest in the broader market. Worse yet, sales had dropped to about six per week after four months and leveled off there.

Green rapture didn't translate into EV sales. Ground zero for Sierra Clubbers is Berkeley, California, and Toyota of Berkeley had been the top Prius seller in the first six months, more than 100 cars, with San Francisco Toyota just behind. Each of them sold fewer than 10 RAV4 EVs in the same period.

Toyota concluded, as had GM before it, that there was no possibility of developing a profitable business with electric cars and ended the program after six months.

Battery electric cars are simply not going to happen for a very sensible reason: Customers don't want them.

Yes, this is my truck. No, I will NOT help you move.

[ITPro]

The problem with the EV1 is it sucks. The average price was $45K for a 2 seater that could only get about 100-150 miles to a charge, not nearly enough for most Californians commute, and was plagued with reliability problems. No way it could even compete with the Japanese hybrids. So, naturally, it does not sell well and GM just gives up. Electric vehicles have never been big sellers because of the limitations, but it was sad that GM gave up, they could have had a solid hybrid seller now like Toyota and Honda and got a jump on the market.

There is a market for technologically advanced vehicles, it will only grow as they grow to meet real needs at a competitive price. Hybrid sales numbers have been consistently doubling each year and are expected to triple this year with the new Prius.

[Drag]

ITPro,

The 45K price on an EV1? Where did you get that from? I was given to understand that it was for lease only. This was not a profit making program for GM, and the Prius is still not profitable for Toyota. The cost of a Hybrid program is huge, and the Prius sales figures are much less than that of even the Cavalier.

For a car company to make money on hybrid vehicles, they would have to build and sell volumes closer to that of Accord and Camry, not low volume like Prius. The real goal of Toyota's hybrid program is to gain emissions credits to offset their higher fuel consuming SUV programs.

Remember how Federal CAFE laws are structured, and that Toyota and Honda have a lot of emissions credits from selling smaller crs in the 80s and 90s. Now that Toyota and Honda are moving into full sized trucks and SUVs, they want to retain those credits by producing hybrids so that their Average Fleet Fuel Economy stays in place.

It's a great plan on their part, and what really will gall US automakers in years to come will be if they have to buy those same emissions credits from Toyota, hence pumping cash into Japanese R&D in order to keep manufacturing the way they currently do.

Skull & Bones Member since 2003

[ITPro]

No, the EV1 was for sale in California. Currently, the profit margin on the Prius is slim, but the new model is much better. While hybrid sales numbers aren’t impressive, they’re still increasing rapidly. And, they sell a lot better in other countries, with low gas prices, it’ll take a little longer in the US. As I said before, they just need to get cheaper and/or be more competitive in performance with other vehicles.

Toyota and Honda are really only moving into the full size truck market in the US as there seems to be a lack of demand in other parts of the world. It took them longer to jump on the market because of the 25% tariff on imported full size models, both Toyota and Nissan put their own plants on US soil to avoid that. And, Toyota has hybrid versions of the Highlander, RX330 and RAV4 coming out in the next two years (most likely before the hybrid Escape). So, the hybrids aren’t just to offset their trucks fuel economy.

[Drag]

First I will quote you

<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR> No, the EV1 was for sale in California. <HR></BLOCKQUOTE>


and then I quote from GM.com, in the EV1 section FAQs.

<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Why was the EV1 lease only?

Since electric vehicle technology was still developing, a lease-only option created a consistent cost of ownership for the EV1 customer. Saturn covered all routine maintenance and service under the terms of the 3-year/36,000 mile-warranty — this included everything from the batteries to tires. Saturn also provided a 24-hour roadside assistance program to make every aspect of the EV1 lease worry-free <HR></BLOCKQUOTE>

Profit margin on the Prius is included as profit in Toyota's quarterly earnings statements, however the profit is being used to make up the cost of the R&D to develop the synergy drivetrain. This was accounted for in charges over the last decade, as Toyota developed the technology for a hybrid powerplant. Now that the synergy drive is on the market, it is not generating current profit, but it is making up the cost of development. One day soon, I'm sure it will be profitable.

One of the reasons that Toyota is developing hybrid trucks is the same reason as GM is developing hybrid trucks....There's more of a market for trucks, period. And I shall quote again, and give you a link to follow for the full article.

<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR> GM calculates, for example, that if the nation's 13,000 transit buses were running as hybrids, they would save the same amount of fuel as 500,000 small hybrid cars.

Put another way, the 235 GM Allison hybrid electric buses being put into service in Seattle next year are equivalent in fuel savings to 8,000 small hybrid cars.

<HR></BLOCKQUOTE>

Detroit News

Skull & Bones Member since 2003

[ITPro]

Not according to these reviews. It was for sale for a brief time.

Car Review

GM has been “developing” hybrid engines for awhile now, I’ll be very surprised if anything actually makes it past the concept stage anytime soon.

Now, there’s more of a market for trucks in the US only. There was not 10 years ago prior to the SUV boom. The majority of domestic profits rely on truck sales because they fell considerably behind in the car market.

[Drag]

Maybe I'm missing it, but I didn't see where it said it was for sale, I just saw an MSRP listing. That's what the lease values are calculated on. GM only offered it for lease so that they could prevent competetors from buying it. Those leases had to be turned in to GM earlier this year, since GM discontinued the EV1 line.

As far as GM developing more hybrid power, it's a smart move for them to do it with their truck line first, and then for their car lineup. The GM car divisions don't need as much fuel economy help as the truck side does, since the trucks make up a huge fraction of total sales. Once the trucks get into shape with fuel economy, then those technologies can be adapted to cars easier than car technology can be adapted to trucks.

Skull & Bones Member since 2003