DETROIT: Back in 2008, with gas prices averaging nearly $4 a gallon, President Barack Obama set a goal of getting one million plug-in electric vehicles on the roads by 2015.
Since then, his administration has backed billions of dollars in EV subsidies for consumers and the industry.
Yet today – with gas prices near $2 a gallon – only about 400,000 electric cars have been sold. Last year, sales fell 6 percent over the previous year, to about 115,000, despite the industry offering about 30 plug-in models, often at deep discounts.
Such challenges are part of the backdrop for Obama’s Wednesday visit to Detroit, where he’s expected to discuss the state of the auto industry.
Despite slow plug-in sales, the industry continues to roll out new models in response to government mandates and its own desire to create brands known for environmental innovation.
At the Detroit Auto Show last week, General Motors Co(GM.N) showed off its new electric Bolt EV; Ford Motor Co(F.N) unveiled a new plug-in version of its Ford Fusion; and Fiat Chrysler Automobiles NV(FCHA.MI) unveiled its first plug-in hybrid, a version of its new Pacifica minivan.
Ford CEO Mark Fields said last week that EVs “are a difficult sell at $2 a gallon.”
Plug-in vehicles accounted for less than 1 percent of the 17.4 million cars and trucks sold last year, according to data from HybridCars.com and Baum & Associates, a Michigan-based market research firm.
That doesn’t include sales of more mainstream gas-electric hybrids such as the Toyota Prius. But hybrid sales also fell last year – by 15 percent, to 384,000 – and now comprise just 2.2 percent of all vehicle sales.
In his State of the Union Address last week, Obama didn’t specifically address electric vehicles but said: “We’ve got to accelerate the transition away from old, dirtier energy sources.”
The main obstacles for electric vehicles are their high cost and short driving range. The Chevy Bolt promises a breakthrough on both fronts, with a 200-mile range and a price starting at about $30,000 – after government incentives.
Still, that’s a steep buy-in compared to increasingly efficient gasoline-powered economy cars that can sell for less than $20,000.
“If gasoline was $8 a gallon, consumers would amortize the costs of an electric vehicle pretty quickly,” said former GM vice chairman Bob Lutz, who headed up the development of the original Chevy Volt, a pioneering plug-in hybrid. “But at $1.50 a gallon, who is going to be willing to pay an $8,000 or $10,000 premium?”
Palo-Alto electric car maker Tesla Motors(TSLA.O) has garnered praise for making high-performance, long-range sport sedans – typically selling for about $100,000 and traveling about 250 miles between charges. But other automakers have struggled to produce a more affordable car with a range longer than 100 miles.
Green car advocates say EVs are a crucial part of the effort to reduce greenhouse gas emissions and will help wean the United States off imported oil. In the long term, they argue, oil prices are almost certain to rise again, making electric cars more viable.
The industry is moving ahead with EV development for a number of reasons.
Many states, led by California, have imposed zero-emission vehicle mandates. California has set an ambitious goal to have 1.5 million such vehicles on its roads by 2025.
The state accounts for about 40 percent of all electric car sales, but only about 120,000 of the 31 million automobiles on California roads as of a year ago were zero-emission vehicles.
Many automakers worry that consumers will perceive them as technologically backward if they don’t build electric cars – even if they can’t yet sell them in large numbers.
The industry is also responding to an influx of state and federal cash and related mandates.
The U.S. Energy Department awarded hundreds of millions of dollars in low-cost loans to spur electric vehicle manufacturing by companies such Nissan Motor Co(7201.T) and Tesla. In 2009, the administration dedicated $2.4 billion of the $787 billion stimulus bill to promote battery and EV production.
Consumers can get a federal tax credit of up to $7,500 for buying electric vehicles and plug-in hybrids. The Obama administration has repeatedly proposed boosting the credit to $10,000.
Carlos Ghosn, CEO of Nissan – which saw sales of its electric Leaf fall by 43 percent in 2015 – told reporters at the show that automakers are ramping up EV offerings because of increasingly strict government mandates.
“Everybody came to the conclusion that there’s no way we can meet the emission regulation in the future” without selling zero-emission vehicles, he said. “This is not going to be an easy shift.”
Volkswagen AG(VOWG_p.DE), still reeling from its diesel emissions crisis, has touted plans to introduce 20 more plug-in vehicles by 2020.
GM chairman and CEO Mary Barra said she is convinced that customers want EVs and that gas prices won’t stay low forever.
“Long-term electrification is part of the solution,” she said at the show.
Lutz, the former GM executive, says automakers have no choice but to build them. Because of government mandates, he said, “Electric vehicles are going to have to be crammed in the market at way below what it costs to make them.”