The Electric Car Market: Not Fully Charged

Large and niche automakers alike are declaring the electric car the vehicle of the future. But it's unlikely that many drivers will be plugging them in soon

A man shows the usage of a RWE charging device for a SMART electric car at the Frankfurt auto show. Miguel Villagran/Getty Images

By Moira Herbst

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At the Frankfurt Auto Show this month, electric cars are the new black. Everyone from BMW (BMWG.DE) to an Atlanta startup called Wheego Electric Cars is trotting out an electric model or two, boasting of their ample features and unique promise.

But beyond the hip music and snazzy displays, electric cars face some sobering realities that make them vehicles of the future rather than of the present. The biggest issues are price and usability. Costly batteries put these cars out of reach for most consumers, and infrastructure isn't currently in place to allow owners to plug in and charge up cars when they're away from home. Add to that speed and range limitations with electric technology, and it's clear the electric future won't come overnight.

That doesn't mean there isn't cause for excitement about electric cars, which offer the possibility of zero-emissions driving for a potentially large number of city dwellers. It does mean, though, that consumers will have to be patient.

"There are a lot of questions to be solved, and of course it will take a few years," says Stefan Bratzel, head of the Center of Automotive Research Institute in Bergisch-Gladbach, Germany. "Nevertheless, it's a major trend in the auto industry, and one can speak about a technology paradigm change."

Renault Gambles Big on Plug-ins

Some companies are fully embracing such a shift, but analysts caution it's a risky strategy. At the Frankfurt show, Renault (RENA.PA) introduced four electric vehicles it intends to bring to full production by 2012. The company is hoping to become the world leader in sales of electric vehicles, as Chairman Carlos Ghosn announced at the Frankfurt show on Sept. 15. Renault boldly forecasts that electric cars will make up 10% of the world market by 2020, but that's way beyond other estimates: Researcher IHS Global Insight (IHS), for instance, currently predicts that electric vehicles will account for just 0.6% of total industry volume in 2020, with an additional 0.7% coming from plug-in hybrid vehicles.

"Renault is taking a big gamble with its electric vehicle strategy," says IHS Global Insight auto analyst Tim Urquhart. Renault's bet, he says, will either succeed and "accelerate the wide-scale commercialization of electric passenger cars or [it] may leave Renault struggling to market and commercialize technology for which the customer has limited enthusiasm."

Other companies are making substantial investments while remaining opaque on strategy amid an uncertain market. BMW is investing $1 billion in a scheme called Project i that will create a line of small cars for urban drivers including an electric-powered version. But CEO Norbert Reithofer wouldn't say when BMW will take its first mass-produced electric car to market. "This product will come; it's a serious product," he assured BusinessWeek on Sept. 15 at the Frankfurt show.

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