Bloomberg News

Automakers Pressed to Sell No-Emission Cars to Reluctant Buyers

June 17, 2013

Automakers Pressed to Sell No-Emission Cars to Reluctant Buyers

Sales professional Scott Watkins opens the hood of a 2012 General Motors Co. Chevrolet Volt vehicle at Green car dealership in Peoria, Illinois. Photographer: Daniel Acker/Bloomberg

Automakers are coming under increasing pressure to sell zero-emission vehicles to U.S. consumers who haven’t shown much interest in them, with more states following California’s lead in setting sales targets.

Nine states, including New York and New Jersey, have adopted versions of California’s goal of having electric, plug-in hybrid and hydrogen-powered models reach 15 percent of its new-car purchases by 2025. Automakers face fines and potentially restrictions on sales for not reaching the targets.

One model made to meet the standards, Honda Motor Co. (7267)’s plug-in electric Fit, had total U.S. sales of 83 through May, according to market-researcher Autodata Corp.

“They are essentially forcing vehicles to be built and delivered to dealers who are forced to sell them,” said Bailey Wood, legislative director of the National Automobile Dealers Association, based in McLean, Virginia.

Honda had set a goal of delivering 1,100 electric Fits over two years. With a two-year supply sitting on dealer lots, the carmaker this month cut its lease rate by about one-third, to $259 a month, for new and existing customers. Three days ago, the company said some customers now have to wait for more EVs to be produced before they can get one.

Its decision followed similar moves by General Motors Co. (GM:US) and Nissan Motor Co. (7201) for the Chevrolet Volt and all-electric Leaf. The Leaf and Volt, unlike the electric Fit, are available in the whole U.S. market. Niche electric-car makers Fisker Automotive Inc. and Coda Automotive stopped making vehicles last year.

‘Inherently Risky’

Requiring minimum numbers of plug-in vehicle sales is “inherently a risky strategy,” said Edward Cohen, Honda vice president for government and industry affairs. The mandate “directs manufacturers to offer consumers technology options along a pre-determined time frame and with specified numbers notwithstanding whether the technology and market are ready.”

About one-third of 1 percent of the 6.4 million new vehicles sold in the first five months of the year were zero-emission vehicles, according to the dealers group.

U.S. regulators, who require automakers to raise to 54.5 miles (88 kilometers) per gallon by 2025 the average fuel-economy of the vehicle fleets they sell in the country, say getting to that goal will require 1 percent to 3 percent of vehicles sold to be electrics.

“An electric car is the lowest hanging fruit on the tree requiring the least amount of change from the consumer of anything we can do to reduce greenhouse gas emissions,” Steve Crolius, transportation director for the Clinton Climate Initiative, said at a fuel-efficiency forum June 13 at Consumer Reports magazine’s headquarters in Yonkers, New York. The group is part of the William J. Clinton Foundation, established by the former president.

Consumer Driven

The lower-priced electric Fit is still more expensive than the internal-combustion engine-powered version, which leases for $169 a month with $1,999 down.

At the end of May, there was a 162-day inventory of Volts, according to Ward’s Automotive Group. That compares with a 50-day inventory for the top-selling Toyota Motor Corp. (7203) Camry.

“ There are only a select number of income brackets that can afford them,” Wood said. “The Chevy Volt in terms of price tag is equivalent to a fairly equipped BMW 3 Series. At the end of the day, we are a consumer-driven economy, particularly in the auto industry.”

Charging Stations

U.S. regulators and policymakers want to reduce the extra expense of electric cars so more consumers can afford them, Ann Schlenker, director of Argonne National Laboratory’s Center for Transportation Research, said at the Consumer Reports forum.

She cited Energy Department figures showing it takes about five years of driving an electric vehicle to make up the extra upfront costs in fuel savings. That compares with a year and a half for a hybrid vehicle, she said.

“The attempt is to get to a three-year payback period” for plug-in electrics, she said.

The availability of charging stations and the time it takes to recharge are other hurdles to wider consumer acceptance. New York is among states spending money to promote and develop electric-vehicle technology, Patrick Bolton, New York State Energy Research and Development Authority senior project manager, said at the Consumer Reports event.

New York Governor Andrew Cuomo has a program, also funded with private-sector money, to install more than 80 charging stations throughout the state. The first of those was unveiled last month at a Homewood Suites hotel in Colonie, New York.

Early Adopters

The Alliance of Automobile Manufacturers, whose members include GM and Toyota, was one of two Washington-based automotive trade groups that in March filed a petition with the U.S. Environmental Protection Agency last month to block California’s sales targets.

“The sales data tell the story of what consumers want,” said Gloria Bergquist, a spokeswoman for the Alliance. “The early adopters have purchased plug-in electric vehicles but mainstream consumers have not followed yet.”

The state mandates are separate from the U.S. fuel-economy standards set by federal regulators.

U.S. National Highway Traffic Safety Administrator David Strickland said the fuel-economy standards are “technology neutral.”

“States can make the decision in terms of their own particular needs,” he said at the Consumer Reports panel. “That was a policy decision they chose to make, but from a federal perspective, we want to remain technology neutral.”

GM, Honda

California’s mandate, which accounts for about one-third of U.S. electric-vehicle sales, is part of the state’s effort to reduce emissions from vehicles, power plants and oil refineries.

“Both a market push and market pull are needed, and they need to be in sync,” said Roland Hwang, the San Francisco-based transportation program director for the Natural Resources Defense Council and a supporter of the California mandate. “We need both a long-term, stable signal for automakers to produce electric cars and a robust, growing consumer market.”

Sales won’t be helped if reluctant automakers sandbag sales, he said.

“Who killed the electric car, part three?” Hwang asked. “Some automakers are more committed than others to the clean car market. And it may surprise some that the industry doesn’t follow the past patterns. We now have GM as one of the biggest champions of electrification and Honda as one of the biggest skeptics.”

To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


Burger King's Young Buns
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Companies Mentioned

  • GM
    (General Motors Co)
    • $34.91 USD
    • -0.83
    • -2.38%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus