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This story has been updated. A previous version read that the Tesla had a range of 160 miles.
Ever since last month’s bankruptcy of Solyndra, the Fremont (Calif.) solar panel maker that received $535 million in federal loans, government support for green-tech projects has been under fire. Republicans already want to cut back on a program that has approved $9.1 billion in loans from the Energy Dept. to carmakers who are willing to boost fuel economy or put electric power under the hood of future models. It’s way too early to say that the program will turn up another Solyndra. In fact, Ford (F) and Nissan (NSANY) qualified for the bulk of the money, and both are plenty capable of paying off the debts.
The bigger problem may be that the government is helping to create a market that could soon be swamped with more electrified vehicles than consumers want. Nissan and two cheeky upstarts—Tesla Motors (TSLA) and Fisker Automotive—all got government money to help bring their electrified rides to market in the next couple of years. All told, the industry’s newcomers and established players will be bringing 14 plug-in hybrids and 15 electric cars to market by the end of 2014, according to J.D. Power & Associates. It will be difficult to fulfill every carmaker’s ambitions, especially when you consider that the 181,000 hybrids sold in the U.S. this year make up only 2 percent of the car market. “We think there is potential for a glut of EVs and plug-ins,” says J.D. Power analyst Mike Omotoso. “These manufacturers have really optimistic sales plans, so we have to inject a dose of realism.”
Ready or not, here come the cars. J.D. Power forecasts that next year, consumers will buy about 50,000 plug-in hybrids in the U.S. Well, General Motors (GM) plans to sell 45,000 Chevy Volts in the U.S. Toyota (TM) has plans to sell 16,000 of the plug-in Prius, which costs $32,400 and $29,900 after a federal tax credit. Fisker plans to build up to 15,000 of its $100,000 Karma sports cars with about 40 percent earmarked for U.S. buyers. That’s a plan to try to sell at least 65,000 cars, and it doesn’t count the Ford C-Max plug-in compact SUV and the slew of EVs coming that could steal some green-minded buyers.
The EV market will also be hotly competitive. J.D. Power predicts that 27,000 EVs will sell next year, and another 58,000 will be sold in 2013. In late 2012, Nissan will be building the Leaf electric-car at its plant in Smyrna, Tenn., with capacity to make 150,000 of them. Nissan plans to sell most of those in the U.S., says Brendan Jones, director of sales and marketing for the Leaf.
In other words, if J.D. Power is right, Nissan in 2013 will be building more than double what the market wants—to say nothing of the other 14 EVs that will come to market between now and then. The challenge for EVs is that people fear they will drive 100 miles and discharge the battery before they can find a place to recharge. “Pure EVs will be a tough sell,” says Jim Hall, principal of 2953 Analytics, a consulting firm in Birmingham, Mich. “Some EVs will be winnowed out unless they are kept alive by government subsidies. Americans want high fuel economy cars.”
Manufacturers are still trying to find out what consumers want. Nissan and Tesla think full electrification is the way to go. The Tesla Roadster can go about 245 miles before needing a recharge, and the Leaf gets about 100 miles on a charge. An electric car such as the Leaf is less complex than a plug-in hybrid, and most people don’t drive enough in a day to run the battery down before they get home to recharge, says Nissan’s Jones. Nissan is trying to pitch consumers on the fact that the average commute is 32 miles, and the Leaf can get up to 100 miles before needing a charge. In certain conditions, a Leaf can get less but still enough to cover many drivers’ daily needs, Jones says. “We’re working to educate consumers,” he says. “Our vehicle overwhelmingly suits the average American’s needs.”
