Government support to close cost disparity gap
Cost disparities between green and conventional light vehicles currently range from about $3,000 for conventional HEVs to more than $10,000 for some PHEVs and EVs. As a result, efficiently achieving adequate economic scale will be a continuing challenge, although early signs of substantial government support in the forms of tax credits and infrastructure support bode well for the industry. Primary demand for green vehicles will come from Triad markets (US, Western Europe, Japan) as well as from China, where the government has emphacized their production and sale.
US to lead green vehicle demand within Triad
Within the Triad, the US market is expected to experience the highest levels of demand for green vehicles, due to erratic fuel costs, the market’s unique and rising Corporate Average Fuel Economy (CAFE) requirements, and the relative lack of demand for light vehicle diesels. Despite being less cost-effective than internal combustion engine (ICE) vehicles, green vehicles have begun to carve out a loyal fuel-efficiency focused niche in the US market. Moving beyond this niche status will be the primary industry challenge going forward.
Green vehicle demand in Europe, where overall light vehicle diesel sales already exceed 50 percent of the total market, will be significantly lower than in the US, although some bright spots for selected green technologies, such as Italy’s preference for NGVs, will persist. Japan will see increased demand for green vehicles going forward, as government agencies and allied associations continue to put tax and other incentives in place to stimulate demand.
Elsewhere in the Asia/Pacific region, both China and South Korea are expected to become key green vehicle markets over the next ten years, due to government interest in dealing with mobile emissions (China), and because local production is planned (both China and South Korea). Other regions of the world will likely experience lower rates of demand, although countries overwhelmed by mobile-generated pollution such as India could mandate use to clean the air. Some emerging market anomalies exist, however, such as the high NGV penetration levels in Pakistan and Brazil.
Green vehicle technologies have become quite robust
Green vehicle technologies have become quite robust in terms of reliability and durability, given their comparatively brief presence in the market. The recent arrival of commercialization-ready advanced vehicle battery systems based on lithium ion technology has increased expectations regarding PHEVs and EVs, although costs that exceed $10,000 for these battery packs alone will hinder their short to medium-term uptake.