Global demand for electric vehicles could outweigh near-term supply

Global demand for electric cars could outweigh near-term supply. Ernst & Young survey suggests 25% of drivers across markets would consider investing in new powertrain technology.

Over 25% of drivers surveyed across US, Europe, China and Japan said they would likely consider purchasing plug-in hybrid (PHEVs) or electric vehicles (EVs), as soon as they become available on the market, according to research by Ernst & Young’s Global Automotive Center. The report canvasses the views of a thousand licensed drivers in each of these regions to gauge consumer awareness and interest in alternative powertrain technologies.

Nearly 7% of respondents globally indicated they would definitely consider buying a PHEV or Electric Car. Applying each market’s percentage of those who said they would definitely buy to the number of registered drivers in each region results in a potential early adopter group of approximately 50 million drivers globally, over half of which are in China.

Commenting on the findings, Mike Hanley, Ernst & Young Global Automotive Leader, said, “As the survey suggests, PHEVs and electric vehicles have an opportunity to make a significant entrance into the global automotive market over the next few years. Even if only a small portion of survey respondents who said they would definitely consider one of these vehicles are serious, there would still be more than enough demand to sell out the estimated 2010 and 2011 production runs of the major and new vehicle manufacturers.”

Regional paradox

While collectively across these geographies there is a relatively positive response to these vehicles, attitudes vary significantly between individual markets.

In the US, for example, the level of awareness toward alternative powertrain technologies is higher than in any other market. However, this awareness does not translate into a higher proportion of drivers who would consider purchasing. Of those surveyed, 17% said they would never consider purchasing a PHEV or Electric Vehicle, and 70% would be unlikely to purchase until the vehicle is well-established in the market.

On the other hand, in China, familiarity with the technologies is the lowest of all the regions, but respondents are by far the most willing to purchase a PHEV or Electric Vehicle when it becomes available. A striking 60% of respondents said they would most likely or definitely considering purchasing such vehicles, far more than in any other market. Only 4% of Chinese respondents would never consider purchasing a PHEV or electric vehicles.

In Japan however, almost 20% of respondents claim they will never consider a PHEV or electric vehicles, and the percentage of early adopters is the lowest of all the regions (3%). Similar results are observed in Europe, with 13% and 5%, respectively.

Hanley adds, “The results reveal the more mature automotive markets are more skeptical of the new vehicle technologies. China on the other hand shows more dynamic characteristics, perhaps because of its shorter exposure to internal combustion technology, with the result being Chinese consumers are less wedded to it.”

Economics and environment drive decisions

Across all markets, fuel savings (89%), environmental impact (67%) and government incentives (58%) were the three most cited factors that would favorably influence drivers to purchase a vehicle with new technology. By market, fuel savings saw the highest response in the US (92%), followed by Europe (89%), Japan (88%) and China (86%). China’s respondents rated environmental impact higher than in any other market (82%).

“This indicates that while the environment and other factors are on consumers’ minds, new technology has to make economic sense,” said Hanley.

Road blocks to technology adoption

The survey also reveals that the significant factors making drivers most hesitant when choosing a PHEV or Electric Vehicle as their next new vehicle are access to charging stations (69%), price (67%) and battery driving range (66%). US drivers are more hesitant over access to charging stations (75%) and price (74%) than drivers in other regions.

“One of the key findings in this survey is that several factors equally contribute to hesitation towards new technology. Factors holding back potential buyers vary widely across these markets, which implies that distinct marketing strategies need to be designed in each market to address the diverse concerns,” added Hanley.

Major global automotive companies such General Motors, Toyota, BYD Auto of China are gearing up to release to electric cars with lithium ion batteries in 2010 and 2011.

Jeff Henning, Ernst & Young Global Automotive Markets Leader, commented, “It is clear that to sufficiently address these factors, collaboration among automotive companies, infrastructure developers, new suppliers, governments and other entities is required to fully support the successful launch of these vehicles.”

Survey highlights

• There is already tangible demand for PHEVs and EVs across all markets surveyed. A notable number of survey respondents are willing to consider the purchase of a PHEV or EV as soon as they are available.
• Despite substantial interest for new vehicle technologies, the overall awareness level is very low, even for established technologies such as the hybrid powertrain. Moreover, the majority of survey participants will not consider a PHEV or EV until they are well-established in the marketplace.
• Several factors infl uence undecided drivers to purchase a PHEV or EV. Most of them are similar across the markets surveyed but vary enough to suggest customized vehicle introduction strategies by market.
• Among the markets surveyed, China presents the greatest variations compared to the results obtained in the other markets. China demonstrates the strongest interest by far in new vehicle technologies.
• A large segment of respondents consider rising fuel prices, dependence on foreign oil and global climate change as “major” issues, and could therefore be interested in the features offered by PHEVs or EVs.
• While there are several factors that are signifi cant in determining new consumption behaviors towards more energy-friendly vehicles, the primary consideration is economic.
• There is a clear awareness gap between PHEV and EV technologies, in favor of the latter. This highlights the need for specifi c promotional and educational efforts to bridge the gap.
• In some markets, natural gas vehicles (NGVs) are more well known than PHEVs.

Survey demographics:

Of the 4,000 respondents interviewed:
• 1,000 were from the US, 1,000 from Europe (equally split between France, UK, Germany and Italy) , 1,000 from China and 1,000 from Japan
• 92% drive less than 50 miles a day
• 83% paid less than $35,000 for their vehicle
• 78% drive less than 30 miles a day
• 4% paid more than $45,000 for their vehicle
• 2% drive more than 100 miles a day

Select findings

• Between 7% and 37% of respondents in the developed markets surveyed (all except China) are willing to consider the purchase of a PHEV or EV as soon as it is available. When considered in terms of the total number of vehicles in service, these responses are indicative of relatively high volumes.
• 60% of respondents in China show a strong interest in purchasing a PHEV or EV — nearly fi ve times that of the US, Germany, UK and Japan, which also potentially represents signifi cant volumes.
• 62% of respondents have never heard of PHEV technology or have heard of it but don’t know what it is.
• 40% of respondents have never heard of EV technology or have heard of it but don’t know what it is.
• More than 60% of respondents say they are not likely to buy a PHEV or EV until it is well-established in the market, highlighting the importance of successful launches among the potential early adopters and sharing these success stories in distinct markets.
• Fuel savings is the most important favorable factor encouraging the purchase of a PHEV or EV. Other factors, such as environmental impact and government incentives, are not nearly as signifi cant to respondents.
• Battery driving range, access to charging stations and vehicle price are the factors that make our survey respondents most hesitant to purchase PHEVs or EVs. Several other factors such as performance and handling, reliability, and lack of clear understanding of cost advantage play an important role with various levels of significance across the markets surveyed.
• The vast majority of respondents would prefer purchasing a PHEV or EV over leasing. Respondents from Europe are slightly more favorable to leasing.
• There is a clear range anxiety among respondents, as 60% believe a battery driving range of less than 100 miles is unacceptable, whereas only 2% drive more than 100 miles a day.
• Willingness to pay for charging stations in their respective communities is higher among respondents than their interest for purchasing PHEVs or EVs.
• Among the markets surveyed, Japan has the lowest interest for PHEVs or EVs, with only 7% potential early adopters.

Ernst & Young’s Global Automotive Center in Detroit, Stuttgart, Shanghai and Tokyo is focused on the mega trends in the global automotive industry. It brings together a team of professionals to help you achieve your potential — a team with deep technical experience in providing assurance, tax, transaction and advisory services. The Center works to anticipate market trends, identify the implications and develop points of view on relevant industry issues. Ultimately it enables us to help you meet your goals and compete more effectively. It’s how Ernst & Young makes a difference.

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