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Here's What We Really Want From Electric Cars — And What Carmakers Must Do
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Americans are warming up to electric cars — but are hesitant about paying for them. And an auto industry still struggling to make electric vehicles profitable is miles away from providing what consumers really want.

Stakes are high for automotive stocks Volkswagen (VWAGY), General Motors (GM), Ford Motor (F) and Fiat Chrysler (FCAU) as they make a major pivot to electric cars, and even for early leader Tesla (TSLA). Globally, automakers are investing $225 billion to develop EV cars through 2023, according to AlixPartners.

But after spending all those billions, will anyone buy their EVs?

A new Electric Vehicle Outlook Study by Investor's Business Daily and TechnoMetrica found 60% of car buyers today would be interested in a vehicle running on alternative fuel for their next new purchase. That's up seven percentage points from a similar study done in 2014. Younger drivers are the most enthusiastic about electric cars, while older and middle-income Americans are "starting to embrace" EVs, said TechnoMetrica President Raghavan Mayur.

But putting their money where their mouths are is another matter. The share of people considering an actual switch to an alternative-fuel car declined to 20% from 25% in 2014. Range and charging infrastructure topped their list of concerns, with EV range — or distance traveled on a single charge — growing even more important in their decision to buy.

Electric Cars Stir 'Outright Fear'

"Range anxiety is a very real problem," said Sam Jaffe, managing director at Cairn ERA, a research firm in energy storage. "That term 'anxiety' is understating the despair that a driver can experience when they're running low on electricity. Getting stuck on the side of a road because you ran out of fuel, that's not anxiety, that's fear, outright fear."

That may explain why plug-in hybrid cars (28%) and conventional gas-electric hybrid cars (27%) outpolled all-electric cars (23%) in the survey of 854 drivers conducted April 26-May 5.

The good news is that car companies are making steady progress improving the range of electric vehicles. For example, the Nissan (NSANY) Leaf, which took EVs mainstream nine years ago, has gone from 73 miles of range back then to more than 200 miles now, according to EPA estimates. And premium Tesla cars now deliver 370 miles.

But auto industry EV moves fall far short when it comes to making charging stations ubiquitous and fast. That's preventing companies from closing the deal with consumers.

"It's so difficult to find a fast charger where you need it, when you need it, today," Jaffe said. "It's a chicken-and-egg problem. You either have a ubiquitous fast-charging infrastructure, and that allows you to buy an electric vehicle. Or you don't, and it stops you from buying an electric vehicle."

The Perfect Electric Car

Ideally, consumers want an EV offering more than 270 miles of range, taking two hours or less to charge and costing no more than $30,000, according to the survey.

No electric car on the market today manages to tick off every one of those boxes, despite big strides in EV battery technology. They're getting awfully close though, a fact that perhaps most people don't appreciate.

Exhibit No. 1: The new Hyundai Kona Electric goes 258 miles on a charge, better than any pure EV except higher-end Teslas. It costs $30,495 after tax credits.

Exhibit No. 2: The new Nissan Leaf Plus offers 226 miles of range and costs $29,945 after credits.

Then there are the new Kia Niro EV, Tesla Model 3 and Chevrolet Bolt, which all offer around 240 miles and cost under $35,000 after credits. (Federal tax credits for Tesla and GM, however, are phasing out.)

The Network Effect For Electric Vehicles

Paradoxically, one of the biggest obstacles to mass EV adoption that car companies face has little to do with the vehicle itself. The availability of charging stations was the No. 2 factor in consumers' decision to buy an electric car, behind range.

The U.S. now has roughly 22,000 public electric-vehicle charging stations with more than 68,800 charging units or outlets, according to the Energy Department. That's up from 16,000 charging stations and 43,000 units two years ago.

That's just a fraction of the roughly 115,000 gas stations in the U.S. Unlike with conventional cars, though, drivers can charge EVs at home. Jaffe believes most charging will be done at home and at work, especially for cars with large batteries.

Automakers are racing to make charging more accessible, as consumer expectations rise. Firms like McKinsey & Co. have also warned that lack of access to efficient charging could become a roadblock to mass EV adoption.

Since 2017, Tesla has more than doubled the number of global Superchargers to 13,344. GM and construction giant Bechtel are together installing thousands of charging stations nationwide. So is Volkswagen via its Electrify America EV charging network, created basically to atone for the diesel emissions scandal.

Even oil giant Royal Dutch Shell (RDSA) is deploying charge stations across the U.S. and Europe, as it makes a pivot to electric power.

Charging Times For All-Electric Cars

Consumers' patience is also wearing thin on the acceptable wait times for charging EV cars. In IBD's study, 59% expect a charging time of two hours or less, up from 51% in 2014. Only 11% are OK with a charging time between four and eight hours, down from 15% five years ago.

Charging speeds are categorized in three levels. At Level 1, a Hyundai Kona would take up to 60 hours to fully charge. It would take six hours at Level 2 and less than one hour at Level 3.

However, Level 3 chargers are costly and represent just 16% of connections at U.S. public charging stations.

New electric vehicles, such as the hotly anticipated, all-electric Porsche Taycan, could spur the growth of ultrafast chargers. If hooked up to the new generation of 800-volt charging points, the sports car could fill up on 250 miles of range in as little as 15 minutes.

Such high-end charging may not be in much demand. And Jaffe considers fast chargers a nice perk, rather than a requirement for EV adoption.

Automotive Industry To Flood Market

Whether consumers will buy them or not, hundreds more varieties of electric cars are on the way.

AlixPartners estimates more than 200 EV models will launch globally by 2022, including 60-plus just in China. Volkswagen plans 70 new EV models by 2028. BMW plans 12 EV models by 2025.

Sales targets are also aggressive. GM plans to sell 1 million electric vehicles a year by 2026, including electric trucks and SUVs. Tesla aims to build 1 million cars in 2020 (though its targets are notoriously optimistic). Volkswagen sees 22 million over the next decade. Toyota eyes electric vehicles and hybrid sales of 5.5 million by 2030.

The move to EVs comes amid a regulatory push led by China and Europe to improve urban air quality. That helps explain the flood of new models despite the fact that electric cars still aren't profitable for automakers nearly a decade after the first Leaf made them mass-market vehicles.

"There's a lot of investment but from a return perspective, it's going to be very minimal," said Arun Kumar, a director in the automotive practice at AlixPartners.

Meanwhile, sales of lucrative SUVs and crossovers have slowed across the automotive industry, joining the plunge in sedans and hatchbacks. If SUV profit margins fall sharply, it's going to be a real struggle for automakers to transition to electrics.

What's The Future Market For EV Cars?

Sales of electrified vehicles — including plug-in hybrid cars — more than doubled in 2018, due mainly to a spike in the Tesla Model 3. But growth is off a small base: Electric cars were just 2% of total auto sales, up from 1.1% in 2017, according to car site Edmunds.

Whether EV cars can expand beyond a niche market will depend on the auto industry's ability to meet consumers' range and price preferences — and live up to promised investments. AlixPartners predicts EVs will swell to 16%-21% of the U.S. market by 2030, but warns heavy spending comes just as key auto markets stagnate or fall, profit margins erode, and return-on-capital-employed approaches Great Recession levels.

"The next generation of electric vehicles will have closer to 300 miles of range, which will satisfy 70% of consumers on the road today," Kumar said.

Consumers are also growing more aware that the environmental impact, fueling costs and maintenance needs of electric cars are lower. Experts caution that alone won't be enough to make EVs popular, though.

The Holy Grail Of Electric Cars: An Electric Camry?

Jaffe is waiting for an electric car that goes after America's top-selling sedan, the $25,000 Toyota (TM) Camry. "If you can do an equivalent kind of car that acts and feels like the Toyota Camry at that price point, then you've succeeded," he added. "Nobody has been able to do that."

Although he likes EVs personally and owns one, Jaffe sounded bearish when asked about consumers overall.

"I think Americans in general are pessimistic about EVs," he said. "People are much more exposed to range anxiety here than in a typical European city, where you drive maybe five to 10 miles per day. It makes people think, 'Hey, this is never going to compete with a gasoline engine.' I disagree with that, but I think that public sentiment and wariness about how far EVs can get is the biggest problem."

Licensing: The full Electric Vehicle Outlook Study by Investor's Business Daily and TechnoMetrica is available for licensing through IBD's partner, The YGS Group, at This email address is being protected from spambots. You need JavaScript enabled to view it. or 800-290-5460.

Please click here to read the original article on the Investor's Business Daily website.

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