Editorial: Selling electrification

Image: Honda_Fit_EV_Google_02.jpg

Steve Center, Vice President of the Environmental Business Development Office at American Honda, presents the keys for a 2013 Honda FIT EV to Kevin Mathy, Transportation Manager at Google, and (left) Rick Needham, Director of Green Business Operations at Google. The Fit EV will be placed in the company's G Fleet, which will provide Honda with real-world feedback on electric vehicle usage in fleet and car sharing situations.

In late January, Honda delivered one of its first Fit EV battery-electric vehicles to the city of Torrance, CA, and then about a week later announced tests of the car with Google Inc. and Stanford University. Each EV customer will provide Honda with real-world feedback on the EV and will use it to further research into human behavior and usage in personal, fleet, and car sharing. These are the first major steps in the Honda Electric Vehicle Demonstration Program, a prelude to the EV’s retail market launch with customers in California and Oregon this summer.

Honda’s and other automakers’ programs also have an eye on recent mandates upcoming in California and other states adopting stringent new environmental regulations. In late January, the California Air Resources Board (ARB) approved a package of vehicle polices intended to reduce air pollution and adverse public-health impacts of cars and trucks while accelerating the market for EV technology. One key aspect of the new regulations is a requirement for battery, fuel cell, and plug-in hybrid electric vehicles to account for up to 15% of California’s new vehicle sales by 2025. Overall, the program will result in more than 1 million such vehicles being sold in the state between 2018 and 2025. Ten other states have already adopted the California ZEV program, nearly tripling its impact on the electric-car market.

“These robust, zero-emission vehicle standards will provide the market assurance automakers and the energy industry need to transform the electric vehicle into a mass-market success,” said Don Anair, Senior Engineer with the UCS (Union of Concerned Scientists) Clean Vehicles program. The initiative makes zero-emission vehicles more affordable for consumers, added Anair.

The big question is: Will consumers want the new electrified vehicles? With the exception of Toyota’s Prius, sales of electrified vehicles have not been as strong as hoped.

Sales success may depend on Gen Y’s strong affinity for hybrid vehicles, which could make it the “generation that leads us away from traditional gasoline-powered vehicles,” said Craig Giffi, Vice Chairman and Automotive Practice Leader at Deloitte LLP, after reviewing the findings of his company’s annual survey of what consumers in the U.S., China, and Western Europe want in automobiles.

About 59% of Gen Y (19- to 31-year-old) respondents surveyed prefer an “electrified vehicle” over any other type of car or truck, with a heavy emphasis on hybrid gasoline-electric vehicles (57%) over pure battery-electric vehicles (2%).

According to Giffi, Gen Y consumers may be the game changers in the U.S. because, at nearly 80 million strong, they are the largest consumer segment since the baby boomers. According to projections, Giffi says that 25% of new automobiles sold this year in the U.S., and 40% sold in the next 10 years, could be bought by Gen Y consumers.

Gen Y consumers are drawn to hybrids for several reasons, most notably fuel efficiency; 89% are considering buying a vehicle that gets better mileage, especially true when gasoline prices rise above $2.75/gal—the median price Gen Y consumers see as “fair.” In addition, 49% of Gen Y consumers are willing to pay an additional $300 for each mile-per-gallon of improvement they can get out of a hybrid—only $50 less than the $350 mile-per-gallon premium that Deloitte estimates a hybrid vehicle currently costs compared to an internal-combustion-engine vehicle. Interestingly, even with their overall preference for hybrids, Gen Y consumers still prefer a non-plug-in hybrid by a margin of more than two-to-one over a plug-in version.

If the Deloitte findings hold true for the broader consumer audience, the industry clearly faces a challenge in convincing consumers to buy plug-in electrified vehicles. The regulatory authorities may need to help persuade a skeptical public.

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