Beyond Detroit Auto Show Hype, Gas-Powered Models Still Rule
DETROIT -- Judging from the hype at the North American International Auto Show in Detroit this week, one might think electric cars and hybrid cars are about to take over the world. Nearly a dozen cars at the show, which runs until Jan. 22, come with advanced battery power instead of just gas-fueled engines.
But speak to industry veterans and it's clear that gasoline will be king for many years. Consumers' enthusiasm is mild for the alternative fuel cars.
Few auto executives think there will be mass acceptance of electric and hybrid cars until at least 2025, when the country's Corporate Average Fuel Economy, or CAFE, regulations kick in, forcing automakers to make cars that attain 54.5 miles per gallon on average.
Until then, relatively low gas prices and cheaper technology will keep motorists humming along in regular gasoline-powered internal combustion engines.
"Internal combustion engines are not going away anytime soon," said Gary Silberg, head of KPMG’s automotive unit and a partner at the firm. Silberg released a report last week that demonstrated the skepticism that global auto executives have for electrifying cars: About 65 percent of those surveyed say electric vehicles and hybrid cars will account for just 6 percent to 10 percent of global annual sales worldwide through 2025.
Even though hybrid and electric car sales have been on the rise in recent years, consumer demand could start waning. A tax credit aimed at making it more economical for Americans to plug in an electric car expired on Jan. 1. Consumers can no longer obtain $1,000 to install at home a 220-volt electric car-charging device. A $7,500 federal tax break given to those who purchase electric vehicles could also be on the chopping block as legislators seek more ways to balance the budget.
Hybrids are more expensive than regular engines for one primary reason: They use two different systems to drive the car; one gas powered and the other electric, adding about $3,000 to the vehicle's price. And the technology for electric cars is brand-new and highly expensive –- although automakers won’t say how much the new battery systems cost.
"I think the level of skepticism is well justified," Sergio Marchionne, CEO of Chrysler and Fiat told reporters on Monday. "But if an American auto executive thinks he can get to the CAFE standards of 2025 on combustion engines alone, he's probably smoking an illegal substance."
Chrysler has just one electric car announced, with an electric version of the Fiat 500 going on sale at the end of this year.
But other automakers are making a bigger push into electric vehicles, despite the uncertainty. Ford will have five such cars by the end the year, including the 2013 Ford Fusion hybrid and 2013 Ford Fusion Energi plug-in electric shown at the Detroit auto show Monday.
The automaker is betting that gas prices will keep rising, making hybrids and electric vehicles more appealing. Ford expects that by the end of this decade, 10 percent to 25 percent of its overall sales will have some sort of battery or hybrid technology.
Other electric or hybrid vehicles shown in Detroit include the 2013 Volkswagen Jetta hybrid, the Volkswagen E-Bugster concept car, the Smart for-us pint-sized electric pickup, the BMW Active Hybrid 3 compact sport sedan, the BMW Active Hybrid 5 and the Nissan e-NV200 concept minivan.
Flexible manufacturing facilities will be key for Ford, said Mark Fields, the company's executive vice president. Ford will make hybrid, battery and regular internal combustion systems interchangeable, so if demand for one kind of engine slackens, it can start producing another kind within the same plant.
"It's dependent on what happens with gas prices," Fields said. "So our strategy is to give people a choice and have the manufacturing processes in place that allow us to be flexible. Then whatever the market does, we're in position to deal with that."
And with five hybrids or electrics on the market, Ford is able to capture the marketing cachet that comes with a green lineup. Even if consumers choose not to buy a hybrid or plug-in, they like them.
That’s a lesson General Motors learned since rolling out its electric and gas vehicle, the Chevy Volt, in late 2010.
"Volt has cause a lot of people to consider Chevrolet" who hadn’t looked at the brand before, said Mary Barra, GM's global product development chief.
Even when sold in small volumes, electric cars lend a buzz that automakers can't resist. Chevy sold just 7,600 Volts last year, out of GM's total of 2.4 million cars and trucks sold in the U.S. in 2011. The automaker showed off at the Detroit show the two-seater electric Chevy EN-V, which goes about 25 miles before losing power.
Fuel economy is the way to grab consumers: Even Bentley, which sells its Continental GT for about $189,000, is promising better gas mileage. Its new Continental has an engine downsized from a whopping V10 to a V8 and achieves a fuel economy that's 40 percent better.
By contrast, many of Ford's vehicles are equipped with V4 engines, which are lighter and more fuel efficient.
Ultimately, there is not much car companies can do right now to try to reaach the stringent new fuel economy standards unless they embrace some sort of alternative fuel solution. That could mean hybrid cars, pure electric cars, natural gas vehicles or hydrogen-powered cars.
"Part of this is looking at the fundamental drivers long term, not over the next five years," said Oliver Hazimeh, a partner at accounting firm PricewaterhouseCoopers' PRTM e-mobility division. "If you were looking at this in 2018 or 2019, the answers will be quite different."