Electric vehicles will face stiff competition from eco-friendly gasoline-powered cars

Popular notions that electric cars will suddenly replace conventional gasoline-powered cars don’t acknowledge the possibility that there could be eco-friendly advances in conventional car technology. A study by the Boston Consulting Group (BCG) finds that “internal combustion engines are improving their ability to cut CO2 emissions at a lower cost than expected, and, as a result, carmakers should be able to meet 2020 emissions targets mainly through improvements to conventional technologies.”

A key word there is should. It would take a concerted effort by automakers in several technical areas.

Internal-combustion-engine (ICE) technologies offer the potential to cut tailpipe emissions of carbon dioxide by approximately 40% at a cost to consumers of $50 to $60 per percentage point of reduction for an average passenger car — roughly half the cost of what was expected three years ago. But original equipment manufacturers will need to pull multiple levers simultaneously to achieve such dramatic reductions. Modifications to combustion technologies, transmissions, vehicle mass, aerodynamics, and power management will all be necessary.

It’s clear that we’ll have mix of electric and gasoline-powered cars for a long time; BCG’s study says that “conventional technologies will pose stiff competition for electric vehicles (EVs).” But the research also found that there is a distinct “green” consumer segment that will be willing to pay a significant premium of $4,500 to $6,000 for EVs, even if the total cost of ownership is higher. These consumers represent 13% of consumers in China, 9% of those in Europe and 6% of those in the U.S.

The study, “Powering Autos to 2020: The Era of the Electric Car?,” has some other interesting conclusions:

  • China and Europe — not the U.S., as many believe — will be the largest markets for EVs in 2020.
  • China is a major wild card. Assuming that the government remains committed to EVs, BCG projects that these vehicles will represent 7% of the country’s new-car sales in 2020. Despite this moderate penetration, China will become the world’s largest market for EVs due to its overall market size.
  • BCG expects EVs to account for 5% of new-car sales in Japan and 2% of new-car sales in North America in 2020.
  • As automakers wrestle with advanced ICEs and EVs, they will have to keep an eye on a compelling alternative fuel source: compressed natural gas. CNG could expand beyond its current strongholds with transit buses and airport shuttles and see growing adoption by delivery vehicles, government fleets and taxis.

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