State and local governments are doing everything possible to promote vehicles that run on alternative fuel. But one problem has been the lackluster sales performance of electric vehicles.
However, there is good news.
Even though U.S. sales figures for EVs were only 17,000 in 2011, sales skyrocketed to 52,000 in 2012. And Americans have purchased 59,000 cars this year so far, as SFGate reports. Still, overall, there are only around 140,000 electric and hybrid cars in the U.S.
However, Massachusetts, Oregon, New York, Vermont, Rhode Island, Connecticut, Maryland, and California are hoping to push 3.3 million alternative vehicles – including fully electric cars, fuel-cell vehicles, and hybrids – on the road by 2025.
These eight states plan to join forces to usher in a more accommodating atmosphere for electric cars by easing building codes for charging stations and constructing more public stations. Other proposals include passing more incentive programs and parking/highway perks, like E-Z pass programs and wider usage of car pool lanes. The state governments also plan to lead the charge by using EVs among their car fleets, and this extends to local governments.
We could very well see a future where a charging station could be at your local mall, grocery store, or theater. After all, this is already being done across parts of Europe and Asia.
And these states could set a standard for the rest of the country to follow in the next few decades.
This is a serious plan that has gained the signatures from governors of these progressive states. There is no set price tag or any sort of initiation date, but it is a step in the right direction.
However, one piece of the puzzle is missing from this new measure, and that is from the private sector.
Although state governments will be crucial in setting up lucrative programs and public stations, there must also be more creativity within the EV marketplace.
EV Success
Here is what’s really going to drive EV sales.
We’ve seen the success of Tesla’s (NASDAQ: TSLA) Model S and the widespread praise it drew from critics. This is because the Model S was able to outdo its competitors when it came to mileage, going up to 300 miles on a one hour charge, and it boasted a modern exterior that looks like any other conventional vehicle on the market.
A lack of recharge stations is one problem, but some of the main problems keeping more customers from buying vehicles is the low mileage, high price tags, and unconventional appearance of EVs.
Many EVs are compact, which has not been a big seller among consumers with families. But if we had an EV out there that resembled a Mustang or Camaro, I guarantee we’d see more buyer interest.
But looks only go so far, and prices would need to come down across the board.
The good news is that this is already starting to happen for electric vehicles. A basic model Nissan (OTC: NSANY) Leaf starts at $28,800 before government incentives kick in. The Chevy Volt costs $34,185. A basic Model S costs $62,400, including a $7,500 tax credit from the federal government. And with Tesla’s leasing plan that requires no down payment for a decent monthly plan of $600, it is easier for more people to get in a Model S.
But hydrogen vehicles are a different story. The high cost of parts can take this type of vehicle out of the price range of many consumers.
Toyota (NYSE: TM) will be debuting an HV in 2015 that could run anywhere from $50,000 to $100,000. If Toyota can bring the price down to 50K or lower, it could compete with the Model S, since it has the same 300-mile road range.
The lack of public charging stations has been another major factor in preventing further production of alternative vehicles.
If we see state governments following through on commitments in ushering in more stations, we could see more car companies taking risks in manufacturing more EVs. This would spark more creativity and competition, lowering prices in the process.
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Will This Work?
Since these states make up 25 percent of the overall auto market, it is definitely a sign of success to come. California alone comprises 29 percent of the EV market.
This new government initiative has the potential to benefit all companies that have a green-powered vehicle of some kind: Toyota, Honda (NYSE: HMC), Volkswagen (OTC: VLKAY), GM (NYSE: GM), Hyundai (OTC: HYMLF), Tesla, Nissan, and others.
But I would truly keep my eye on Tesla, not only because of the Model S, but because the Model X is set to debut in 2014. The relatively new company managed to outsell ten major car companies in California this year, and it is leading the charge of green vehicles while doing its part to shine more light on this sector.
2014 will be a better year for alternative vehicles as a whole. More model cars are expected to be on the road next year, and there will be 200,000 vehicles on the road in the next few years. Nearly every major automaker will have some type of alternative vehicle on the market. And I am hopeful because car companies are working together as well.
Daimler (OTC: DDAIF) and Renault (Paris: RNO) have been collaborating on electric cars and fuel cells. GM and Honda have also agreed to work together on enhancing fuel cell technology.
In fact, companies like GE are investing time and energy into building more recharge networks around the country.
What we’re seeing is a groundswell of collaboration and support that will give EVs a better chance going forward. As an investor, it is definitely something to watch out for.
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