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Thread: [[M]] In Japan, Testing the Market for All-Electric Cars

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    [[M]] In Japan, Testing the Market for All-Electric Cars

    In Japan, Testing the Market for All-Electric Cars

    As Japan's top automakers, Toyota and Honda, battle it out for supremacy in the hybrid car market, Japan's smaller car companies are taking a different eco-car road. Mitsubishi Motors on June 5 presented its zero-emissions i-MiEV Japan's first fully electric vehicle (EV) for the global market. Production of the egg-shaped vehicle, which has a range of 99 miles (160 km) on a single charge, kicked off this week; fleet sales will start in Japan next month and the car is expected to reach U.S. buyers by the end of next year. Tooting its own horn, Mitsubishi is calling the new i-MiEV "a pioneer to open the door to the next 100 years."

    Like Nissan and Subaru, which are rolling out their own plug-in electric cars over the next 18 months, Mitsubishi hopes that they'll catch on with consumers worldwide. But they are still a gamble. Although technological advances continue to reduce the cost and recharging time of lithium-ion batteries while increasing range, electric vehicles are expensive the i-MiEV costs $47,500 and the market will take years to reach the level of hybrid sales. "For five to 10 years, EVs will be for city commuters, used in a limited area, while the hybrid is a pure alternative to the conventional vehicle," says Tatsuo Yoshida, senior analyst at UBS Securities Japan. "There needs to be a breakthrough to the battery technology so that the EV becomes a viable alternative to existing vehicles."
    The hybrid market has taken off with about half a million units in global sales in 2008; cars made by Toyota and Honda accounted for 90% of those sales. For Japanese consumers who want to buy a hybrid this year, there's a waiting list. Toyota launched its new Prius in May, on the heels of Honda's launch of the Insight, a cheaper subcompact hybrid. In Japan, the Prius grabbed the top spot for new car sales (nearly 11,000) last month followed by the Insight in third, according to the Japan Automobile Dealers Association.

    Despite the dominance of hybrids, smaller automakers including start-ups like Tesla Motors in the U.S. and several Chinese car companies see EVs as a chance to gain ground on larger rivals, especially in an era of high fuel prices and a more environmentally conscious public. Fuji Heavy Industries, the maker of Subaru, announced on June 4 its rollout plans for its Stella EV, which has a sticker price of $48,000 and a range of 90 km. The company will begin delivering the vehicles around the same time as Mitsubishi (late July) and expects to produce about 170 units this fiscal year, compared with 1,400 for the i-MiEV. Nissan, too, will unveil an EV in August, with production planned for 2010.

    Chris Richter, senior research analyst for CLSA, a Hong Kong-based brokerage house, says smaller players are starting to build electric cars because the playing field is fairly level. EVs are not as complicated to manufacture as hybrids, and the market is in its infancy. Toyota, for all its success with the Prius, has said it could launch EVs in the U.S. by 2012, but has not announced plans to introduce them in Japan. "If you're third or fourth, you'll never beat Toyota or Honda head on," says Richter. "But you can beat them if you change the rules of the game."

    Consumers, though, are still wary of electric vehicles because of their limited range and the time it takes to replenish batteries. "You go out for the day and you don't want to get stuck," says Richter. A full charge for the i-MiEV takes 7 hours; a quick charge of 80% takes 30 minutes. Mitsubishi's development group wanted to ease concerns by making a car with a range significantly greater than the average daily commute of about 25 miles (40 km) in Japan's urban areas. But until charging stations become prevalent in cities, worries will remain. "Infrastructure and driving range it's kind of a chicken and egg situation," says Kenichiro Wada, the i-MiEV team leader of Mitsubishi's Engineering Planning Team. "If the infrastructure is expanded, there's no concern. Shopping centers, restaurants, banks and convenient stores we want to expand the infrastructure in collaboration with many partners." Currently there are just 39 charging stations in the Tokyo metropolitan area.

    The Japanese national and local governments are doing their part to help consumers to overcome their fears, from helping to develop infrastructure to offering cash incentives to Japanese who want to purchase hybrid or fully electric vehicles. Incentives will reduce the cost of the i-MiEV by 30% to $33,100. That should help Mitsubishi meet its production targets of 2,000 i-MiEVs in the next 12 months, 6,000 in the second year of production and 15,000 the following year. Mitsubishi says it can turn a profit on electric cars when it reaches an annual production volume of 30,000 a year.

    To make EVs an easier sell to those who might be put off by a high initial cost, Richter says, car companies are getting creative about pricing for example, by allowing buyers to lease expensive battery packs to spread the cost over the lifetime of the car. The electricity required to run an electric car costs about a penny a mile, he says, compared with 10 cents a mile for a gas-powered vehicle. "Think of a battery as part of the fuel of the car," says Richter. "When you buy a new car you don't buy 10,000 gallons of gasoline out of the dealer showroom. As purchasing terms are structured in a way that is acceptable for consumers, people start to notice the convenience."

    That convenience includes never having to go to the gas station, fewer trips to the auto repair shop since an EV is mechanically simpler, and the "feel good" factor of not polluting the air. But will consumers decide that's enough to make the switch?

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