Navigant Research Blog

The Humblest, Most Popular EV on the Planet

— July 15, 2014

Neighborhood electric vehicles (NEVs) are a less famous sub-segment of the more familiar class of battery electric vehicles (BEVs), such as the Nissan LEAF.  NEVs are low-speed EVs that are limited to a top speed of 25 mph and to roads that have maximum speed limits of 35 mph; they usually take the form of golf-cart-style vehicles.  Although they get less attention, and advertising, than their larger, faster cousins, NEVs are the most popular type of EVs in use worldwide.  Fleets, including airports, local governments, university campuses, retirement communities, and the military, are the principal users of the technology.  Navigant Research estimates that fleets account for at least 75% of the global NEV marketplace.


 (Source: GEM)

The primary market driver for NEVs is the low production cost and purchase price of the vehicle.  Most NEVs are priced between $8,000 and $14,000, compared to $28,980 for a full-sized BEV like the Nissan LEAF (excluding incentives).  The operating costs of NEVs are also very low, since they use electricity to charge batteries that are typically much smaller than those found in BEVs.

Half a Million Strong

While NEVs are affordable, and particularly convenient in fleet applications, they have their flaws.  Being limited to streets with a maximum speed limit of 35 mph is enough to deter the majority of private consumers, who expect full access to all roads.  Combined with poor performance in snow and cold weather, safety concerns (NEVs usually have less safety equipment than full-speed vehicles), and short battery ranges (25-30 miles per charge), the market for NEVs will remain with niche fleets for the foreseeable future.  Nonetheless, this has proved successful, as significantly more NEVs are in use worldwide than BEVs.  Navigant Research estimates that globally 229,166 light duty BEVs were in use by the end of 2013, less than half the number of NEVs, at 542,134.

As battery prices come down and gasoline prices continue to rise, NEVs will likely increase their market share within fleet applications.  Meanwhile, some companies are also looking into using NEVs for carsharing programs.  In this scenario, the vehicles would be used mostly for connecting travel purposes – from homes to public transit stations, for example, or from stations to offices.  Additionally, NEVs are also considered to be the frontrunners for autonomous vehicle technologies – mainly because low-speed EVs are safer and more suitable than full-sized vehicles for testing these experimental technologies.


Tesla’s Patent Giveaway Paves the EV Freeway

— June 26, 2014

Tesla’s move to open up its patent portfolio is undoubtedly risky, and it could erode Tesla’s competitive advantage.  But the potential rewards outweigh the risks.  The thinking behind Elon Musk’s move is that by allowing the major automakers to use Tesla’s technology, it will help lead to Tesla’s ultimate goal: a comprehensive network of cars, batteries, suppliers, components, and charging stations that utilizes electricity for transportation.  In other words, since Tesla is one of the top electric vehicle (EV) players currently in the market, the company stands to benefit from a vastly expanded network of EV infrastructure based on Tesla’s technology.  The more people that are connected to a network of vehicles relying on electricity, the better it is for Tesla.

Rivals and Collaborators

BMW and Nissan have already expressed interest in collaborating with Tesla on their supercharger technology to potentially create global vehicle charging standards.  BMW has also reportedly considered lending its expertise in carbon fiber technology in exchange for powertrain development and supporting infrastructure.  A partnership between BMW and Tesla could prove to be very powerful, bringing together the highly successful Model S with BMW’s electric city car, the i3, and its soon to be released i8 plug-in hybrid supercar.  Currently, Tesla, BMW, and Nissan account for roughly 80% of the world’s plug-in electric vehicle (PEV) sales.

Car charging companies are also looking to benefit from the technology transfer, with Car Charging Group, Inc. announcing its intention to integrate Tesla’s EV charging technology into its Blink EV charging stations.  Car Charging Group is one of the largest owners, operators, and providers of EV charging services in the United States and is also the owner of the Blink Network, one of the most extensive EV charging networks.

On the Sidelines

While the patent release by Tesla will surely increase collaboration with the major car manufacturers already producing EVs, it’s much less clear that open patents will move the dial on the major automakers that have largely steered clear of EVs in the past.  Toyota, GM, and several other major players are hedging their bets on EVs, and Tesla’s patent release is unlikely to change their position.

Navigant Research’s report, Electric Vehicle Charging Equipment forecasts that cumulative global sales of electric vehicle supply equipment (EVSE) will reach 25 million units by 2022.  Increased collaboration between the major EV players could lead to this figure being achieved ahead of schedule.

Cumulative EVSE Unit Sales by Region, World Markets: 2013-2022

(Source: Navigant Research)


New Emissions Rule Won’t Destroy the Economy

— June 4, 2014

The Environmental Protection Agency’s (EPA’s) new emissions rule, released on June 2, proposes to reduce carbon dioxide emissions from power plants by 30% compared to their 2005 levels.  It follows a surge of reports warning of the dire consequences of failing to rapidly transition to a low carbon economy, including the Obama Administration’s National Climate Assessment, the National Security and the Accelerating Risks of Climate Change report from the Center for Naval Analyses, and a new study from researchers at the University of California Irvine and NASA.

Critics of the EPA’s proposal are once again arguing that environmental regulations will destroy the U.S. economy.  Senator James Inhofe (R-Okla.) stated that “More EPA regulations … threaten the reliability and affordability of our power grid, will weaken our economy, and drive more people into the unemployment lines.”  The U.S. Chamber of Commerce estimates that the plan would eliminate $50 billion a year in GDP.  However, the history of environmental regulation makes it clear that these alarms have not been borne out by subsequent events.  Similar responses followed the 1990 Clean Air Act (CAA) amendments, which targeted reductions in acid rain, urban air pollution, and toxic air emissions.  Auto industry executives at the time claimed that “[Further reducing auto emissions] is not feasible or necessary and that congressional dictates to do so would be financially ruinous.”  Peer-reviewed studies have demonstrated that the central benefits of the programs established by the 1990 CAA amendments have actually exceeded the costs of the program by a factor of more than 30:1.

Health experts have estimated that in 2010 alone, the CAA amendments were responsible for:

  • Avoiding more than 160,000 premature deaths, 130,000 heart attacks (acute myocardial infarction), millions of cases of respiratory problems such as acute bronchitis and asthma attacks, and 86,000 hospital admissions – thus avoiding the costs to the economy of all of these health issues.
  • Preventing 13 million lost workdays, improving worker productivity.
  • Keeping children healthy and in school, avoiding 3.2 million lost school days due to respiratory illness and other diseases caused or exacerbated by air pollution.

Adaptation and Innovation

The EPA estimates that while investments of about $8 billion a year will be needed to meet the emissions limits, the new emissions rule will save 6,600 American lives and $50 billion annually on health costs related to air pollution.  Additionally, a study by the NRDC and ICF International found that the emissions rule could create 274,000 jobs through energy efficiency and renewable energy solutions.

It’s clear that when challenged by stricter environmental rules, industry finds ways to adapt and innovate, and the savings to society outweigh the costs imposed on the particular regulated industry.  This is particularly true of the potentially disastrous costs of climate change.  Proponents of “cheap coal,” for example, ignore a 2011 study, published in the American Economic Review, which concluded that the mining and burning of coal actually imposes more costs on the economy than the value it creates by generating electricity.

The figure below from the Pacific Institute shows U.S. GDP from 1929 to 2013 in real 2009 dollars (corrected for inflation), along with major environmental legislation passage.  No correlation exists between the implementation of environmental regulations and damage to the U.S. economy.

(Source: Pacific Institute)


Incentives Are Driving PEV Sales – Right?

— May 21, 2014

New data from the International Council on Clean Transportation (ICCT) shows that incentives are, for the most part, driving sales of plug-in electric vehicles (PEVs) globally (with the United Kingdom, China, and a few others aside).  For example, while consumer uptake of PEVs has been limited to less than 1% in nearly every major auto market, Norway’s fiscal incentives (equivalent to 55% of the vehicle base price) have resulted in a 6% market share for 2013.  Similarly, large incentives in the Netherlands (5.6% market share) and California (4% market share) have led to strong PEV growth in those markets.

Exceptions to the Rule

However, not all jurisdictions with strong incentives have led to higher market share.  Despite a robust €5,000 ($6,850) incentive per PEV purchased, exemption from the vehicle taxation system, and exemption from London’s CO2-based congestion charge, just 0.2% of vehicle sales can be attributed to PEVs in the United Kingdom.  One possible explanation could be the large influx of French-manufactured PEVs in the country, such as those made by Renault and Citroën, which have traditionally not been highly sought after brands in the United Kingdom.  China’s PEV incentives have similarly not made a significant impact because the middle and upper class who can afford PEVs are looking to buy non-Chinese brands, such as Teslas, which have historically been largely unavailable.

The following graph shows the correlation between fiscal incentives and the market share for plug-in hybrid electric vehicles (PHEVs) and battery electric vehicles (BEVs).

(Source: ICCT)

While the ICCT data leaves some questions unanswered, it does demonstrate that fiscal incentives can be powerful mechanisms for reducing the effective total cost of ownership and are largely successful at encouraging consumers to buy PEVs.  For example, California’s PEV penetration growth forecast numbers (7.61% market share by 2023) are partially calculated by using a combination of financial and other incentives, such as HOV lane access and exemption from emissions inspections and state sales and use taxes.  For an in-depth analysis of how quantifying U.S. state incentives can identify the best market opportunities in the country, see Navigant Research’s report, Electric Vehicle Geographic Forecasts.


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