EV makers who have tried to develop a model for the mass market have not done well to date, as they must convince buyers that the high initial costs of EV ownership will be offset by the lower ownership cost of more efficient vehicles.  While the argument is mostly true, it takes a long time for an EV to pay itself off (see table below).  In a robust global economy with lots of young progressive buyers aged 18-35, it might be easier to convince potential customers.  Unfortunately, EVs have emerged in an economy that is bumbling at best, and vehicle ownership among those aged 18-35 is falling drastically.

Est.  Total Cost of Ownership Comparison at Current Fuel Prices with 120,000 Lifetime Miles, United States: 2012

(Source: Pike Research)

The struggles of EVs aimed at the masses has pushed back deployment in favor of other new plug-in EV models, as plug-in hybrid sales represented by the Volt and Prius Plug-in have shown strength.  The best example of this phenomenon is Ford, which has de-emphasized its Focus Electric in favor of its C-MAX Energi Plug-in Hybrid.

Despite all of this, bright spots are emerging through innovative business models.  One early success has been selling the vehicle and leasing the battery.  Another is simply selling the service the vehicle provides (not the vehicle itself) through car shares.  While the former is certainly an interesting financial concept, its practice is confined to select European markets.  The latter, however, is seeing worldwide adoption.

Car share programs like ZipCar and Hertz Connect have been early adopters of hybrid and efficient vehicles as the fuel savings have cut costs significantly.  A more interesting development has been the increased number of vehicle makers eyeing car shares as launching points for their EVs.  The first major automaker to try this was Daimler, through its subsidiary Car2Go, which has put 300 pure electric Smart ForTwos in San Diego and 300 in Amsterdam.  Other automaker programs utilizing EVs include Renault’s Twizy Way in France, BMW’s DriveNow in San Francisco, and Kandi Technologies’ future EV car share in Hangzhou, China.

The strategy behind this movement has a strong business case as it 1) mitigates the high initial costs of EVs by distributing the EV premium throughout a community of members, 2) allows progressive young motorists the chance to experience the benefits EV ownership without the costs, and 3) harnesses the growing trend of car ownership avoidance among those young, progressive, would be buyers.

The EV movement may be flagging due to a lack of individual interest at current costs, but that doesn’t mean EVs won’t be on the streets.  The major existing car share programs like Car2Go are gobbling up prime service territories.  Automakers on the sidelines are falling behind in a market that could prove as profitable as the Prius is for Toyota.