Navigant Research Blog

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.


Luxury EV Sales Outpace Overall Market

— May 13, 2014

The plug-in electric vehicle (PEV) market continued to see strong growth in early 2014, and the high-end segment is likely to expand most quickly during the remaining months.  According to data from, sales of PEVs in the United States grew by 24% during the first quarter of 2014 compared to the prior year and now make up approximately 0.6% of new light duty vehicle sales.

But if you look at sales from only the luxury vehicle segment, the penetration rate jumps to nearly 3% of new vehicles sold.  Nearly all of those sales (94%) came from just one company – Tesla Motors.  Two models accounted for the rest of the luxury EVs sold: the Cadillac ELR and the Porsche Panamera S E-Hybrid, both plug-in hybrids.

PEV Market Penetration by Vehicle Type, United States: 1Q 2014

(Sources: Navigant Research,,, Tesla Motors)

PEVs are doing well in the luxury market not only because the Tesla Model S is a great looking and performing vehicle, but also because its target audience is unfazed by its higher price tag.  Whereas Chevrolet, Nissan, Ford, and others are asking consumers to spend an additional $5,000 to $10,000 for a comparable looking electric compact or sedan (albeit with more features, such as navigation and telematics), Tesla and the other luxury makers are requiring customers to spend about as much as they normally would.  Upselling is always more challenging than asking customers to choose between equally priced options.

Top-Down Approach

Navigant Research projected that the luxury market would be an area of great interest and activity this year as part of our free annual white paper, Electric Vehicle Predictions: 10 Predictions for 2014.  Tesla, which reported sales of 6,457 vehicles during 1Q in its recent quarterly filing, continues to thrive, but competition is coming.  (Tesla does not identify how many of its vehicles were sold outside of the United States separately, so the PEV percentage in the United States is slightly inflated.)

Until recently, the only other luxury options have been the Cadillac ELR and Porsche Panamera S E-Hybrid (the Fisker Karma was also briefly on the market).  However, BMW will soon have two models available, and Mercedes just announced an aggressively priced battery electric vehicle.  And, within a year, Audi and Volvo will also be in the mix with new PEVs for sale in the United States.

While the styling from some of the luxury PEVs may not mirror their internal combustion engine counterparts, the interior creature comforts and vehicle performance will tempt consumers who are interested in avoiding paying more at the pump.  The rapid expansion of luxury PEV models available should enable the segment to stay well ahead of the overall PEV market penetration for the foreseeable future.  We can expect even more luxury PEVs to be announced before the year is over.

The overall PEV penetration rates will only grow if automakers pursue more segments and the high costs of batteries today makes moving from the top down a reasonable strategy.  Tesla and Chrysler are also eying other potential opportunities for PEVs – the SUV and minivan segments.

If you’d like to hear more on the future of electric vehicles, I’ll be speaking at the Electric Drive Transportation Association annual conference on May 20 in Indianapolis.


The Coming Crack-Up on U.S. Highway Funding

— May 6, 2014

The White House has submitted its transportation funding proposal to Congress, where it immediately fell victim to the legislative rigor mortis that’s overtaken the 113th Congress.  The current lack of congressional activity is partly thanks to the November elections.  But it also reflects two broader trends in Congress that spell serious problems for the future of U.S. infrastructure.

First is the loss of bipartisan agreement on the importance of transportation funding.  Transportation used to be one of the few areas on which Republicans and Democrats could be counted on to pass legislation, even when they disagreed about broad policy objectives.  This is no longer true.  While transportation funding is not as contentious as some issues, there is less consensus on its importance than in previous eras.  That means that policy disagreements are more likely to prevent action from being taken.

Broke by Fall

The second, and related issue, is the divide over tax policy.  Although support for tax reform is strong, proposals put forward by the House Ways & Means Committee chair and the White House have not made much progress.  One ongoing area of disagreement is whether to use new revenue from eliminating tax breaks to fund other priorities, such as transportation, or whether any tax reform must be “revenue neutral.”

This divide will make it very difficult to address the problem of dwindling gas tax revenue.  The transportation funding problem is better described as a revenue problem.  As we’ve noted before, the U.S. Highway Trust Fund – which comes from gas tax revenue – has been steadily dropping, creating a major gap between U.S. infrastructure needs and available funding.  This issue has been abundantly clear to Congress and the White House for years, yet there’s no solution in sight because of an unwillingness to make difficult decisions about new revenue schemes.

The problem may come to a head this summer.  According to the White House and the Congressional Budget Office, the Highway Trust Fund will run out of money in August.

Pothole Puzzle

This creates problems for states looking to start major construction projects in the warmer spring and summer months.  A new report by advocacy group Transportation for America projects that gas tax revenue in fiscal year 2015 will not be able to fund any new projects.  And this problem will only worsen as the U.S. passenger car fleet becomes increasingly fuel efficient under stringent Corporate Average Fuel Economy (CAFE) regulations out to 2025 and urban areas continue to push alternatives to individual car ownership.

Congress could raise the gas tax, but this is extremely politically unpalatable.  New revenue could come from increased use of tolls.  Indeed, the White House has proposed allowing states to implement tolls on interstate highways for the first time.  It could come from greater use of privately operated, tolled highways – though early results on that have been mixed, with the highways garnering little revenue.  It could come from mileage-based taxing schemes, but these face hurdles due to privacy concerns.

Each of these options would continue to move the United States away from a long-term, national vision for the country’s transportation future and toward a patchwork of ad hoc solutions that rely more on city and state initiatives.  While localities do well as laboratories for innovations in transportation, the United States will not be well-served in an increasingly competitive global economy if it is not able to support a robust national transportation infrastructure.


Green Light for Roadway Lighting Controls

— May 5, 2014

Numerous cities around the world have begun replacing outdoor lights with light-emitting diodes (LEDs), though many of them have not been able to take advantage of the superior dimming capabilities of LED lighting or the inherent controllability that this semiconductor-based lighting technology offers.  In order to dim an LED light, a control device must have direct access to that LED’s driver.  This means that the manufacturer of the LED luminaire must either integrate its own controls or partner with a controls company to allow for communications between the driver and the controller.  A city customer that wants smart dimming controls must, therefore, select both fixture and controls vendors up front, limiting its options and making the decision much more complicated.

Fortunately, this roadblock has recently been removed.  With the publication of NEMA/ANSI standard 136.41 in February, manufacturers now have a single standard to follow so that any company’s controller will work with any other company’s luminaire.  Products that meet this standard are quickly coming into the market.  TE Connectivity has begun manufacturing the receptacle and contacts that provide interconnection between a compliant controller and a luminaire, giving luminaire manufacturers an easy means to produce compliant luminaires.

We Approve

Big lighting players such as Acuity Brands and Philips have come out with products that meet the new standard, and even smaller decorative outdoor lighting companies, such as Sternberg Lighting, are committing to offering compliance with the standard as an option on new products.  The controls companies themselves have been very enthusiastic, with CIMCON Lighting announcing compliant product lines immediately after the standard was published and a representative from Sensus describing the publication to me as a watershed event.

Navigant Research expects that adoption of this NEMA standard will become so widespread in outdoor lighting fixtures that many cities will install compliant products without even specifically requesting them.  Those cities will then be free to add smart networked controls at any point in the future by simply plugging in compliant controllers into the top of lights.  This freedom, both in the timing of the controls installation and in the choice of what products to use, is expected to lead to rapid growth in the number of networked systems.  In a recently published report titled Outdoor and Parking Lighting Systems, Navigant Research forecasts that revenue from the sale of intelligent control devices will increase at a compound annual growth rate (CAGR) of 18% through 2023, and that revenue from the sale of controls software will increase at a CAGR of 43%.  That growth will be driven by a number of factors, including falling LED prices and increased expectations for monitoring and control, but it will be facilitated along the way by standardization efforts such as this one.


Blog Articles

Most Recent

By Date


Clean Transportation, Electric Vehicles, Energy Storage, Policy & Regulation, Renewable Energy, Smart Energy Practice, Smart Energy Program, Smart Grid Practice, Smart Transportation Practice, Utility Innovations

By Author

{"userID":"","pageName":"Clean Transportation","path":"\/tag\/clean-transportation?page=5","date":"7\/31\/2014"}