Image: Chevy Volt
REBECCA COOK  /  Reuters
A Chevy Volt pulls into the front of GM's world headquarters in Detroit, Mich. Observers say the one thing that could help kick-start the nascent market for electric vehicles is demand from corporations.
Image: Paul A. Eisenstein, msnbc.com contributor
By
msnbc.com contributor
updated 12/1/2010 8:04:13 AM ET 2010-12-01T13:04:13

To Willy Morales, the little Leaf electric car sitting on the Nissan stand at this year’s Los Angeles auto show “looks like the future.”

It's “like the stuff I used to see on the Jetsons,” he said, referring to the futuristic cartoon series he loved to watch as a child.

But while Morales admits being impressed by the idea of never having to buy gasoline again, he’s far more concerned about the idea of running out of power one night with his kids in the back seat. And he isn’t alone. So-called “range anxiety” is unquestionably the biggest obstacle automakers like Nissan face as they begin to roll out a new generation of battery-electric vehicles, or BEVs.

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Still, initial consumer interest in the Nissan Leaf has been strong. And General Motors reports solid demand for the new Chevrolet Volt, a plug-in hybrid that soon will hits showrooms in select U.S. markets. But George Peterson, head of the consulting firm AutoPacific, fears this initial demand reflects “greenies and early adopters.”

“Once those buyers have gotten what they want, we don’t expect sales to remain very strong,” he said.

A recent study by J.D. Power and Associates suggests that even by 2020, hybrids, plug-ins and pure electric vehicles like Nissan’s Leaf will likely account for no more than 7.3 percent of the global automotive market.

But senior J.D. Power analyst Dave Sargent said the one thing that could help kick-start the nascent market for electric propulsion — short of “a dramatic and sustained increase in gasoline prices” — is demand from corporations for electric vehicles in their fleets.

That means customers like Jeff Immelt, chairman of General Electric, which operates one of the world’s largest motor vehicle fleets. Over the next several years GE plans to convert half its vehicle fleet to battery power, including 15,000 Chevy Volts and perhaps 15,000 electric vehicles from other makers.

(Msnbc.com is a joint venture of GE's NBC Universal unit and Microsoft.)

While GE will undoubtedly promote the fact that it will soon be operating the world’s largest electric vehicle fleet, Immelt’s passion for battery power is anything but altruistic.

GE is one of the world’s largest suppliers of electric grid technology, and the company is a fast-growing force in solar, wind and other “green” energy sources. It’s also the largest shareholder in A123, a pioneering producer of the lithium-ion batteries used in the latest electric vehicles. Immelt calculates GE eventually could get up to 10 cents of every dollar spent on electric propulsion.

It could also save itself a bundle on operating costs for its vast fleet.

Slideshow: L.A. story (on this page)

And while consumers may worry about running out of power if they have to make a run to the airport or pick up a sick child from school, fleet operators like GE (or a delivery service like UPS) have a clear understanding of how many miles each of their vehicles will clock per day — and how each mile will cost the company, said Peterson of AutoPacific.

“Fleets have lots of cars, lots of people running around on prescribed routes, and central depots where it’s easy to set up charging stations that a company can get tax credits for,” Peterson said.

Even at standard electric rates — which average about 10 cents per kilowatt hour nationwide — it costs just 2 cents a mile to run a Volt or a Leaf on battery power, barely a fifth of what it would cost to run a comparable gasoline-powered automobile.

Maintenance costs are also lower for battery cars, which don’t need tune-ups or oil changes. True, the technology costs more up front, but as volumes increase all signs point to a steady decrease in the price of lithium batteries and related hardware.

Elon Musk, CEO of battery car pioneer Tesla Motors, predicts that the cost of operating battery-run vehicles will drop from around $1,000 per kilowatt-hour to less than $350 by mid-decade.

For a vehicle like the Nissan Leaf, which has 24 kilowatt-hours of onboard batteries, that cost could add up to thousands of dollars, even if a carmaker pockets some of the savings gained by making battery cars even more competitive in the controlled environment of a corporate or government fleet.

GE is by no means alone in its drive to turn is fleet electric. Several companies have already started field-testing battery-electric passenger cars and light trucks for use in their fleets.

Azure Dynamics, which is handling the development and production of Ford’s Transit Connect Electric van, has already lined up 93 orders under its Lead Customer Program, a group that includes AT&T, Johnson Controls, Southern California Edison and the Canadian Post. The U.S. Postal Service, meanwhile, is working with Bright Automotive and could eventually replace tens of thousands of local delivery vehicles with new battery-powered models.

And there’s no shortage of electric vehicles coming to market. These days, it’s hard to find a single automaker — from luxury brands like Jaguar to mainstream automakers including Ford and Toyota — that isn’t working on some form of battery propulsion. Volvo, for example, plans to roll out a mix of hybrids, plug-ins and pure battery-electrics, said CEO Stefan Jacoby.

But Jacoby is skeptical about the potential for building any significant market volume among individual car buyers in the near term, mainly because it’s too expensive right now for a car buyer to purchase and operate an electric vehicle. The real boom, he said, “will be primarily among fleets for a considerable time.”

Story: GM, Chrysler each to hire 1,000 engineers

Others echo Jacoby’s view. Toyota’s top American executive, Jim Lentz, insists the company “want[s] to see a mix of fleet and retail” for the battery cars it's developing, such as the RAV4-EV it unveiled at this year’s Los Angeles auto show.

Meanwhile, GM’s new marketing chief, Joel Ewanick, suggests the automaker will put retail customers at the front of the line when the new Volt starts rolling into showrooms in coming weeks. In fact, Chevy is stretching out the planned GE car order so there will be enough Volts “to put in consumer hands during the first year.”

Longer-term, as those earlier adopters get what they want, however, having a customer like GE waiting with an open checkbook could keep the Volt assembly line rolling until mainstream consumer buyers like Willy Morales get over their anxieties.

© 2013 msnbc.com.  Reprints

Photos: Los Angeles Auto Show

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  1. Focusing on electric

    Ford Motor Company Focus Electric, Ford's first all-electric, zero CO2 emissions passenger car, is test driven at the 2010 Los Angeles Auto Show. (Damian Dovarganes / AP) Back to slideshow navigation
  2. It's Karma

    Fisker Automotive's Fisker Karma, a sports luxury plug-in hybrid car, is shown at the auto show, Nov. 18, 2010 (Damian Dovarganes / AP) Back to slideshow navigation
  3. Making like a leaf

    The Nissan Leaf, a 100% electric car, is test driven at the auto show on Thursday. (Damian Dovarganes / AP) Back to slideshow navigation
  4. Whip it

    Mike McQuary, CEO of Wheego, speaks beside two Wheego Whip Life vehicles, Nov. 18. (Mario Anzuoni / Reuters) Back to slideshow navigation
  5. Cool blue

    The Mazda Shinari concept car is displayed at the Los Angeles Auto Show, Nov. 17. (Mario Anzuoni / Reuters) Back to slideshow navigation
  6. Pile up

    Scion cars are on display at the show in Los Angeles. (Mario Anzuoni / Reuters) Back to slideshow navigation
  7. One of 333

    The Audi R8 GT, of which only 333 are scheduled to be sold worldwide, is seen at the show on Thursday. (Reed Saxon / AP) Back to slideshow navigation
  8. Electrifying concept

    The 2011 Kia Pop concept car is revealed. Less than 10 feet in length, the all-electric, chrome-colored three-seater was created by Kia's European Design Center in Germany and can travel up to 100 miles on a single charge, according to press materials. (Robyn Beck / AFP - Getty Images) Back to slideshow navigation
  9. Trying it on for size

    A visitor sits in the driver's seat of the 2012 Infiniti M35 h (hybrid). (Robyn Beck / AFP - Getty Images) Back to slideshow navigation
  10. Coming to America

    The new Fiat 500 is seen near the old version during the press day of the LA Auto Show. (Gabriel Bouys / AFP - Getty Images) Back to slideshow navigation
  11. Chrysler interior

    The interior of the 2011 Chrysler 200. (Damian Dovarganes / AP) Back to slideshow navigation
  12. What's it going to take to put you in this car?

    The 2011 Hyundai Elantra is presented by John Krafcik, president of Hyundai Motor America at the Los Angeles Auto Show. (Friso Gentsch / EPA) Back to slideshow navigation
  13. SAAB story

    The SAAB 9-4X Crossover is unveiled at the LA Auto Show. (Mario Anzuoni / Reuters) Back to slideshow navigation
  14. Electric presentation

    Shinichi Kurihara, President and CEO of Mitsubishi Motors North America, introduces the Mitsubishi electric vehicle at the LA Auto show. (Phil Mccarten / Reuters) Back to slideshow navigation
  15. The 2011 Chrysler 200 is unveiled at the 2010 Los Angeles Auto Show Thursday, Nov. 18, 2010. (Damian Dovarganes / AP) Back to slideshow navigation
  16. Charge!

    General Motors North America Marketing Vice President Joel Ewanick drove this Chevrolet Volt electric car with extended range capability from Detroit to the Los Angeles Auto Show. The Volt will go on sale in December. (Steve Fecht / GM via EPA) Back to slideshow navigation
  17. Hepcat

    The Jaguar CX75 Concept electric car is unveiled at the Los Angeles Auto Show. The show opened to the press Wednesday. (Robyn Beck / AFP - Getty Images) Back to slideshow navigation
  18. Topless

    The Nissan Murano Cross Cabriolet Concept, unveiled at the show, is ready to take in the Southern California sun. (Gabriel Bouys / AFP - Getty Images) Back to slideshow navigation
  19. Star power

    Jonathan Browning, President and CEO, Volkswagen Group of America, left, and German model Heidi Klum show off the new Volkswagen EOS convertible at the show. (Damian Dovarganes / AP) Back to slideshow navigation
  20. Big entrance

    The 2011 Chevrolet Camaro convertible makes its world debut at the show. The car features a 312-horsepower direct injection V-6 engine delivering 29-mpg highway. An SS model will feature the 6.2L V-8 engine producing 426 horsepower. A six-speed manual transmission will be standard, with an optional six-speed automatic. (Steve Fecht / GM via EPA) Back to slideshow navigation
  21. Interior design

    A Nissan's Ellure opens up at the show. The car may be poised to replace the Altima in the automaker's current model lineup. (Lucy Nicholson / Reuters) Back to slideshow navigation
  22. Golden moment

    Stefan Jacoby, President and CEO of Volvo, gives the keynote addres at the Los Angeles Auto Show on Wednesday. (Damian Dovarganes / AP) Back to slideshow navigation
  23. Hello L.A.

    The Range Rover Evoque, a five-door, all-wheel drive vehicle makes its debut at the show. (Reed Saxon / AP) Back to slideshow navigation
  24. Tonight's guest ...

    Mercedes CEO Ola Kallenius introduces the automaker's CLS63 AMG at the show. The V8-powered sedan sports a menacing look. (Paul Buck / EPA) Back to slideshow navigation
  25. Going up

    This Cadillac concept car unveiled at the LA Auto Show makes simply opening the door an adventure. (Lucy Nicholson / Reuters) Back to slideshow navigation
  26. By a nose

    Fuji Heavy Industries President and CEO Ikuo Mori poses with a new Subaru concept car unveiled during the show. (Gabriel Bouys / AFP - Getty Images) Back to slideshow navigation
  27. "F" grade

    President and CEO of Mercedes Benz USA Ernst Lieb introduces the Mercedes Benz F-Cell at the show. The F-Cell is a hydrogen electric, zero-emmissions vehicle powered by a fuel cell. (Paul Buck / EPA) Back to slideshow navigation
  28. Close Focus

    Visitors look at a 2012 Ford Focus with racing modifications. (Robyn Beck / AFP - Getty Images) Back to slideshow navigation
  29. Concept hybrid

    The Lexus CT 200h hybrid concept is on display at the show. (Robyn Beck / AFP - Getty Images) Back to slideshow navigation
  30. Porsche hybrid

    A Porsche GT3 R Hybrid is displayed. (Damian Dovarganes / AP) Back to slideshow navigation
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