Where are the customers?
The return of battery electric vehicles (BEVs) to the US market nearly a century after internal combustion technology swept them aside is one of the most compelling automotive stories of the last decade, bringing a much-needed injection of fresh ideas and enthusiasm to an increasingly mature and commodified industry. Though BEVs remain less than 1% of global auto sales, they have become immensely important to automakers by aiding compliance with various emissions regulations, as well as creating an aura of environmental responsibility and technological innovation. The immense power of these incentives is made manifest in Tesla, the Silicon Valley-based BEV maker that has defied the industry’s immense challenges to startups and become the hottest automotive brand in the world. Despite selling just 31,655 vehicles in 2014, a tiny fraction of the industry’s global volume, Tesla and its CEO Elon Musk receive huge amounts of (largely favorable) media coverage and enjoy a market capitalization that exceeds far larger competitors like Fiat Chrysler Automobiles.
Sales of BEVs continue to grow in the face of lower gas prices, but nearly every model still sells far below initial estimates. Even President Obama’s goal of putting a million plug-in vehicles (BEVs and plug-in hybrids [PHEVs]) on US roads by 2015 has turned out to be wildly optimistic. The high cost of lithium-ion batteries is widely considered a key limiting factor on the growth of BEVs, but just as important is the issue of range and recharging; in a market long accustomed to the convenience of gasoline, the limited range and long recharging time of BEVs remains a major barrier to consumer acceptance. Though rapid charging infrastructure has grown as more BEVs have been brought to market, they still require at least 30 minutes to deliver a meaningful amount of power, speed battery degradation, use competing charging standards, and remain far less common than gas stations.
These shortcomings have pushed some automakers, like Toyota and Hyundai, to avoid BEVs altogether in favor of hydrogen fuel cell electric vehicles (FCEVs) that generate zero tailpipe emissions but can be recharged as rapidly as gasoline cars. The only other way to provide rapid refueling of zero-emissions vehicles (ZEVs) involves swapping batteries rather than recharging them. This strategy was attempted by Project Better Place, a now-defunct firm that deployed battery swap stations and an innovative pricing structure in Israel and Denmark between 2008 and its 2013 bankruptcy, as well as several pilot projects elsewhere. When Better Place failed, the battery swap concept was widely seen as having been discredited. But by then, another startup had taken up the mantle of the promising-yet-challenging swap strategy: Tesla.
