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Can electric cars break out of niche status in US, China market?

Despite a surge in interest, electric cars may remain niche products in the world's two largest auto markets. Advocates disagree.

By Jaeah LeeContributor / May 10, 2010

The first preproduction electric Chevrolet Volt rolled down an assembly line at a Detroit GM plant in late March as part of a production-quality test.

Reuters

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Beijing and New york

Interest in electric cars is surging:

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•Nearly 52,000 people were wait-listed as of mid-April for General Motors' electric model, the Volt, due in November. As of March, almost 56,000 people had signed up to reserve Nissan's all-electric Leaf, due in dealerships by December.

•In China, leading automakers BYD and Chery have announced plans to roll out their own electric models within the next two years.

•Investors, too, are excited. Electric-car ventures made up nearly 40 percent of $1.9 billion invested in 180 green-technology companies worldwide in the first quarter of 2010, according to a study by the Cleantech Group and Deloitte.

Yet in the United States and China, automakers' caution, weak price incentives, and concerns over the electrical grid are slowing the electric car's introduction. If electric cars can't break out of niche status in the world's two largest passenger car markets, then a transition away from gasoline-powered vehicles could be delayed. And many would-be buyers are likely to be frustrated by the lack of available cars. "There is undoubtedly going to be a backlog, where demand exceeds production for the next few years, due to the trepidation of the automakers that the electric car is not something consumers want," says Marc Geller, cofounder of the advocacy group Plug In America.

Take the 56,000 people who have signed up for a Leaf. Nissan is planning to start deploying it in only five states. Total cars initially available: 4,700.

Other automakers are also proceeding cautiously. Bob Lutz, the outgoing vice chairman of GM, has said the company will produce about 8,000 Chevy Volts in 2011. BMW's Mini is rolling out its electric car in three phases. In 2008 the company released a test fleet of 450 Mini-E vehicles and is getting ready to announce its second phase. The third phase will be released around 2015.

Similarly, in China, the sheer size of the auto industry and the country's ambitious clean-energy goals suggest a potentially huge market for electric cars. China overtook the US last year as the largest auto market in the world.

Still, Chinese auto-makers hesitate to mass-market their electric models domestically. BYD's all-electric e6 production line at the company's base in Shenzhen was "ready for manufacturing" in March, but was only producing the gasoline-powered F6, according to Yang Binbin, who writes for Caixin magazine, a business publication based in Beijing.

In the meantime, the company is focused on government-funded mass- transit projects, which guarantee investment returns. In March, BYD chief executive officer Wang Chuanfu announced that in the first half of 2010 the company will sell only 100 e6 cars, to a taxi company in Shenzhen.

Chinese green-car subsidies on hold

The uncertainty surrounding Chinese demand for electric cars is tied to subsidies, Mr. Yang says. The government-run newspaper China Daily reported on April 8 that the Ministry of Industry and Information Technology had postponed its plans to launch incentives for private purchases of new energy vehicles in March.

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