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Mar 21, 2012, 10.00 AM IST | Source: Reuters

Electric car revolution faces increasing headwinds

ELECTRICCARS:Electric car revolution faces increasing headwinds

By Ben Klayman

DETROIT (Reuters) - Scott Kluth has a love-hate relationship with his new Fisker Karma luxury electric sedan.

The 34-year-old car lover bought the plug-in hybrid electric Karma in December for $107,850, but five days later the car's battery died as he was driving in downtown Chicago. While the car he affectionately calls a "head turner" was fixed in a recall, Kluth remains uncertain how much he will drive it.

"I just want a car that works," Kluth said. "It's a fun car to drive. It's just that I've lost confidence in it."

The Karma's problems -- one vehicle died during testing by Consumer Reports this month -- follow bad publicity arising from a probe of General Motors Co's Chevrolet Volt and weak sales of the car, and the closure or bankruptcy of several electric vehicle-related start-ups.

The unrelenting bad news has led to questions about the readiness of electric cars and raises fresh doubts about a technology that has around since the late 1890s but still struggling to win over the public.

Whether electric vehicles can find an audience beyond policymakers in Washington and Hollywood celebrities depends on lowering vehicle prices wi thout selling cars at a loss, an alysts and industry executives say, while extending driving range to make the cars competitive with their gasoline-powered peers.

"It's going to be a slow slog," said John O'Dell, senior green car editor a t industry research firm Edmunds.com. "Maybe there's too much expectation of more and quicker success than might realistically be expected of a brand new technology."

He also questioned whether priorities will simply change for whomever is U.S. president after the November election. Electric vehicles could lose tax breaks -- currently worth $7,500 a vehicle for buyers -- particularly if a Republican ends up in the White House.

Edmunds expects pure electric cars and plug-in hybrids to make up only 1.5 percent of the U.S. market in 2017, compared with 0.1 percent last year, and O'Dell said that may be optimistic. Consumers charge all-electric cars by plugging into an outlet, while hybrid versions include a gasoline engine.

President Barack Obama's administration has been a strong proponent of e lectric vehicles l ike the Volt and set a goal of getting 1 million battery-powered vehicles on the road by 2015. Lux Research estimates that number will actually be fewer than 200,000. Both the Volt and Karma's development were supported by low-interest federal loans.

That has not dissuaded automakers, many of which plan to launch electric vehicles to j oin the Volt and Nissan's <7201.T> all-electric Leaf in a bid to meet rising fuel efficiency standards. Toyota <7203.T> has begun selling a plug-in Prius, and EVs from Ford , Honda <7267.T>, BMW and Fiat will join the fray this year, along with cars from start-ups Tesla and Coda Automotive.

HENRY FORD'S WIFE

Electric cars aren't a new concept. Henry Ford bought his wife, Clara, at least two electric cars in the early 1900s offering at best 50 miles driving range and top speeds of about 35 miles per hour, according to the Henry Ford Museum.

But analysts said automakers have not done a good enough job getting the costs down and explaining the technology to win over anyone beyond early adopters like actor Leonardo DiCaprio, pop idol Justin Bieber, comedian Jay Leno and former U.S. Secretary of State Colin Powell.

"You can do all the advertising and promotion you want, but if people don't buy into the message the needle's not going to move," said George Cook, a marketing professor at the University of Rochester's business school and a former Ford executive.

The Volt, at almost $40,000 before federal subsidies, is seen as too expensive by many critics. Fiat-Chrysler Chief Executive Sergio Marchionne, a long-time EV skeptic, has said Chrysler will lose more than $10,000 on every battery-powered Fiat 500 it sells.

And even with rising gasoline prices -- topping $4 a gallon in parts of the country -- EVs a re just n ot competitive, according to the Lundberg Survey. Gasoline prices would have to rise to $8.53 a gallon to make the Leaf competitive and hit $12.50 for a Volt to be worth it, base d on the cost of gasoline versus electricity, fuel efficiency and depreciation, the s urvey said.

Obama's vision, which he laid out at a Daimler truck plant in North Carolina this month, includes a car battery that costs half the price of today's versions and can go up to 300 miles on a single charge. The industry is far from achieving that.

Since last fall, there has been a run of bad news for EVs, starting with the late November news t hat U.S. safety regulators were investigating the Volt for possible battery fires.

While the federal investigation was closed with the conclusion there was no defect and the car did not pose a greater risk of fire than gas-powered vehicles, weak demand led GM to halt production for five weeks and temporarily lay off 1,300 workers at the plant that builds the car. GM, which strengthened the structural protection of the Volt battery, has repeatedly said the car is safe, and some said t he safety probe should have never occurred.

The Karma that died during testing by Consumer Reports magazine was another blow following a recall of more than 200 o f the cars la st year and the halting of sales in January for a software issue. Fis ker, which builds the Karma in Finland, also suspended work last month at its U.S. plant scheduled to make another car, the Nina sedan, whi le it works to renegotiate a $529 million loan from the U.S. Department of Energy.

Fisker spokesman Roger Ormisher said problems can arise with new technologies and a new company but added Fisker had gone "beyond the call of duty" in instituting a system to respond to customer issues and had plenty of satisfied owners. CEO Tom LaSorda in a letter to Karma owners last week said Fisker was committed to giving customers "complete peace of mind" and he had created a "SWAT team" of 50 engineers and consultants to identify issues with the car.

'FIRST LAW OF DISNEY'

"The expectations have always been too high for electric cars," said Bill Reinert, Toyota's U.S. manager for advanced technology. "The realities have always been clouded by the dreams. I like to say it's the first law of thermodynamics versus the first law of Disney. Disney is wishing it w ill be so. It do esn't work." Toyota has always been skeptical EVs would quickly boost its share of the auto market.

Meanwhile, several companies have struggled due to lack of funding or customer troubles.

A123 Systems

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