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Why $3 Gasoline Problematic

Executive Summary

“If gas continues to go significantly below $3 a gallon, it’s not going to make electric vehicles more affordable,” says Ford’s Jim Buczkowski, whose company twice has cut the price of the Focus EV.

DETROIT – Automakers generally would cheer the recent availability of regular unleaded gasoline for less than $3 a gallon in parts of the U.S., unless they are trying to sell electric vehicles and plug-in hybrids as a hedge against stiffening fuel-economy standards.

“With gas prices going down, that’s a problem. People are looking at value,” Jim Buczkowski, Ford’s director-electrical and electronics systems/research and innovation, says at a panel session at the recent SAE 2014 Convergence electronics conference here.

“If gas continues to go significantly below $3 a gallon, it’s not going to make electric vehicles more affordable,” says Buczkowski, whose company twice has cut the price of the Focus EV. It stickers now at $29,995 after a $6,000 price reduction.

“I think that’s the challenge we face. We have to have C- and D-segment vehicles that are very affordable for customers to really get EVs to take off,” he says.

Harald Kroeger, vice president-electrical/electronics and electric drive at Mercedes-Benz, tips his hat to Tesla founder Elon Musk for establishing an EV model that actually works: Mitigate range anxiety by stuffing lots of batteries into the chassis of a beautiful car and charging a premium price.

Meanwhile, established high-volume automakers must fight for scraps selling small EVs that hold limited appeal and require expensive batteries.

“We stuff that super-expensive technology into inexpensive C-segment or below cars and wonder why customers didn’t really bite here because the customers who have a lot of money might not want to sit in a small vehicle,” Kroeger says. “I think the first big step will be to have good EVs in the upper segments.”

In the U.S., Mercedes is offering an electric B-Class, and California customers can lease a B-Class powered by hydrogen fuel cells as part of a pilot lease program.

Kroeger also makes a bold prediction about battery cost reductions: “I would bet that 10 years from now, we’re going to have cells with twice the capacity at half the price. We have the first samples in our labs at home that show me it’s true. It’s coming – it’s not just wishful thinking. In that case, an EV becomes attractive for a lot of customers.”

Session moderator John McElroy says the “hardest thing to change in the world is consumer behavior,” and that the simple process of plugging in an EV or even positioning a car over a wireless inductive charging port can seem like a major hassle.

Despite slow growth for EVs, McElroy says the U.S. is by far the world’s most receptive market for them. He encourages automakers to market the fun-to-drive characteristics of EVs.

“Marketing electric vehicles as clean for the environment resonates with about 3% of people,” he says.

At the high end of the market, Mercedes is introducing the plug-in hybrid version of the S500 sedan. Kroeger says he was surprised German journalists liked the car so much, even though electric range is limited to 20 miles (32 km). He expects that range will double in the future.

Kroeger also praised his German rival, Porsche, for introducing a plug-in hybrid version of the Panamera sedan. He’s heard 10% of Panamera customers are opting for the PHEV.

“Who would have thought that among Porsche customers 10% would care for the polar bears?” he says. “That basically shows there is something out there.”

Kroeger says he lives 16 miles (26 km) from his Stuttgart office, and that a car like the S500 PHEV makes good sense for him because he can charge both at home and work.

“If I don’t have any traffic or stops in between, then I manage to ride with zero gasoline from Monday to Friday,” he says. “And on weekends with my kids, we can take long trips, sure. But I have the full power of the vehicle. That’s pretty nice.”

Alan Amici, director-global UConnect for Fiat Chrysler, says the problem of range anxiety cannot be overlooked. People who are used to driving hundreds of miles on a tank of gasoline will struggle to embrace a small EV, most of which today are limited to about 80 miles (129 km) fully charged.

Amici perceives today’s generation as reluctant to give up any personal mobility or freedom, at least until a charging infrastructure is more established.

“They would ask, ‘Do I have enough charge to make this a round trip, or is this a one-way deal?’ So there’s the cultural part of it we have to deal with.”


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