Big Picture: Good news for EV fans – Federal agency reports growth in renewables and decline in coal for electricity

Total installed operatiing generating capacity 2013Electrified transportation has major challenges to overcome with one of them being where the electricity comes from. Your car could be zero emission, but if the energy source used to generate the electricity powering your motor is spewing carbon, then what’s the point? Or so the thinking goes. One bright spot is that new power plant capacity is seeing big growth in renewable energy and natural gas, and steep decline in coal-fired plants. A new report from the Federal Energy Regulatory Commission’s Office of Energy Projects says that renewables (such as solar, wind, biomass, geothermal, and hydropower) made up 37.16% of new domestic electrical generating capacity during 2013 for a total of 5,279 milliwatts (MW). Natural gas led 2013 with 7,270 MW of new capacity (51.17%). Renewable energy made up for three times that of coal (1,543 MW or 10.6%); oil (38 MW – 0.27%); and nuclear power (0 MW – 0.00%) combined.

Electricity production accounts for about 33% of greenhouse gas emissions in the US, according to US Environmental Protection Agency. Natural gas is a fossil fuel, just like coal, but it’s a much cleaner source of power – the EPA says its produces less nitrogen oxides and carbon dioxide than coal, and half as much carbon dioxide, less than a third as much nitrogen oxides, and only one percent as much sulfur oxides at the power plant. As you can see in the Federal Energy Regulatory Commission chart above, coal still makes up for a large share of US power plant operations at 28.57% last year. It used to be right above 50%; natural gas has been taking some of that share away for the past two years. Water and wind make up the biggest part of the renewable category; solar gets a lot of attention but is still in an early stage of development – but if you look at the new roll outs last year, solar is looking better. Solar led the way with 266 new units totaling 2,936 MW, followed by wind with 18 units producing 1,129 MW. Biomass provided 97 new units totaling 777 MW; water had 19 new units and 378 MW; and geothermal steam had four new units and 59 MW.

And in other clean transportation news:

  • Along with the new fuel economy standard, the US Environmental Protection Agency began working more closely and cooperatively with automakers in 2011 on tailpipe smog emission standards. At the Detroit Auto Show, EPA Administrator Gina McCarthy told automakers that the agency will take final action on its “Tier 3” standards next month; it’s putting stricter limits on tailpipe emissions and will have a mandate for oil companies limiting the amount of sulfur that can be used in gasoline. The rule will cost less than a penny a gallon and bring improved health protections to the public, McCarthy said to Automotive News. Automakers are pleased with the prospect of making and selling the same vehicles globally with better emission controls, as long as the oil industry does its part. The negotiations in 2011 appear to have been the start of ongoing cooperation between government and the auto industry. Technology is now in a place to provide solutions to barriers that used to be insurmountable.
  • Tesla Motors CEO Elon Musk thinks leasing is the answer for electric vehicle acquisitions, and just about all other types of vehicles out on the roads. Tesla guarantees the future value of its cars during the lease, allowing it to bring down monthly payments for the luxury, sporty sedan, the Model S. The premise of the guaranteed residual value has been based on the Mercedes Benz S Class as the benchmark – Tesla promises the Model S won’t depreciate any lower than the S Class; and Tesla will buy back the car at the agreed price. It will be very interesting how Tesla and its finance department do in the future; automakers get a lot of flexibility in how they report profit and loss from leasing within their captive finance divisions; some would call it “creative finance.” The Model S will cost much more in China – about $121,000. There’s bound to be very competitive lease deals in that country, which Tesla is counting on for pushing forward in its unit sales.
  • The 2015 Cadillac ELR took the Green Car Technology of the Year award. That extended range plug-in hybrid luxury car just rolled out last month and has only sold a handful of units. Winning the award should help, just like cars have done winning Green Car Journal’s sister award, the Green Car of the Year award, which is given out in November at the LA Auto Show. Ron Cogan and the other award judges were particularly impressed with the ELR’s paddle shifters used to increase the amount of energy it’s able to regenerate and store in its battery pack. That helps increase its range.
  • More students are being called on for breakthroughs in green vehicle technologies. Not long after Ford showed off its Fusion Hybrid automated research vehicle, Ford announced two alliances with impressive universities. Ford has projects started with Massachusetts Institute of Technology and Stanford University to research and develop solutions to some of the challenges that come up with automated driving. The teams will explore Ford’s Blueprint for Mobility, where driverless, automated driving is expected to bring long-term social contributions.
  • Going green is becoming more appealing to auto dealers around the country as a marketing message and as a strategy to build employee and customer loyalty – something to be proud of contribute to the local and global community. Rossi Honda of Vineland, NJ, says it’s the first-ever US dealer to become “Electric-Grid Neutral” and that happens through using no net electricity from its local utility. Rossi Honda installed solar panels during 2012 that took care of 90% of its need for electricity; the other 10% and its neutrality rating came from replacing metal halide lamps with LED lamps. Installing canopies outside for weather protection was also part of it neutral program.
  • Via Motors has made an $80 million purchase agreement with Sun Country Highway, a Canadian company that’s bringing electric vehicle charging stations to the nation’s highways. The deal will bring 1,000 of Via’s extended range plug-in hybrid Vtrux vans as shuttle vehicles for the Best Western hotel chain.
  • The Smart ForTwo Electric Drive was named the most environmentally friendly vehicle on American roads, according to the 2014 Greenest Vehicles list released by the American Council for an Energy-Efficient Economy; an assortment of battery-electric vehicles, plug-ins, hybrids – and one natural gas model – rounding out the Top 10. Toyota and Honda overwhelming dominated the ACEEE list of “Greenest” models.

What Rick Sikes and Joe Stergios say about managing green fleets

Rick Sikes and Joe Stergios webinarI would suggest that you take an hour and listen to the webinar from last week sponsored by 2014 ACT Expo and featuring Rick Sikes, feet superintendent for the City of Santa Monica, and Joe Stergios, area sales manager for Enterprise Fleet Management. Their experience and expertise is quite impressive, and it points toward what can be shared at ACT Expo in a few months. Sikes has been at it since the early 1990s and now has a 78% green vehicles in its 800 unit fleet, with natural gas vehicles making up about half of its fleet and electric vehicles (EVs), propane, hybrids, and hydrogen making up the rest of the green vehicles. Stergios works for Enterprise, which has the world’s largest private fleet with about 1.4 million vehicles on roads; the company serves about 9,000 commercial and government fleet accounts. Hybrids, EVs, and compressed natural gas vehicles are what Enterprise has been testing out on the rental and fleet sides. Enterprise’s alternative fuel vehicle experience increased four years ago when the company adopted an environmental stewardship initiative with the assistance of the CICS sustainability consulting agency.

Here are some of the more interesting points they made:

  • Sikes: Having a written policy on alternative fuels is important tied into strategic objectives like reducing fossil fuel consumption and reducing greenhouse gas emissions. With that, keeping an accurate inventory of the vehicles and their fuel use is important. Where and how its fueled onsite and offsite; making better use of under-utilized assets can free up capital and make operations more efficient.
  • Stergios: Creating a total cost of ownership (TCO) model is an important part of managing the assets. There are five aspects that need to be analyzed – acquisition, funding, compliance, operation, and remarketing. Those go into the TCO model and show you where the best fleet decisions are being made for the vehicle’s lifecycle. Stergios showed a chart with an electric vehicle, plug-in hybrid, clean diesel, hybrid, and fuel efficient car for comparison – they came out very close to each other. Trucks are in the same realm lately – where gasoline, bi-fuel CNG, and diesel are very close to one another on a financial level.
  • Sikes: Grant funding is bringing down the lifecycle costs of these vehicles, so you need to do your research. When asked whether he’s seeing the 50 cent per gallon equivalent for natural gas affecting fuel prices, he’s not seeing that happen. His fleet doesn’t buy off local pumps; they may see it in the future but he doesn’t have a sense of how much they’re passing it on to customers lately.
  • Stergios: Enterprise managers turn about 700,000 vehicles a year and most all of them are at risk units; it’s still a bit early to get accurate readings on where green vehicles are going in resale values – if anyone has insight on that one, he’d like to hear from them. (Santa Monica keeps its vehicles 12 to 14 years, so Sikes doesn’t have much to share on this topic, though five-to-eight year turn-ins are common for other fleets, he says.)
  • Sikes: Santa Monica is looking at bringing in extended range trucks from Via Motors. He likes the low maintenance that EVs have to offer, but is concerned about the range anxiety, so the 40 miles on electric and then the extended range on Via pickups and vans are interesting to him.
  • Stergios: Complying with California regulations can be tricky especially when a green vehicle might lack CARB and EPA conformity. Certification with CARB is starting to get a bit easier with more engines passing the certification process.

It ain’t over till it’s over: Biofuels vs. Big Oil battle continues

E15The US Environmental Protection Agency’s open comment period on its proposed revisions for the Renewable Fuel Standard will close at the end of today. The public comment sessions have been heated and comprehensive, and have come from a long list of federal and state elected officials, industry association leaders, and advocacy groups. However, if I had to put money on it, I would bet that the EPA will stick to the proposal that it issued in mid-November; that’s the way it usually goes. Beyond that, the battle between the biofuels industry and “big oil” (oil companies and refineries) is likely to continue. Here’s the latest:

  • The oil industry would like to see gasoline avoid the E15 (15% ethanol) blend, along with seeing renewable identification number (RIN) credit prices dropping or going away entirely. More recently, a bigger issue seems to be the cellulosic biofuels mandate requiring oil refiners to blend a specific amount of advanced biofuels from grasses, trees, and crop waste into gasoline. The American Petroleum Institute and American Fuel & Petrochemical Manufacturers petitioned the EPA to reduce its target, stating that advanced biofuels producers were failing to delivery on production schedules to meet the federal target. That was the case in 2013 when the cellulosic biofuel industry could only deliver one million of the six million mandated gallons. EPA Administrator Gina McCarthy said that her agency will reconsider its 2013 cellulosic biofuel mandate after viewing the objections raised by the oil industry.
  • A large number of US senators have called on the EPA to revise its 2014 mandate proposal. McCarthy received a letter signed by 31 senators who called on the EPA to revise its proposal to stimulate growth in next-generation biofuels and infrastructure. The letter was led by Senators Dick Durbin (D-Ill.). Chuck Grassley (R-Iowa), Al Franken, (D-Minn.), Amy Klobuchar (D-Minn.), and John Thune (R-S.D.). “Without a revised proposal, the EPA’s rule will bring severe economic consequences, and prevent the growth of the renewable fuel sector,” the letter said.
  • Speaking this month at the Biodiesel Conference & Expo, National Biodiesel Board CEO Joe Jobe called on President Obama to stand tall with his support for alternative energy industries. Jobe said that “big oil” has been misleading Americans about fuel policy, and gave his perspectives on misconceptions in how Americans think about energy.  “Strong government policy support along with a unique spirit of innovation, entrepreneurship, and risk-taking are the primary reasons that so many major modern industries had their start in America,” Jobe said.
  • Fuel stations are rolling out more E15, regardless of where the federal policy goes. MAPCO Express Inc. will be offering E15 at 100 of its mega stores in the Southeast.  American Freedom Energy has become the first retailer in Ohio to offer the E15 blend at its pumps. Seeing retailers like American Freedom Energy, MAPCO, Murphy Oil, and Minnoco offering E15 continues to make the case for the fuel blend, says Growth Energy CEO Tom Buis. “When given the choice, consumers will seek the fuel that costs less, improves the performance of their vehicles and is better for our environment,” Buis said.

Big Picture: Big Opportunity – Rick Sikes and Joe Stergios on ACT Expo webinar tomorrow

webinarFor those of you who enjoy good webinars, register immediately for an Alternative Clean Transportation (ACT) Expo session coming up tomorrow, January 22 at 11:00 am PT / 2:00 ET (though it’s possibly filled up by now). Two seasoned experts will share their experience and insight on “How to Integrate Alternative Fuels into Your Fleet Operations” – Rick Sikes of City of Santa Monica and Joe Stergios of Enterprise Fleet Management. Sikes has been in the trenches with alternative fuel vehicles for about 25 years and has played a leading role in organizing AltCar Expo in Santa Monica each year. Stergios has worked closely with fleet clients who want to integrate clean, efficient technologies into their fleets; he’s played a valuable role in the monthly stakeholder calls for Green Auto Market, shedding light on what’s actually happening out there. These two speakers will talk about evaluating economic and environmental benefits of AFVs in their fleet operations, selecting the right equipment and fuel options, securing funding and tax credits, and maintaining and operating equipment safely and cost-effectively. Click here to register.

AIRNow shows you five major pollutant categories in air you’re breathing

Interested in gauging the quality of the air you’ve been breathing lately? Visit the AIRNow website, which offers Air Quality Index (AQI) reporting on 300 major US cities with links to more detailed state and local air quality website. It’s been coordinated by the US Environmental Protection Agency and partner federal agencies (such as the National Oceanic and Atmospheric Administration).  Its maps are updated daily by the hour. The AQI focuses on health effects you may experience within a few hours or days after breathing polluted air. It measure five major pollutants listed under the Clean Air Act – ground-level ozone; particulate pollution (aka particulate matter); carbon monoxide; sulfur dioxide; and nitrogen dioxide.  The data is collected by federal, state, local, or tribal monitoring agencies to enforce the act.

And in other news……

Speaking of air pollution, Utah resident want to see tougher air pollution requirements on industry. They said they’re more concerned about air pollution today than they were five years ago, according to a survey conducted for The Salt Lake Tribune. Researchers found that residents favored stricter laws for industry emissions on a 3-to-1 basis.

Two Chinese companies will square off in bankruptcy court on February 12 to determine the fate of Fisker Automotive. An auction will take place that day and Wanxiang Group will be competing with investor Richard Li of Hong Kong and his Hybrid Tech Holdings partner. Hybrid has said its initial bid would be worth $55 million – so the numbers are more than doubling over the initial bid.

Tesla CEO Elon Musk has been getting into squabbles with NHTSA over how the Model S investigation should be conducted, what’s going to be investigated, and what it will be called. Musk has been upset that the word “recall” has been issued when customers as of yet don’t have to bring their cars in to a Tesla retail location. The garage fire caused by house wiring was another slap to Musk in having it defined as a recall. “What are they supposed to do about that, issue a recall for the house?” he asked.

Strong fuel economy was a key them at the Detroit Auto Show especially for Ford Motor Co. and its new F-150 pickup with an all-aluminum body that weighs 700 pounds less. Chrysler emphasized its Ram 1500 pickup with an eight-speed transmission and a 2015 Chrysler 200 with a nine-speed gearbox, which gives it 35 mpg on the highway. Toyota will be rolling out even more hybrids and will bring its hydrogen powered car to market a year earlier than previously announced – now it will be 2015. During the Automotive News World Congress, Brian Kesseler, president of Johnson Control’s battery division made a strong statement. He thinks it’s entirely possible for the auto industry to reach the lofty 54.5 mpg by 2025 directive from the federal government. He thinks it will come from a mix of stop-start systems, turbochargers, direct injection and other cutting-edge technologies.

Overall sales slowed down last for Toyota Motor Corp, but hybrid electric vehicles continued to see strong numbers. Toyota sold over one million units for the second year – this time reaching 1.279 million units sold. That’s up over 1.219 million hybrids sold in 2012, which was the first year Toyota passed the one million annual mark for hybrids. There were several new hybrid models introduced in late 2012 and through 2013 in different global markets – the Crown Hybrid, Avalon Hybrid, Lexus IS 300h, Corolla Axio Hybrid, Corolla Fielder Hybrid, Crown Majesta Hybrid, and the Lexus GS 300h. It’s an impressive lineup – 24 hybrid models and one plug-in hybrid in about 80 countries. The automaker says it will roll out 15 more hybrid models in the next two years.

Expired federal tax credit raises natural gas prices and its challenges

Ford CNG F-150For those in the natural gas vehicle business, a new challenge took hold on January 1, 2014 – a federal tax credit expired, which has been adding 50 cents on each gasoline gallon equivalent (GGE) of natural gas sold at a lot of fueling stations. That’s been a 30% cost increase at some fuel stations, and it’s a cause for concern for compressed natural gas (CNG) vehicle owners and for those providing the vehicles and infrastructure. Prices are varying in the US – around $1.65 to $2.50 per gallon equivalent around the country (according to CNGPrices.com on January 20). Gasoline prices were about $3.28 and diesel is around $3.85 nationwide according to AAA. Taking an estimated average of $2.10 for natural gas GGE in the US, that makes it about 64% the cost of gasoline and 54% the cost of diesel. Not long ago, natural gas was costing well under half the price of gasoline and only about one third the cost of diesel.

It is being felt in Oklahoma, which has more CNG fueling stations per capita than any other state. It apparently hasn’t caused uproar yet, since Oklahoma has been seeing cheaper price per gallon – still under $2.00 per gallon equivalent in parts of the state, but it is being noticed. Operators of fueling stations have some decisions to make in that market and around the country about how the pricing will go. Natural gas producers had been passing the credit on to consumers. Time will tell who will be paying that increase, but based on scanning the news and talking to someone in the business, natural gas prices are starting to rise for consumers now that the credit has gone away.

For example, natural gas producer Apache has passed on a 50 cent increase to its 19 fueling stations in Texas, Louisiana, Oklahoma, and New Mexico. Apache had seen an 88% increase in CNG sales at its stations in 2013 due to the low prices for natural gas.

All things considered, here a few points to follow:

• The tax credit might come back in Washington; it was part of the “fiscal cliff” fight over a year ago, and could return as a tax credit or another incentive from the federal government. NGV advocates like T. Boone Pickens have been knocking on doors in Washington and lobbying for it. NGVAmerica reported that Sen.  Max Baucus (D-MT) had drafted a bill to modify all energy taxes including the CNG fuel credit in a tax extender bill. His proposal, if adopted, would extend the fuel credit for three years (until 2016) and modifies them with a clean fuel credit based on BTU and emission factors. Senate Majority Leader Harry Reid (D-NV) has introduced a senate bill that includes an extension of related credits until 2014, and other elected officials have been supportive in the talks. It’s a wait-and-see situation, according to NGVAmerica.

• The benefits of going with natural gas are still there; the fuel is expected to remain very cost competitive for years to come in the US due to its abundant supply. The reduced emissions with CNG and LNG is very appealing to fleets directed by carbon and smog emissions targets.

• The vehicle offerings are getting better. There are a lot of EPA and CARB-certified commercial vehicles and pickup trucks out there. Consumers like the Honda Civic Natural Gas and Ford F-150 – it appears to be slowly growing in interest from consumers who might have bought a hybrid or clean diesel vehicle before. The price is higher for NGVs due to gasoline and diesel comparable vehicles – usually around $10,000 for a conversion (sometimes cheaper); so it takes about a year and a half to break even and loss of the tax incentive will add a few months to that calculation.

• The infrastructure has a long way to go, but it is getting better each year. Navigant Research predicts that 40% of the stations to that will be opened in the next two years will be in North America. Growth in the fueling station networks will help take away some of the hesitation.

LeSage Consulting Starts Up to Offer Services to Stakeholders in Alternative Fuel Vehicles and Clean Transportation

LeSage Consulting image - mediumJanuary 21, 2014 – Alternative fuel vehicles are playing an increasingly vital role in environmental issues, government policies, and economics. LeSage Consulting now offers services to support stakeholders in alternative fuel vehicles and clean transportation – education and public awareness, informative content, and market research services designed to assist clients in accomplishing their missions.

“Electric vehicles, hybrids, hydrogen fuel cell vehicles – and natural gas, propane autogas, and advanced biofuels – are starting to see real numbers in vehicle offerings, sales figures, and infrastructure,” said consultant Jon LeSage. “Consumers, fleets, automakers, charging and fueling companies, governments, and other stakeholders, are making the necessary investments and commitment to meet what I would call the E Benchmarks – emissions, energy, economics, and efficiency.”

Stakeholders in this emerging field have been calling out for years on helping consumers better understand and make informed decisions. Education and public awareness services provided by LeSage Consulting – including online and onsite seminars, ride and drives, and educational materials – are vital for answering frequently asked questions and breaking through range anxiety and other concerns. LeSage Consulting will provide education resources to three audiences:  automakers and dealer networks informing car shoppers and customers; stakeholder alliances deploying fuels and infrastructures; and conferences and events presenting educational seminars and hands-on experience with the vehicles.

LeSage Consulting also provides informative content ideal for websites and blogs, articles and newsletters, webinar presentations, and public information campaigns. The firm’s market research services will support education, awareness, and analysis of what’s happening in this industry; these services include industry metrics, surveys, focus groups, in-depth interviews, and analytical reports on emerging trends impacting stakeholders in the field.

Jon LeSage is known in the industry as a writer/editor covering alternative fuel vehicles for Green Auto Market, AutoblogGreen, and Automotive Digest. In addition to media, LeSage worked in market research serving clients in automotive, transportation, and consumer products. LeSage Consulting is a logical continuation of his professional experience and skillset – and his passion for clean transportation – in an engaging, insightful format.

“There’s so much to follow these days with breakthroughs in vehicle technologies, alternative fuels, and renewables, along with new ways of thinking about transportation such as carsharing and autonomous, driverless cars,” LeSage said. “Every one of the alternative fuels and vehicles has a series of challenges to break through to see real growth. LeSage Consulting works with clients to turn these challenges into opportunities that will help clean transportation move forward.”

Stakeholders served by LeSage Consulting will include:

  • OEMs, automotive suppliers, and dealerships
  • Fleet managers, fleet management companies, and transportation companies
  • Charging and fueling infrastructure providers
  • Government agencies and research centers
  • Industry associations and environmental groups
  • Marketing agencies
  • Energy companies
  • Carsharing and ridesharing providers
  • Telematics and connected car providers

More information on LeSage Consulting products and services is accessible on LeSage’s website including current and back issues of Green Auto Market; subscribers can choose the Extended Edition with industry metrics including hybrid and EV sales, alternative fuel prices, stock market performance for companies in the field, and US charging and fueling stations. In the next few months, LeSage Consulting will release the Green Vehicle Database with specifications, pricing, and incentive data on passenger and commercial vehicle offerings for the 2014 and 2015 model years. Jon LeSage can be contacted at (562) 505-6380 and jlesage@jonlesage.com.

Education & Public Awareness Services – LeSage Consulting

Education & Public Awareness Services – LeSage Consulting

Big Picture: The latest on the Fisker bankruptcy settlement, Lithia Motors gains silver LEED certification

Fisker plant in DelawareSettlement of the Fisker Automotive bankruptcy and bidding for new ownership continues to be dragged out – but the Delaware plant may survive. Hybrid Technology, led by billionaire Richard Li, has put in $55 million for Fisker’s assets. Hybrid’s bid had been rejected days ago by bankruptcy court judge Kevin Gross. Hybrid is offering $30 million in cash and is willing to cancel $25 million in debt that Fisker owed the Chinese company. Hybrid also is offering $5.5 million to unsecured creditors if they would agree to back Hybrid Technology instead of its rival, Wanxiang Group.

Hybrid Technology has also changed its tune on what will happen with the Boxwood Road plant near Newport, Del. Hybrid changed course after gleaning that many people in the court building were very upset about the shutdown of the factory. Hybrid is now willing to use the shuttered plant if market conditions demand it. On Friday, bankruptcy judge Gross said he would put Fisker’s assets up for auction to try to maximize the automaker’s market value. Wanxiang had told the judge that if it can acquire Fisker at auction and cultivate a market for the cars, they would have them made at the Boxwood Road plant. Wanxiang had been non-supportive of the Delaware plant before that court day, as well.

And in other clean transportation news…..

  • Lithia Motors, Inc., the Medford, Ore.-based and ninth largest US automotive retailer, has been awarded Silver LEED certification by the US Green Building Council. Building construction completed in August 2012 in downtown Medford used environmentally-sustainable building products, furniture, and furnishings; many contain a significant amount of recycled-content materials. The new building has solar panels on its roof to offset energy usage.
  • VIA Motors signed an agreement with Recargo, Inc., at the North American International Auto Show in Detroit to include Recargo’s PlugShare charging infrastructure information in VIA’s in-dash electric vehicle application. VIA thinks the comprehensive charging station information will help its customers find a charge whenever and wherever they need one.
  • At the Consumer Electronics Show, Toyota said that its Toyota FCV (fuel cell vehicle) will go on sale in the US in 2015, one year earlier than the company had previously announced. The fuel cell vehicle will have a range of 300 miles and take three-to-five minutes to refuel.
  • Chrysler Group is going to start building its 2014 Ram 1500 EcoDiesel pickups this month; that’s several months after it had been originally scheduled to start up. These 3.0L diesels are expected to be distributed to dealers in February.
  • The CBS series “60 Minutes” has been getting heavily criticized for its January 5th segment called “The Cleantech Crash.” The segment presented a laundry list of government-backed failures starting with the infamous Solyndra bankruptcy, failing to mention the large number of successful ventures.

Dark clouds on the used green car front – and what could be done about it

Used geen carsElectric vehicles, hybrids, and small, fuel efficient vehicles are having a tough time on the used vehicle market lately. Black Book’s Ricky Beggs and Kelley Blue Book forecast downward pricing. Wearing my hat as editor of Used Car Market Reports, I would say it’s not something to be alarmed over, but it is important to stay current and study the options.

Here’s the latest:

  • I interviewed Ricky Beggs last week on Black Book’s 2014 used vehicle market forecast. He said that entry-level cars, hybrids, and EVs will continue to soften in used vehicle prices this year. The 54.5 mpg by 2025 federal fuel economy standard is playing into it – there’s a lot more automakers competing in these segments now and the market is still sorting it out.
  • Gasoline prices are the main drag on their resale values, Beggs said.  While gas prices have gone up a bit lately, he thinks it will be much like the past two years. We’ve been see­ing an increase in gas prices since mid-December and that should con­tinue through mid-February; but gas prices will likely drop beyond that point. Beggs expects to see a high in the national aver­age some­where in the $3.75 to $3.85 range; it aver­aged $3.49 overall last year. It would need to go up quite a bit for that to be felt in strong used prices for fuel efficient, green cars.
  • As for this year, three leading energy agencies have reported that oil production outside of OPEC countries should be increasing this year – with much of that coming from US shale fields. That’s one of the reasons gasoline and diesel prices are expected to stay about where they are now by energy analysts.
  • Kelley Blue Book (KBB) thinks electric vehicles are going to see big drops in used vehicle values after five years of ownership. The Ford Focus Electric could take a nosedive – dropping down to $7,200 from a starting price at nearly $36,000. The new Chevy Spark EV is also expected to get hit hard – retaining only 28% of its value and coming in at under $8,000 after selling for $28,305. The Nissan Leaf could be the loss leader after five years, seeing only 15% retained value at just under $5,355.
  • Keep in mind that these value forecasts don’t factor in federal tax credits, usually at $7,500 for these models being analyzed. Regional and state incentives also come into the equations. Buyers saving around $10,000 off the sticker price would soften the value retention’s downward spiral, but the price drop is still there.

My thoughts on the situation:

  • Watch what the OEMs are doing. The used vehicle remarketing process has changed quite a bit in recent years. During the past four years, there’s been a lot more discipline in the market with OEMs, captive finance divisions, and dealer networks reducing incentive offerings and avoiding dumping low-sales volume vehicles into fleets. It will be very interesting to watch what Toyota, GM, Ford, Nissan, Honda, and BMW do to respond to EV and hybrid resale value loss.
  • Plug-hybrids are doing better in the KBB forecast. They have a much better chance of retaining more of their value. The Tesla Model S is also looking good since Tesla is building its leasing deals on high forecasted prices. That makes them more affordable for consumers and Tesla is taking more of the risk of absorbing any losses.
  • OEMs, dealers, and remarketers should emphasize the lifecycle costs of these vehicles. A lot of fleets are acquiring more of these vehicles because of their total cost of ownership – the fuel cost per mile is much lower and there’s less to spend on maintenance for an EV, and many times for a hybrid, than for an internal combustion engine vehicle. The soft resale value forecasts will hurt, but the other cost saving factors could salve the wound a bit.
  • Some of the tried and true marketing methods could help. When you think of TV commercials and other marketing methods in the past few years (such as for Nissan Leaf and Chevy Volt ads), there’s always been messaging around a few themes – air pollution, carbon emissions, fuel prices, and freedom from oil addiction and the power of foreign oil markets. Gasoline prices made for the most convincing argument after the staggering price spike of 2008; but that was nearly six years ago and gasoline prices look like they’ll be staying under $4 a gallon for a while longer. Resale values will take a while to improve. Focusing on other themes besides gas prices and resale values would be a good idea for now.
  • There’s also the fascination a lot of people have with cool new technologies on the market and how they work. That’s always part of the EV marketing campaigns out there from Nissan, Tesla, BMW, Toyota, GM, and Ford. The autonomous, driverless car projects make for a good example. Google chose the Toyota Prius for its initial driverless test car and Nissan has gone with its all-electric Leaf. Focusing on the cool technology theme could help offset declining used vehicle values.
  • Improving the brand image might not bring the resale values back right away. Emphasizing the green benefits and the fun of driving these new technologies won’t stop a price plunge for used vehicles in the short term. Some of that will have to be addressed through bringing the production costs and lithium battery costs down in scale to be more cost competitive on the market; and eventually creating accurate alignment with supply and demand. It’s still very early in the lifecycle process of these vehicles – especially EVs – on the market to gain a realistic analysis of precisely how many should be built and delivered to dealers.