Demand for electric and hybrid cars has risen dramatically in recent years, and many major automakers have or are planning to roll out their own green car models. Reports show that this rapidly expanding market is not simply motivated by fuel concerns.

The focus on hybrid and electric vehicles in the United States has resulted in an expanding consumer base for green cars. With many buyers looking for greater fuel efficiency and more environmentally friendly vehicles, many of the world’s largest automakers have taken notice and introduced or begun development on electric or hybrid models.

The steady growth in this market is driven not only by concerns over fuel pricing and emissions, but also a wave of new technologies, shifts in global competition and changes in public policy.

According to a January survey from Ernst & Young, more than 10 percent of licensed drivers in the U.S. would consider purchasing a hybrid or electric vehicle, representing nearly 20 million Americans who have a favorable attitude toward green automobiles. Thirty-four percent of respondents also said they would be willing to subsidize charging stations for these types of cars.

“Even if only a small portion of the 10 percent of survey respondents who said they would consider a plug-in hybrid or electric vehicle when introduced are serious, there would still be more than enough demand to sell out the 2010 and 2011 production runs of the major and new manufacturers, while buying crucial time to build out infrastructure and increase public awareness,” Mike Hanley, the global automotive leader for Ernst & Young, said of the findings.

The commercial transportation industry has also taken an interest in green cars. A late-2009 report from Pike Research forecast that nearly 4 million hybrid vehicles would be sold worldwide in the fleet sector by 2015, and that hybrid fleet sales would increase from 300,000 in 2009 to 830,000 in 2015.

“Manufacturers are beginning to turn their attention beyond light duty vehicles to the efficiency opportunities for hybrid drive in heavy trucks,” Clint Wheelock, a managing director at Pike, said in the report. “For example, in North America nearly 10 percent of buses sold in 2015 will be hybrids.”

In addition to fuel efficiency and energy pricing issues, there are a number of other factors motivating the expansion of the electric and hybrid car market. In a speech at the Fortune Brainstorm Green 2010 conference earlier this month, Ford Motor Co. Chairman William Ford outlined some of the key forces influencing the future of green cars.

Green technology blog earth2tech provides a summary of Ford’s five main points:

• Federal Subsidizing — The U.S. government’s investments in electric car battery technology and support for green automobiles is likely to become an increasing priority in the future because, as Ford explained, it is “really important that we are competitive as a nation in this really critical technology.” Removing subsidies would be a mistake because “that’s not what other countries are doing.”
• Competition from China — Chinese automakers have made major inroads in developing global car brands and their significant funding of green automotive tech may provide a competitive advantage. “They all have plans to come over, and we would be absolutely crazy” to underestimate China’s affect on the U.S. auto market, Ford said.
• Biofuel Development — In his speech, Ford asserted that biofuels “might not make sense for land-strapped, or land-constrained economies,” but that the U.S. has the resources to make biofuels a viable energy alternative for powering cars in the future.
• Common Platforms — Having learned from its financial struggles, the automotive industry is now focused on providing cars to meet specific consumer demand. Some companies, including Ford, are developing plug-in versions for existing car models, and as common platforms for electric alternatives to existing models spread, green car production can more easily adapt to the demand for these models.
• Mobility as a Service — Increasing global urbanization means that lucrative emerging markets “will need very different mobility solutions than our current model allows for.” As a result, car companies may start shifting away from ownership or leasing structures to provide “mobility as service” alternatives, such as car sharing programs, which will influence green vehicle availability.

As the green car market continues to evolve, automakers are seeking ways to increase mass market appeal for electric and hybrid vehicles, but pricing remains one of the primary challenges. While the initial purchasing expense and the cost of batteries tend to be high, lower fuel costs and certain tax credits offset some of the price, and car companies are now striving to highlight these features.

“To achieve real market penetration at mass market numbers, what electric drive vehicles must ultimately do is sell on their merits, appealing to buyers with desired features and functionality at a price they can afford,” GreenCar.com explains. “Innovation and creativity — not smoke and mirrors — will be required.”

Earlier: 2008 Fuel Efficiency Guide

Resources

Are U.S. Drivers Beginning to Get Switched on to Electric Cars?
Ernst & Young, Jan. 13, 2010

Nearly 4 Million Hybrid Vehicles to be Purchased by Fleet Managers through 2015
Pike Research, Nov. 16, 2009

Ford Chairman: 5 Forces That Will Shape the Green Car Industry
by Josie Garthwaite
earth2tech, April 14, 2010

The Truth about High Cost EVs and Their Market Potential
by Ron Cogan
GreenCar.com, Feb. 21, 2010