Electric Vehicles Start to Catch On, But Can They Go Mainstream?

Last night’s reveal of Tesla’s forthcoming electric pickup truck, the so-called Cybertruck, definitely made waves in the automotive world. Tesla CEO Elon Musk introduced a prototype and claimed some eye-popping figures relating to the future truck’s acceleration and towing capabilities. And its styling proved to be, umm, polarizing.

If this were simply a one-off for the auto industry, from a manufacturer that has yet to turn a consistent profit and has a history of overpromising on new models, it wouldn’t be much of a story. But the Tesla truck is not a one-off. As I wrote earlier this week, a bevy of electric trucks are in the works, from both established automakers and scrappy startups looking to shake up the industry. And the fact that so many companies are working on the once-unthinkable concept of an electric pickup underscores a broader truth: Electric vehicles in general are slowly gaining traction in the market.

A recent report from the Edison Electric Institute, which represents investor-owned electric utilities, notes that in September, plug-in vehicles made up 2.6% of U.S. auto sales. That’s not much, but it’s up from the roughly 1% that EV sales accounted for not long ago. Also, at a time when car sales around the world are slowing, EV sales are accelerating.

New EV models seem to make headlines every day now. This week alone, Ford unveiled a sleek electric SUV that it is calling the Mustang Mach-E. (What do the brand’s long-time fans of the venerable – and gas-powered – Mustang sports car think of that, I wonder?) A few days later, Toyota announced a plug-in version of its RAV-4 hybrid, which still has a gas engine but also can drive almost 40 miles in EV mode. Earlier this year, Porsche showed off a new high-performance EV sport sedan, which should rival the speed and handling prowess of its famous gas-powered models. The list goes on and on.

The downsides that EVs come with – expensive batteries, limited driving range, slow recharging times, not enough public charging stations – haven’t gone away. But those drawbacks are getting less onerous. Battery costs keep falling. The amount of energy they hold keeps growing, which means greater driving range than earlier models offered. High-voltage charging means less waiting to get back on the road. And the network of public charging stations keeps expanding.

All of those improvements mean that EVs are becoming a more realistic option for more consumers, says Bill Visnic, editorial director of mobility media at the Society of Automotive Engineers. Visnic recently wrote about his road trip in an electric Jaguar SUV. He found that a journey that once would have been unthinkable in an EV had become surprisingly doable, though not without hiccups.

Further improvements in battery tech and charging facilities will pave the way for greater EV adoption. But don’t expect electrification to displace internal combustion engines tomorrow. When I asked him for his thoughts about when EVs could become mainstream, Visnic said that the automotive suppliers he talks to tend to regard 2030 as the date by which EVs will be cheap enough and capable enough to truly compete with gas-powered cars.

Between now and then, look for more EVs on the road, but not in huge numbers. Odds are they’ll take hold in suburban neighborhoods before making big inroads in the cities or the rural countryside. Unlike in the cities, suburban homes are more likely to have garages where an owner can install a home charger. And unlike in rural areas, commutes in the suburbs tend to be short enough that a typical EV’s driving range won’t be a limiting factor (assuming the owner remembers to plug in the car to charge overnight).

You may also be seeing more EVs among commercial fleets before 2030. Given their relatively short, repeated routes with lots of stop and go driving, delivery trucks are good candidates for going electric. (Amazon recently announced a big investment in electric delivery trucks from startup Rivian, for example.) Ditto for garbage trucks. These types of vehicles tend to return to a garage or depot every night, allowing the fleet operator to recharge them on a nightly basis. Doing that could save a bundle in energy costs, given the difference between typical electric rates for commercial customers and the cost of diesel fuel.

Here Come the Electric Trucks

Once again, electric car maker Tesla is creating a buzz in the automotive world. Its newest sensation: An about-to-be-revealed electric pickup truck.

You read that right: An electric truck. So far, Tesla has stuck to sporty roadsters, sedans and SUVs, but now CEO Elon Musk is promising a battery-powered truck that can go toe to toe with some of the most popular – and profitable – vehicles on the market, such as the perennially best-selling Ford F-class pickups. In a tweet more than a year ago, Musk said the future truck would have all-wheel drive, “crazy torque,” and high-voltage power outlets capable of running heavy duty power tools at a job site. When a follower requested that the truck offer 30,000 pounds of towing capacity, Musk tweeted back: “300,000 pound towing capacity.”

Don’t plan on towing your house with your Tesla just yet. But the Tesla “cybertruck” and other forthcoming electric pickups probably will sport some eye-popping capabilities and features.

A surprising number of automakers are hoping to dive into this highly lucrative segment of the vehicle market. In addition to Tesla, there are also startups Rivian and Workhorse, along with industry stalwart Ford Motor Company. (Ford recently showed off its electric F-150 pickup towing a literal trainload of gas-powered F-150s. It has also invested in Rivian.)

So far, electric vehicles have generally been marketed as eco-friendly, whereas pickup trucks are generally known for hauling heavy loads while guzzling a lot of gasoline or diesel fuel. So why are manufacturers pouring money into the seeming contradiction of an EV truck? For one thing, “the luxury pickup truck market is booming,” says Aaron Bragman, Detroit bureau chief of Cars.com. Whereas trucks were long viewed as the utilitarian, uncomfortable workhorses of the auto world, today they come festooned with all the creature comforts of a luxury car, and the lofty price tags to match. With the Detroit Big Three selling plenty of trucks for upwards of $50,000, it’s not surprising that a company like Tesla would want a piece of the action. And in turn, if Tesla is getting into the truck market, the established manufacturers feel that they can’t afford to stay on the sidelines.

But will buyers actually go for an EV truck? Bragman thinks some will, but probably not the customers who are used to regularly towing or hauling heavy loads long distance for work or play. Rather, he expects the early EV truck adopters to be affluent “lifestyle” buyers who want a do-it-all vehicle, something with the versatility of a family transporter that is rugged enough to go off-road, haul some mountain bikes or camping equipment in the bed and occasionally tow the boat to the lake. Importantly, these buyers tend to be keen on new technology in general, and are likely to prize the “wow” factor of an electric pickup.

In terms of capabilities, what should you expect from the coming crop of electric trucks? A lot. Rivian, the Michigan-based startup, is promising maximum towing capacity of up to 11,000 pounds; the ability to ford water up to three feet deep; a 0 to 60 mph acceleration time of 3 seconds (besting most sports cars on the market); and, perhaps most crucially, 400 or more miles of driving range between charges. Of course, getting all of that depends on opting for the most expensive version of its R1T truck, which will feature the biggest battery pack.

Only time will tell if there’s room in the truck market for these electric players. But with sales of EVs slowly rising and the availability of charging stations growing, it looks like EV trucks will make some inroads.

Coming up next, I’ll delve into the future of electric vehicles more generally and look at when, or if, they’ll break out of their current niche to become practical, mainstream options for car shoppers.

Shopping for a New Car? Here’s What to Know Now

If you’re going to be in the market for a new car this year, it pays to know what sort of shape the auto industry is in and what sort of deals you can expect to find. If you haven’t shopped for new wheels in a while, you might be surprised at just how much the market has changed.

U.S. auto sales are still going strong, but they’re showing signs of weakening, according to industry analysts. Every expert I spoke with recently expects total sales to come in a bit below 17 million this year, which would be good, but behind the recent pace. Combined sales of cars and light trucks hit a record 17.5 million in 2016 and stayed above the 17-million market in 2017 and 2018; 16.8 million or a bit lower seems like a reasonable bet for this year.

What’s selling these days? Pick-up trucks and SUVs. Traditional truck stalwarts such as the Ford F-150 and RAM 1500 still roll off dealer lots in large numbers. Big SUVs are popular, too, but automakers are also scrambling to make more small and midsize SUVs. “It’s across the board,” says Kelly Blue Book Senior Managing Editor Matt DeLorenzo of the popularity of trucks and SUVs. Midsize pick-ups such as the Chevy Colorado are selling well, as are small, crossover SUVs. A couple of automakers are planning new, compact pick-ups, too. To paraphrase Alfred Sloan, General Motors’ longtime president during the first half of the 20th Century, the U.S. auto industry is now bent on offering a truck or SUV “for every purse and purpose.”

Traditional sedans, meanwhile, have fallen out of favor. Many once-popular nameplates have been retired or will be soon, and some automakers are abandoning sedans entirely. Large sedans are a dying breed, notes KBB’s DeLorenzo.

The shift to trucks and SUVs has driven the prices of new vehicles into nosebleed territory. Car shopping website Edmunds.com notes that a new auto costs, on average, more than $36,000, largely because of all the pricey trucks and SUVs buyers are snapping up. At the same time, interest rates on auto loans are at their highest level in years after the Federal Reserve hiked interest rates a couple of times.

Given the lofty prices and financing costs, shoppers not bent on a truck or an SUV should check out a sedan. They’ll find some compelling values. Many sedans have had design overhauls and been upgraded with premium features such as advanced safety systems and lavish interiors. Yet, their price tags are much less eye-popping than similarly equipped SUVs.

In terms of price discounts or other incentives, you might be surprised to find better deals on trucks and SUVs than on sedans, even though the latter aren’t selling as well. The prices of the former are so high that dealers have room to make concessions while still netting a solid profit. Also, dealers generally have larger truck and SUV inventories. To keep the bigger vehicles moving, dealers and automakers need to be willing to offer some discounts.

Whatever sort of new vehicle you’re looking for, it’ll pay to shop strategically. Jessica Caldwell, executive director of industry analysis at Edmunds, says that August and September should be good times to score deals because dealerships will be more eager to sell off 2019 models to make room for the 2020s. Year-end sales, when manufacturers get their last shot to pump up their annual numbers, figure to feature plenty of bargains, too.

She also urges consumers to not overlook the used market. A record number of vehicles were leased in 2016, which means a ton of late-models will need to be sold. That spells lots of opportunities among carmakers’ certified preowned programs. (CPO cars must pass manufacturer inspections and come with extended warranties.) Caldwell also notes that the technology you’ll find in a three-year-old car isn’t far behind what’s in new cars. Automakers have struggled to come up with new “wow” features lately.

Industry Outlook

A decade after it emerged from the Great Recession, when sales collapsed and two of Detroit’s Big Three filed for bankruptcy, just how healthy is the U.S. auto industry?

All the truck and SUV sales are a major boon for automakers. Their profit margins are hefty, especially when it comes to full-sized pick-up trucks. The Big Three, which dominate truck sales, are raking in particularly fat profits these days.

Moving more-profitable vehicles will cushion the blow of declining sales, says Bill Visnic, editorial director at the Society of Automotive Engineers. Plus, automakers’ operations are leaner a decade after the recession, which means they are less dependent on keeping sales volumes sky-high, he notes. Automakers would gladly opt to sell a smaller number of lucrative trucks and SUVs than a larger number of small sedans, which usually have razor-thin margins.

But that reliance on trucks and SUVs is also a liability. Haig Stoddard, industry analyst at WardsAuto, thinks total sales will come in at 16.9 million this year, but warns there is a fair amount of downside risk in that forecast, especially if the economy softens later in 2019. In that scenario, he expects that truck and SUV sales would take the biggest hit, given their high prices. After years of robust sales, the industry can’t count on as much demand from customers who really need to replace their old vehicle, Stoddard notes. Most of the folks who had put off buying a new vehicle in the wake of the recession have done so by now.

SAE’s Visnic echoes those concerns. Prices are “really getting a little bit scary,” he warns. Consumers can handle them, but only because they feel good right now about the economy and their own finances. If that positive mood sours, watch out. “A car purchase is a fairly discretionary thing” for most consumers, he points out. If they start worrying about the economy, they’ll easily punt on buying a truck or SUV that costs $40,000.

CAFE Rollback Uncorks Another Regulatory Fight

The Trump administration’s push to roll back vehicle fuel-economy standards sets the stage for a lengthy legal battle with Democrats, environmental groups and the state of California, who hail the Obama administration rules as a landmark achievement in the fight against climate change.

Once finalized, the joint proposal from the Environmental Protection Agency and Transportation Department would suspend required increases in corporate average fuel-economy standards (CAFE) after 2020, capping them at a fleet average of 37 miles per gallon. President Obama’s plan, by contrast, called for raising the standard to 47 miles per gallon by 2025.

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What Car Shoppers Need To Know This Year

If you’re in the market for a new ride or might be later in 2018: You’ll find better deals on popular SUVs and crossovers…new or used…if you wait a bit. Manufacturers continue to ramp up SUV and crossover production, so that supply of these popular vehicles may soon outstrip demand. Also, while vehicle sales are off to a good start so far this year, they’re likely to slow later, forcing automakers to rely more on discounting and other buyer incentives. These should approach $5,000 per vehicle, on average.

Given the popularity of SUVs and crossovers, manufacturers are offering more models than ever before, including luxury models. Car-based crossover SUVs are especially prized for their blend of size and practicality. Plus they’re relatively fuel-efficient, so the return of $3 gas won’t ding their popularity. As a result, manufacturers are cutting back on their car models. The Chevy Impala is likely to be cut, and Ford has already announced that it will abandon most of its car models in the next few years to focus on SUV/crossover/pickup truck production. (The Ford F-150 pickup truck is the best-selling model of any vehicle.) Even sedan perennial best sellers Toyota Camry, Honda Accord and Nissan Altima have required incentives to bolster demand. This means that there are likely to be some good deals on car models as the shift occurs, especially full-size and mid-size sedans. Demand for compact cars has ticked up recently as the cost-conscious buyer segment finds fewer low-cost options.

Interest rates are rising, with the rate of the average new car loan expected to jump from 5.0% to 5.5% by the end of the year. However, this is likely to increase the average monthly payment by only $7 over the life of a five-year loan.

For those interested in electric vehicles, hybrids with plug-in capability (called PHEVs) will be the most in demand, according to Jessica Caldwell, executive director of industry analysis at Edmunds. These vehicles have the most flexibility and range, currently. The Toyota Prius Prime, Chevy Volt, Honda Clarity and Ford Fusion Energi are examples. Caldwell expects electrics will account for 4.4% of total sales in 2018. Tax credits of up to $7,500 per vehicle, depending on the size of the battery, make these attractive. But buyers should be aware that the government program may be ending for GM and Tesla electric vehicles this year, unless Congress extends it.

You might want to consider a late-model used car instead of buying new. Jonathan Smoke, chief economist at Cox Automotive, points to record lease returns expected in 2018 and 2019, including more SUVs and crossovers than had previously been the case, so there will be more of these popular vehicles to choose from.

Also consider buying used from rental fleets: Former rental vehicles typically cost 5% to 15% less than the same model sold by used-car dealerships.

Car subscription services are getting attention. Participants can reserve vehicles for shorter periods of time than in leases, allowing members to try many different types and models. However, these plans are still quite pricey.