J.D. Power and Associates Reports: Future Global Market Demand for Hybrid and Battery Electric Vehicles May Be Over-Hyped; Wild Card is China

By J.d. Power And Associates, PRNE
Tuesday, October 26, 2010

Regulatory Inconsistencies across Markets; Relatively Stable Oil Prices; and Consumer Concerns about Cost and Ease of Operation Present Challenges for Sales of Hybrid and Electric Vehicles

WESTLAKE VILLAGE, California, October 27, 2010 - Combined global sales of hybrid electric vehicles (HEVs) and battery
electric vehicles (BEVs) are expected to total 5.2 million units in 2020, or
just 7.3 percent of the 70.9 million passenger vehicles forecasted to be sold
worldwide by that year, according to a report issued by J.D. Power and
Associates. For comparison, global HEV and BEV sales in 2010 are forecasted
to total 954,500 vehicles, or 2.2 percent of the 44.7 million vehicles
projected to be sold through the end of 2010.

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The report, titled "Drive Green 2020: More Hope than Reality" considers
various factors affecting the future potential for "green" vehicles in the
world's largest automotive markets. These factors include market trends,
regulatory environment, consumer sentiment and technology development in
these markets.

According to the report, it will be difficult to convince large numbers
of consumers to switch from conventionally powered passenger vehicles to HEVs
and BEVs. A consumer migration to alternative powertrain technologies will
most likely require either one of the following scenarios, or some
combination of these scenarios:

    - A significant increase in the global price of petroleum-based fuels by
    - A substantial breakthrough in green technologies that would reduce
      costs and improve consumer confidence
    - A coordinated government policy to encourage consumers to purchase
      these vehicles.

Based on currently available information, none of these scenarios are
believed to be likely during the next 10 years.

"While considerable interest exists among governments, media and
environmentalists in promoting HEVs and BEVs, consumers will ultimately
decide whether these vehicles are commercially successful or not," said John
, senior vice president of automotive operations at J.D. Power and
Associates. "Based on our research of consumer attitudes toward these
technologies-and barring significant changes to public policy, including tax
incentives and higher fuel economy standards-we don't anticipate a mass
migration to green vehicles in the coming decade."

Consumer Sentiment about HEVs and BEVs

    Consumers have a variety of concerns about HEVs and BEVs, including:

    - Dislike of their look/design
    - Worries about the reliability of new technologies
    - Dissatisfaction with overall power and performance
    - Anxiety about driving range
    - Concern about the time needed to recharge battery packs

More importantly, however, are the personal financial implications of
deciding to purchase an alternative-energy vehicle. While many consumers
around the world say they are interested in HEVs and BEVs for the expected
fuel savings and positive environmental impact they provide, their interest
declines significantly when they learn of the price premium that comes with
purchasing these vehicles.

"Many consumers say they are concerned about the environment, but when
they find out how much a green vehicle is going to cost, their altruistic
inclination declines considerably," said Humphrey. "For example, among
consumers in the U.S. who initially say they are interested in buying a
hybrid vehicle, the number declines by some 50 percent when they learn of the
extra US$5,000, on average, it would cost to acquire the vehicle."

The overall cost of ownership of HEVs and BEVs over the life of the
vehicle is also not entirely clear to consumers, and there is still much
confusion about how long one would have to own such a vehicle to realize cost
savings on fuel, compared with a vehicle powered by a conventional internal
combustion engine (ICE). The resale value of HEVs and BEVs, as well as the
cost of replacing depleted battery packs, are other financial considerations
that weigh heavily on consumers' minds.

Finally, it is clear from research in the world's largest automotive
markets that buyers of hybrid and electric vehicles occupy a unique
demographic niche. Buyers of HEVs and BEVs are generally older, more highly
educated (possessing a postgraduate degree), high-income individuals who have
a deep interest in technology, or who like to be among the early adopters of
any new technology product. As a result, it is not clear that HEVs and BEVs
will appeal to the general population.

Government Regulations

While the governments of the world's largest automotive-producing nations
have schedules in place for improving fuel economy and reducing exhaust
emissions, there is little consensus about the timing or manner in which
these objectives are to be achieved. Some governments are promoting HEVs,
others are focusing on BEVs, and still others are considering additional

According to Humphrey, the lack of consistency in regulations across
markets is causing global automakers to hedge their options by seeking
alliances and technology-sharing agreements. The heavy fixed costs associated
with developing multiple powertrain options simultaneously are prohibitively
expensive. When combined with the projected lower sales volumes of these
products, collaboration between auto companies is almost a necessity to
control costs and remain competitive.

One unpredictable aspect of the 2020 outlook is how markets would be
affected if more stringent and consistent legislation is adopted that
supports specific technologies. In particular, China has the ability to move
quickly, invest heavily in the development of one specific propulsion
technology, and mandate fuel economy or emissions standards that could favor
a particular technology or require a minimum sales penetration level for
vehicles with a designated technology. Given the size and growth rate of the
Chinese auto market, such a coordinated regulatory environment might allow
Chinese companies to achieve economies of scale and drive down the cost of
alternative-energy vehicles.


While HEVs and BEVs offer an interesting alternative for the future, it
must be acknowledged that many of the shortcomings that defined battery-based
vehicles 100 years ago are still prevalent today. These include limited
driving range, extended recharging times, limited support infrastructure, and
the high cost of battery packs.

Moreover, while reducing exhaust emissions was not an important factor in
the development of battery-based vehicles 100 years ago, it has been a
significant driver behind the development of BEVs today. For many
governments, the primary goal of transitioning to alternative powertrains is
to reduce exhaust emissions, and it is not clear how much of this can be

"We don't want to replace tailpipe emissions with the emissions of coal-
and oil-fired power plants that produce the electricity used by BEVs," said
Humphrey. "We have to look at the carbon footprint of the entire energy
supply chain."

Breakdown of Global HEV and BEV Sales by 2020

Of the 5.2 million HEVs and BEVs forecasted to be sold worldwide in 2020,
some 3.9 million units are expected to be HEVs, according to the J.D. Power
and Associates global forecast numbers for the third-quarter of 2010. The
leading markets for HEVs are the United States (1.7 million units), Europe
(977,000 units), and Japan (875,000 units). China is expected to sell fewer
than 100,000 HEVs in 2020.

Of the 1.3 million BEVs projected to be sold worldwide in 2020, sales in
Europe will account for 742,000 units; sales in China will account for
332,000 units; and the United States and Japan should each account for sales
of approximately 100,000 BEVs in 2020.

To view the "Drive Green 2020: More Hope than Reality" report, click here

About J.D. Power and Associates

Headquartered in Westlake Village, Calif., J.D. Power and Associates is a
global marketing information services company operating in key business
sectors including market research, forecasting, performance improvement, Web
intelligence and customer satisfaction. The company's quality and
satisfaction measurements are based on responses from millions of consumers
annually. For more information on car reviews and ratings, car insurance,
health insurance, cell phone ratings, and more, please visit
www.JDPower.com. J.D. Power and Associates is a business unit of The
McGraw-Hill Companies.

About The McGraw-Hill Companies:

Founded in 1888, The McGraw-Hill Companies (NYSE: MHP) is a global
information and education company providing knowledge, insights and analysis
in the financial, education and business information sectors through leading
brands including Standard & Poor's, McGraw-Hill Education, Platts, and J.D.
Power and Associates. The Corporation has more than 280 offices in 40
countries. Sales in 2009 were US$5.95 billion. Additional information is
available at www.mcgraw-hill.com/.

Media Relations Contacts:

    Jeff Perlman; Brandware Public Relations; Malibu, Calif.;
    +1-818-317-3070; jperlman@brandwaregroup.com

    John Tews; J.D. Power and Associates; Troy, Mich.; +1-248-312-4119;

    Syvetril Perryman; J.D. Power and Associates; Westlake Village.;
    +1-805-418-8103; media.relations@jdpa.com

No advertising or other promotional use can be made of the information in
this release without the express prior written consent of J.D. Power and
Associates. www.jdpower.com/corporate

Jeff Perlman of Brandware Public Relations, +1-818-317-3070, jperlman at brandwaregroup.com, for J.D. Power and Associates; or John Tews, +1-248-312-4119, or Syvetril Perryman, +1-805-418-8103, both of J.D. Power and Associates, media.relations at jdpa.com

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