Electric Car Demand Could Dwarf Supply

About 11 million cars are sold in the U.S. each year, and the first two practical and moderately priced plug-in electric cars -- the Chevrolet Volt and Nissan Leaf -- are about to be delivered to the first customers in December. Over the next 12 months (calendar year 2011), Nissan (Stock Quote: NSANY) will deliver 20,000 Leafs and Chevrolet about 15,000 units in the U.S. market.

The total of 35,000 cars is less than one-third of one percent of the U.S. car market.

Leaving aside the important distinction that the Chevrolet Volt, made by General Motors (Stock Quote: GM), is close to a "no compromise" solution with a back-up gasoline engine that picks up after the first 25 to 50 miles, who will be buying plug-in electric cars out of these 11 million annual U.S. buyers? The debate seems focused, almost subconsciously, on single-car households, and the argument goes that almost all U.S. households won't tolerate the familiar "range anxiety" phenomenon.

Let's for a moment assume the debate is right about single-car households: If you are a one-car household, you will simply not buy an all-electric car. This is where the analysis these days typically stops.

But what about multi-car households? In most multi-car households, the second car is driven shorter distances -- to school, shopping, soccer practice and local errands. It is often asserted that a majority of cars are driven less than 60 miles a day. Rarely is the question asked: How many second or third household cars are driven less than 60 miles a day? I would venture to guess close to 99%.

In other words, most households only need one car that can go 60 or 100 or more miles a day, while the second car almost never does. This means that as long as all-electric cars can be price-competitive, the demand in the U.S. alone could be 5 million electric cars a year if one assumes that almost half all cars sold in the U.S. are for multi-car households. You only need one car that can handle a longer road trip; the second car is almost always used only locally.

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