Think Electric for survival : Electric vehicles

The luxury car market may have changed forever –in the direction of electric vehicles. You ignore that change only at your peril.

Six year ago, the world auto industry talked of hydrogen-power cars, using fuel cells, as vehicles of the future. That turned out to be a passing fad. Actual market fashion moved in a different direction-toward huge sports utility vehicles (SUVs).The biggest of these was the Hummer of General Motors. Every big auto manufacturer shifted to SUVs.

However, the market was transformed when oil crossed $100/barrel in 2007 and touched $147/barrel in 2008.Simultaneously, the Great Recession arrived. Demand for SUVs crashed as buyers switched to more energy –efficient vehicles, and the switch drove General Motors and Chrysler into bankruptcy.

The Great Recession may be ending. Optimists hope for an upturn this quarter, although pessimists warn about a double –dip recession. But even if the optimists are right, the auto industry will not go back to old fashions and mammoth luxury cars. If the world economy booms again, the price of oil will surely boom to $150/barrel once again. The era of cheap oil is over.

Does this matter for luxury brands like Jaguar and Land Rover? Rich buyers hardly care about the price of petrol; it’s a negligible part of their expenses. Even rich buyers hold off buying new vehicles during a recession, so sales of all luxury cars have fallen. But once the recession ends, won’t the rich flock again to buy large luxury cars, regardless of the price of petrol? No, because we have reached a turning point in consumer values, and that matters intimately more than the price of petrol. Remember, ivory was once a standard luxury product, but demand for it evaporated once it was associated with the extinction of elephants. The rich could still afford ivory, but did not wish to be seen wearing it. That was not a passing fad: it was a turning point in consumer values.

The same is now true of large, carbon-emitting cars. Whether or not you personally view global warming as a threat to humanity, you can not ignore two imperatives. First governments across the world are going to penalize manufacturers of large carbon-emitting vehicles. Second, and more important, the rich no longer want to be seen as large emitters of carbon, just as they no longer wish to be seen wearing the remains of dead elephants.

So, all global manufacturers are rushing into petrol-electric hybrids, whose technology is now established. Some of them are experimenting with fully electric plug-in cars,but those are expensive and lack the characteristics of a luxury car. The Telsa roadster is costing about $100,000 but the very limited driving range between recharges. As for small electric cars, the Telsa model S will cost around $60,000.This is the almost thrice of the best selling Toyota. New technology can make electric cars more affordable in a decade.