Are you ready to go electric? Patrick A. Fraioli, Jr., John I. Gordon and Steven Qi discuss the burgeoning global electric vehicle market – its promises and its challenges.

The story of the global impact of electric vehicles (EVs) on the international vehicle market is evolving, but with resolution of key consumer acceptance issues and successful build-out of charging infrastructure in the key U.S., Asian and European markets EVs should be able to capture a significant share of overall vehicle sales alongside traditional gas-powered vehicles. Many EV manufacturers and technology providers are extremely positive today about where this market is heading and are now gearing up for anticipated quick uptake by consumers of these new vehicles. The international vehicle manufacturing industry landscape is thus changing in the U.S., Asia and Europe to meet demand.
EVs have been championed before by false prophets heralding promised profits. Prior versions of EVs were handicapped by range limitations and long recharge times unsuited for the mass consumer market. Their inglorious downfall has been well-chronicled in books and movies. But the EVs’ reported death was premature and they are very much alive, bigger and better than ever.

EVs and battery electric vehicles (BEVs) will come to the U.S., European and Chinese mass markets in two variations: BEVs powered solely by relatively large rechargeable batteries with a range of 100 or more miles and plug-in hybrids that have two sources of power – a relatively small battery with shorter ranges of about 40 miles and an on-board internal combustion engine that kicks-in for longer range driving when the batteries run low.

Perhaps most importantly, the revitalized vehicle industry has devoted extensive resources to designing and building the necessary infrastructure to ensure the viability of these cars longer than their initial charge out of the dealership. This marriage of manufacturers and service providers will be the key to the ultimate success of today’s BEVs. “The market for the charging station and the accompanying infrastructure will be in demand regardless of whichever technology penetrates the market first; both BEVs and plug-in hybrids will require an efficient charger and its grid connectivity,” says Daniel Brock, President of Tecnospot Solar USA and consultant to automotive companies involved with alternative propulsion systems.

The current environment is not without its naysayers. While 21st century politicians may promise “an EV in every garage,” critics point to the raging debate about whether today’s BEVs will even reduce overall greenhouse emissions, since the plants that generate sufficient electricity to power these neat, new toys are often powered by fossil fuels. Pessimists also cite the current lack of a charging infrastructure, and the high costs of purchase and deployment that, for now, are out of reach of the mass market.

The sale of BEVs and installation of the home charging equipment hardwired to a 240-volt line in the consumer’s garage has never been done on a mass market scale. Thus, while market studies by manufacturers, including most recently BMW (presented at the DC Auto Show, January 2010), appear to confirm the appeal, convenience and likely quick uptake of BEVs, in urban environments in particular, it remains to be seen whether U.S. consumers will accept BEVs and home charging units.

The first mass-produced and affordable BEVs are slated to come from GM, with its Chevrolet division delivering the plug-in hybrid “Volt,” its first significant new product following last year’s government bailout, and Nissan, which, after being caught flat footed for years without any significant gas hybrids, now completely leap-frogs the industry with introduction of the state-of-the-art, zero emission (“look Mom, no gas at all”) “LEAF.”

China will, of course, play its usual role in the BEV supply chain, as outsourced contract manufacturer. Vehicle and accessory manufacturers are already contracting with Chinese manufacturers for tooling and parts. China is reaching still higher, however, seeking to crack the glass ceiling of component part and accessory manufacturer to become vehicle manufacturers as well. This may be good news for the U.S. economy, especially if Japanese and European vehicle manufacturers are unable or unwilling to invest in new U.S. plants.

Meanwhile, Chinese leaders are highly focused on BEVs as a solution to many of their 21st century problems which, after 20 years of industrial evolution, are increasingly similar to ours: pollution, foreign oil dependency, employment and global competition. China is already actively pursuing its alternative fuels policy, and if the PRC government decides to mandate and subsidize BEVs, you can bet that Chinese taxi drivers and consumers will be driving them. China is already the world’s second largest car market, with room to grow; vehicle ownership penetration is only about one-sixth the global average. If China’s BEVs perform well, they will likely become the low cost stars of the global industry, and odds are that the BEV industry will be led by China within a decade.

A key milestone for judging the rate of Chinese consumer adoption will be its progress in building out the charging infrastructure to support BEV use in 13 of China’s largest cities. The BEV can be more easily supported and thus more quickly adopted in urban centers, where driver trips are shorter, charging stations can be easily installed and shared, and consumers are most educated and affluent, and the crowding of millions of tailpipes on city roadways generates the highest concentrations of greenhouse emissions. Today, millions of urban BEV drivers could simply plug in for a few hours overnight, enough to power their relatively short commutes.

The design and cost for the recharging infrastructure, however, is a tremendous logistical and practical hurdle as a result of technological limitations and installation challenges in and near residences, work sites and shopping. Today, a recharging system for your home or apartment is not yet widely available, and recharging the current, state-of-the-art batteries for sufficient use should take about four hours. Manufacturers, however, likely will be offering sales and installation of recharge systems as part of BEV purchases, and over time, one can expect all of these components to become smaller, simpler, less expensive, and with shorter charge times. Expect to buy them at a Home Depot or WalMart near you before too long.

In China, building out the charging infrastructure on today’s technology platform is even more challenging because most urban Chinese live in large apartment complexes and not individual homes, and do not have second cars. These problems can be addressed with government mandated charging areas in apartments, and installations in shopping centers and commercial buildings. The Chinese government is confident it can build the infrastructure and is actively promoting BEVs production by all its major, state-owned and joint venture automotive companies, which have either already introduced hybrids to the domestic market or are soon to do so. The current lack of infrastructure is a great opportunity for U.S. business; in particular as U.S. companies will be first movers and can sell their charging supply know-how and technology to China, or partner with Chinese firms. A China-U.S. partnership on BEVs makes a lot of sense, says Tom Gage, of AC Propulsion, a California-based EV technology company. “EVs will proliferate worldwide, but the U.S. and China are perhaps the most critical markets. The U.S., because we are off the charts in our per capita petroleum consumption and we have to pursue every approach to reducing it. EVs provide transportation without petroleum. China, because they have the fastest growing automobile fleet in the world. They can’t sustain that growth on petroleum fuel alone.”

The Chinese-U.S. partnerships have already begun. BYD (“Build Your Dreams”) Company Limited is 10-percent owned by Warren Buffet’s MidAmerican Energy Holdings, whose investment is specifically earmarked for funding the production of BEVs (or other plug-in hybrids similar to the Volt) for the China market as well as the U.S. and Europe. Its expertise is in batteries, the heart of the BEV, and it is actively seeking a U.S. production base. It may supply the first low cost, high volume BEVs for China and the U.S. and Europe.

Ultimately, BEVs may not only receive power from “the grid” but someday may also supply it. “As the infrastructure is updated,” predicts Gage, “our vehicles, when plugged in, can provide dispatch of power, responding to commands from the grid. This will help the grid, and in return, the grid will pay the driver.” Reducing household electricity expenses by plugging your car’s battery into the grid while you sleep and then waking up to drive your fully charged long-range BEV – now that sounds like the practical innovation that we have all been waiting for.

Patrick A. Fraioli, Jr. is a business and intellectual property attorney practicing with the Beverly Hills, CA firm of Ervin Cohen & Jessup LLP (pfraioli@ecjlaw.com); John I. Gordon is an international attorney in Los Angeles specializing in contract manufacturing, supply chain and technology issues involving EVs and other global industries (john@gordonlawoffice.net); Steve Qi is a corporate and commercial attorney in Los Angeles representing American and Chinese manufacturers, service providers and investors (steveqi@sqilaw.com).