Green Cars Face Obstacle of Cost Confusion

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NEW YORK (MainStreet) – Hybrid cars are becoming increasingly common on American roads, and manufacturers from Chevrolet to Nissan now produce mass-market electric vehicles. But a new study from J.D. Power & Associates says that these green vehicles face an uphill battle in the U.S.

Two out of three consumers would consider buying a so-called alternative powertrain vehicle, a group that includes hybrid electric cars, plug-in hybrid cars, battery electric cars and clean diesel cars, the survey finds, but there’s a big gulf between considering buying an electric car and actually buying one. The online survey of more than 4,000 American consumers found that manufacturers are still having trouble bridging that gap.

“The level of openness toward these products is high, but actual conversion [to making the purchase] falls off,” Mike VanNieuwkuyk, executive director of global vehicle research at J.D. Power and Associates, told MainStreet.

According to the report, the primary hang-up for these consumers remains the price, and VanNieuwkuyk notes that this concern is now more acute since the expiration of federal tax subsidies for hybrid cars at the end of 2010. Still, gas prices are on the rise once again, and consumers are generally aware that savings on fuel can offset the premium paid for a hybrid or electric vehicle (in the survey, 75% of those considering a green vehicle cited fuel costs as a primary motivator).

Unfortunately there remains widespread confusion about the actual savings a green car will get you.

“There’s probably not a clear understanding of what the return is – how much I will actually save in fuel costs and when I will recoup that premium,” says VanNieuwkuyk. “It’s the industry’s responsibility to make that clear.”

As MainStreet reported last month, owners of certain hybrids and electric vehicles can realize a return on their investment within a few years of ownership. Of course, there are other barriers as well, with many consumers in J.D. Power’s survey citing the poor range of electric cars and a scarcity of charging stations. And VanNieuwkuyk acknowledges that some people simply won’t be able to afford the initial investment of a pricey hybrid or electric car, even if they know that investment will eventually pay off in the long-term.

None of this is to say that green cars are on the road to nowhere, as the report concludes that alternative powertrain cars will achieve close to 10% market share by 2016. But if green cars are going to make serious inroads with consumers, costs will have to come down to a point that is economically feasible for the average person – and the car companies will have to clearly communicate those savings to would-be buyers.

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