Via Forbes:

Expensive and range threatened pure electric vehicles have failed to meet sales targets, and over-ambitions global projections will have to be scaled back, investment bank Morgan Stanley said in a report.

Traditional internal combustion engines will take up the slack for a while yet, while fuel cell powered vehicles will come more into favor, the report said.

Expect early success too for plug-in hybrid vehicles, which lack the purity of battery-only but offer an acceptable compromise of limited clean driving without range anxiety.

Renault of France famously used to claim that 10 per cent of global car sales would be electric-only by 2020. This is more likely to be closer to one per cent, the report said.

Only Tesla Motors Inc, with its luxury battery-only sports car the Model S, can claim success, Morgan Stanley analyst Adam Jonas said in the report.

High prices and range anxiety have crimped buyer enthusiasm for electric cars despite generous subsidies offered by some governments. Also, the advent of plug-in hybrid vehicles, which offer substantial battery–only and local emission free range of up to 40 miles before internal combustion engines kick in to save them, are undermining the case for battery only. Not only are battery cars pricey with unpredictable range, they also need a hugely expensive network of charging stations to make longer journeys even remotely viable.

Plug-in hybrid electric vehicles (PHEVs) avoid this expensive network necessity. PHEVs like the Mitsubishi Outlander SUV and upcoming VW Golf sedan will offer green enthusiasts plenty of scope for city driving on electric power only, knowing that the gasoline engine will kick in and offer a range equivalent to a conventional vehicle. The Chevrolet Volt too, a so-called extended range electric vehicle, has conventional range with its gasoline engine generating electricity when the battery runs out of juice. With the availability of PHEVs, battery-only vehicles are only likely to appeal to blinkered green purists and zealots.

It’s not only buyers who are spooked by the price of electric vehicles. Manufacturers are taking a hit too. Earlier this week Fiat Chrysler Automobiles CEO Sergio Marchionne pleaded with the public to avoid buying battery powered Fiat 500s because every time one moved off the dealer lot his company lost $14,000.

Morgan Stanley’s Jonas headlined his report “EVs are Dead, Long Live Tesla”.

“Tesla aside, the auto industry’s push into EVs has fallen far short of expectations. Just a few years ago, forecasts for global EV penetration were as high as five or 10 per cent by 2020. From today’s perspective, we think penetration in the one per cent range would be respectable,” Jonas said.

Jonas said manufacturers will look more to hydrogen-powered fuel cells as they seek to meet harsh fuel consumption rules.

(Europe demands average fuel consumption equivalent to 57.4 miles per U.S. gallon by 2021. The U.S. rules are a less aggressive 54.5 mpg by 2025. China has introduced tough rules too.)

Internal combustion engines are rising to the occasion.

“We are bullish on the internal combustion engine technology through the next decade. A combination of software, weight-reduction, mild-hybridization, high-speed transmissions, boosting turbo and injection systems show great progress in achieving CO2 (carbon dioxide) and fuel economy improvement,” Jonas said.

Tesla’s success was more down to its supercar performance than its electric power, he said.

Electric vehicles still have their cheerleaders, though.

In a recent report, IHS Automotive conceded that EVs had fallen short of expectations, but pointed out that the pace of sales exceeded that of early hybrid cars.

“With EV adoption exceeding the historical precedent of hybrids, this means the trend toward EVs is still progressing, although at a lower rate than many had expected,” IHS Auto said.

IHS Auto agreed that PHEVs would be an important stepping stone to electrification.

“Motorists like the safety and freedom to travel for longer distances without being constrained by charging intervals, which is why PHEVs are a good alternative. IHS Automotive predicts that by 2020, global production of PHEVs will exceed EVs by a ratio of 55:45. PHEVs could be a critical stepping stone to pure electrification of the power-train in the years following the year 2020.”

Meanwhile, unless battery only cars can offer perhaps twice the range at half the price than now some time soon, sales will continue to stumble.