Neighborhood Electric Vehicles (NEV) is the relatively new official classification of battery electric vehicles that are speed limited. The National Highway Traffic Safety Administration created the NEV classification in 1998, launching a new market of vehicles. In essence, there are two key parts to the definition of an NEV: speed limited (meaning that they cannot travel on freeways, and therefore do not require crash testing and safety features of traditional vehicles) and they are electric. Licensing is required for NEVs (a driver's license is required to operate it, and most states require a license plate for operating on public streets). Their use is limited to streets where the speed limit is 35 mph (in most states) and their speed is limited to 25 mph.

The NEV market has been quietly growing over the past few years according to IMS, and it is likely to continue for the next couple of years (11.5 percent growth per year). Helping to spur this growth has been the development of U.S. communities centered around these vehicles (places like Peachtree, GA, Celebration, FL, Playa Vista, CA, and others). Local governments and corporations have also been discovering the usefulness of NEVs. NEVs are being utilized for neighborhood patrolling and parking enforcement by police and for working around corporate campuses by maintenance crews.

There is substantial competition in the NEV market from a variety of manufacturers. Global Electric Motorcars (GEM) is the market leader (and is a division of Chrysler Corp.), producing and selling approximately 40,000-50,000 units since 1998. GEM has recently made a lot of news with its iPod-esque new Peapod. There are a variety of other small manufacturers and importers, including ZENN, Miles EVs, and Clubcar (the golf cart maker that makes not only electric vehicles, but also gas powered carts). Most NEV manufacturers likely selling between 500 to 3,500 vehicles per year in the U.S. currently.

There are also several new low-speed city cars that are more familiar to European and Asian consumers, including the Think City Cars, REVA, and Aixam (from France which recently acquired NICE from the U.K. - no news about either NICE or Aixam coming to the U.S., though). However, these low-speed city cars are slightly different classification than NEVs, as they will travel at a top speed of somewhere between 40 and 70 mph.

Overall, the market influences on NEVs are very different from that of automobiles, and NEVs are likely to follow a very different trend due to lower costs. Urban planning and development of communities focused on these vehicles is likely to have a much larger impact on the market than the forces that impact the automobile industry. As cities and planners work to develop urban centers that reduce congestion, the market for NEVs is likely to grow in appeal. Urbanites are likely to be drawn to high design (like the Peapod), and overall acceptance is likely to grow as plug-in hybrids and electric vehicles become more available to the mainstream automobile market. While the market will see substantial growth, it will likely remain significantly smaller than the U.S. automobile market (or even the potential EV market) and is likely a slight addition to the market rather than a competitor to traditional automobiles.

Dave Hurst is an industry analyst at Pike Research