Obama's EV goal may be as elusive as fuel cells
Photo credit: BLOOMBERG
President Barack Obama's call during his State of the Union speech this week for 1 million advanced-technology vehicles on U.S. roads by 2015 may prove elusive as well, said Michael Omotoso, director of global powertrain forecasting at J.D. Power and Associates in Troy, Mich.
“I think it's a stretch goal,” Omotoso said in an interview. “We don't think we're going to reach that number by 2015.”
While the U.S. has more than $25 billion invested in advanced-technology vehicle development and two cars in production by major automakers, the Chevrolet Volt and Nissan Leaf, the high cost of batteries and the limited market for short-range compact cars will be obstacles to reaching Obama's goal, Omotoso said.
The administration's own projections suggest the challenge ahead. Automakers will sell about 281,000 electric cars and light trucks from 2011 through 2015, according to U.S. Energy Information Administration figures compiled by Bloomberg Government. That figure includes fuel-cell vehicles and excludes electric-gasoline hybrids. Sales will rise to 71,000 units in 2015 from 31,000 in 2011, the agency forecasts.
A total of 326 Volts and 19 Leafs have been sold so far, according to company sales data compiled by Bloomberg.
Cost of incentives
The president's goal is “not only doable but probable” if the government backs it with at least $6.9 billion in federal and state tax credits, manufacturer and dealer incentives to reduce the price of the vehicles, said Art Spinella, president of CNW Marketing Research in Bandon, Oregon.
The least expensive Chevy Volt starts with a manufacturer's suggested retail price of $40,280, according to Edmunds.com. The Leaf starts at $32,780.
“There's a substantial gap between what the price is and what people are willing to spend,” Spinella said.
Representative Sander Levin, the top Democrat on the House Ways and Means Committee, said he is working to expand tax incentives for electric vehicle purchases at the behest of GM Chief Executive Officer Dan Akerson.
The Michigan lawmaker plans to introduce a bill to raise the cap on how many of an automaker's plug-in electric vehicles can receive a $7,500 federal tax credit to 500,000 from 200,000.
“It seemed to be the necessary bridge to the future” for electric vehicles, Levin said. “It has to be high enough so that the auto companies can predict and tailor their production and their technology so that it can happen.”
Allowing certain vehicles access to high-occupancy vehicle lanes may do more to spur electric-vehicle purchases than expanding consumer tax credits, said James Colon, vice president for product communications at Toyota Motor Corp.
“To have a tax credit on a vehicle nobody wants would defeat the purpose,” Colon said in an interview at the Washington auto show this week. “We want the government support, there's no question. But I think they have to keep the consumer in mind as they develop the programs.”
J.D. Power projects under current market conditions, there will be 750,000 plug-in hybrid vehicles like the Volt and battery-electric cars like the Leaf by 2015, Omotoso said.
GM, Nissan, Honda
General Motors Co., with about 24 percent of the market, and Nissan Motor Co. will be the winners, because they're already selling the cars, he said. Honda Motor Co., which is at least a few years away from selling an electric model, will be among the losers, Omotoso said.
Ed Cohen, Honda's vice president of government and industry affairs in Washington, noted the discrepancy between Obama's specific mention of electric cars when his prepared text referred to “advanced technology” vehicles.
“As a company that has a particular interest in fuel cells, we would hope that goal would include those technologies, and that the federal investment would extend to those technologies as well,” Cohen said.
Cohen said Honda is working on all the advanced technologies, including plug-in hybrids like the Volt and battery-electrics like the Leaf. Government shouldn't be picking winners, he said.
“It's important not to stifle the development of any technology, and for the government to send the right market signals,” Cohen said.
Getting to 1 million electric vehicles on the road will require a significant drop in the price of lithium-ion batteries or technological breakthroughs making electric-vehicle range comparable to what's possible with a tank of gas, Omotoso said.
The Environmental Protection Agency has estimated the Volt's electric-only driving range at 35 miles. Drivers will be able to go another 344 miles on the gasoline engine, reaching a combined range of 379 miles, GM said in November.
Nissan's Leaf traveled 73 miles on a fully charged battery in fuel economy tests, the EPA said in November. The company has estimated the driving range at 62 miles to 138 miles, depending on conditions.
The Obama administration has backed previous efforts to spark new technologies with $25 billion in interest-free Energy Department loans to retool auto factories to improve fuel- economy technology.
GM drops application
GM said this week it was withdrawing an application for $14.4 billion of loans from the program, citing progress in rebuilding its business and the goal of carrying minimum debt. Ford Motor Co., Nissan Motor Co. and Tesla Motors Inc. have accepted Energy Department loans.
The decision won't affect GM's “aggressive investment in new products and technology,” Ed Welburn, the Detroit-based automaker's vice president of global design, said in a speech at the Washington auto show.
GM is accelerating the availability of the Volt by having it for sale in all U.S. dealerships by the end of the year instead stretching into 2012, Welburn said.
Current electric-vehicle sales are “a rounding error,” said Jeremy Anwyl, chief executive officer of Edmunds.com, an automotive research website based in Santa Monica, Calif. Purchases make more sense for fleets, such as commercial delivery vans, than individual drivers, he said.
Fleets have more predictable charging and driving-distance needs, he said. Boosting electric vehicles in commercial fleets alone won't achieve the president's goal; in 2010, commercial delivery vans were 1.9 percent of U.S. light-vehicle sales, according to Edmunds data.
“It boils down to the consumer,” Anwyl said. “There's only so much poking and prodding you can do.”
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