President Obama’s vision to put a million plug-in cars on U.S. roads by 2015 is shorting out. Speaking back in March 2009 of pumping billions of dollars in federal grants, loans and subsidies that would bring this about he promised “This investment will not only reduce our dependence on foreign oil, it will put Americans back to work…”It positions American manufacturers on the cutting edge of innovation and solving our energy challenges.”
But woops, it turns out that plug-in car energy-saving argument is running out of juice. A September Congressional Budget Office Report has concluded that all that spending “…will have no impact on the total gasoline use and greenhouse gas emissions of the nation’s vehicle fleet over the next several years.” It also found that even with the $7,500 tax credits we taxpayers generously provided to purchasers, electric cars are still a bad buy, costing owners far more over the life of the car than traditional gas-powered vehicles.
Apparently Toyota, the world’s largest carmaker, has figured that out, deciding that its new sub-compact iQ plug-in isn’t a great idea after all. Instead of mass marketing it, total production will be cut off at just 100. As their Vice Chairman Takeshi Uchiyamada explained, “The current capabilities of electric vehicles do not meet society’s needs, whether it may be the distance the cars run, or the costs, or how it takes a long time to charge.”
Cancellation of the iQ will leave Toyota with one pure EV in its lineup, an all-electric RAV4 model to be produced in the U.S. with Tesla Motors. Their expectations are to sell 2, 600 of these vehicles over the next three years. Still, after receiving a $465 million DOE loan, Tesla has reduced its original revenue forecast, and is now seeking a waver to amend loan terms for a second time in the event it can’t raise enough more money from investors.
While playing down the near-term outlook for all-electric vehicles, Toyota is investing more attention on gasoline-electric hybrids with plans to roll out 21 new or redesigned models by the end of 2015. The company predicts that its hybrid sales will top one million this and every year through that period. And although this number is up from the 310,000 gasoline-electric vehicles they moved last year, constituting 26 percent of total sales, they still remain only a niche in other important markets.
Last year, Toyota reportedly sold 178, 587 hybrids in the U.S., its largest market, compared with 37,000 Camry sedans during last August alone. The automaker had planned to sell between 35,000 and 40, 000 Prius plug-in hybrids in Japan this year, but by September had sold only 8,400, about 20 percent of its target. In fact, the worldwide 2011 hybrid market was down nearly 12 percent from the previous year, while the overall market was substantially higher.
A Business & Financial News/Reuters article reports that a broad industry consensus sees plug-in cars accounting for only a single-digit percentage of total global sales over the next decade, with Nissan more bullishly forecasting that one-tenth of all cars sold will be electric by 2020. Yet Nissan has a long way to go in meeting its quota, having sold only 38,000 of its $36,000 Leaf models since production began at the end of 2010 haven’t been exactly electrifying, having sold only slightly more than 4,000 this year as of September. In fact, sales plummeted 69 percent in June from a year earlier.
Although the all-electric Leaf is claimed to travel 100 miles on a single overnight charge, according to EPA, under real-world driving tests it is much more likely to go about 73 miles. And under heavy traffic conditions with heat blasting, we can expect to go only about 63 miles. Traffic jams then keep you on the road longer than four hours are likely to leave you stranded.
The 2013 Chevrolet Volt which has a backup gas tank is supposed to travel about 38 miles on a charge before its gasoline engine kicks in, extending its combined range to 380 miles. Although sales for the first half of 2012 more than tripled to nearly 9,000 from 2011, it hasn’t proven to be an overwhelming winner either. Altogether, fewer than 22,000 have been sold since they were introduced in December 2010, with year-to-date sales of 13,500, far below the 40,000 they had hoped to sell this year. That’s despite desperate lease offers that have some Americans driving around for two years in a vehicle that costs as much as $89,000 to produce.
Yes, and according to estimates provided to Reuters by industry analysts and manufacturing experts, GM is even losing $49,000 on each $40,000 Volt it sells. While GM issued a statement disputing the estimate without providing their own, the company acknowledges that each Volt does lose money. As Doug Parks, GM’s vice president of global product programs and former Volt development chief states: “It’s true, we’re not making money yet [on the Volt]. The car will eventually make money. As the volume comes up and we get into the Gen 2 car, we’re going to turn [losses] around.”
Sandy Munro, president of Michigan-based Munro & Associates which performs detailed tear-down analyses of vehicles and components for manufacturers and the U.S. government isn’t very optimistic about that prospect. He said “I don’t see how General Motors will ever get money back on that vehicle.”
Remember also, that we taxpayers are covering much of those losses as GM bail-out lenders and stockholders. And then, we can count on General Electric to help out too. Soon after President Obama appointed Jeffrey Immelt to chair his Economic Advisory Board, the GE CEO announced that his company would buy 50,000 of those cars. This will be great to promote more taxpayer subsidies plus markets for GE’s wind, solar and electric vehicle recharging station businesses.
The GM Volt isn’t likely to be the last electric car short-out to give us a jolt. Appearing with Vice President Joe Biden in Wilmington Delaware three years ago on the occasion of granting approval of a $529 million loan to electric car start-up Fisker Automotive, Secretary of Energy Steven Chu said “This is proof positive that our efforts to create jobs, invest in a clean energy economy and reduce carbon pollution are working.” Joe Biden was equally exuberant, heralding the loan as a” bright new path to thousands of American manufacturing jobs”.
So how did that work out? Part of that Fisker loan was originally supposed to help purchase a shuttered GM plant in Biden’s home state where one day 2,000 workers would assemble a $100 thousand plug-in luxury sports sedan called Karma. But since then, the company as one of four projects to receive loans under the Obama administration’s $25 billion Advanced-Technology Manufacturing Program. In addition to the federal loan, the company also raised more than $850 million from private investors. But since then, the company has suspended construction and has laid off 26 employees and 40 contractors. This is to allow time for the loan guarantee commitment to be renegotiated due to Karma production delays and a vehicle recall… after already spending $193 million of that amount.
It has now been revealed that Fisker never really intended to build the Karma in Delaware, but rather, had always planned to eventually build a different gas-electric family car there called Atlantic. Its Karmas are all being built in Finland. It now appears that the Atlantic may not be built in Delaware either. After DOE froze the $336 million loan balance, Fisker has indicated that it may look for another location, quite possibly one outside the U.S. As Company spokesman Roger Ormisher said: “If Fisker no longer gets government monies, then obviously we are in a place where other options are open to us and have to be considered from a business prospective. However, given the work that we have done at the plant in Delaware and the fact that we own it, it is still our primary option to consider.”
Then, because of that stoppage and lagging sales projections, Fisker’s battery supplier, A123 Systems, laid off 125 employees after they received $249.1 million from generous U.S. taxpayers, plus $141 million in State of Michigan tax credits and subsidies. The company filed for bankruptcy protection this month after drawing down $129 million, and is selling $125 million of its assets to Johnson Controls which will enable it to stay open for the time being. Ironically, Fisker’s production delay resulting in DOE’s freezing of the unspent loan balance was largely due to car fires and other problems caused by faulty batteries supplied by A123 Systems. A123, in turn, suffered a big setback when Fisker decreased orders.
Referring to the electric car-dependent battery industry, John Gartner, an industry analyst with Boulder, Colorado-based Pike Research, observes, “…the market was never going to develop as quickly as DOE expected.” Carter Driscoll, an alternative energy company analyst at Capstone Investments, blames the problem on the Obama administration’s overly rapid setup and staffing of these operations: “It was about making jobs in certain areas. It wasn’t market driven.”
So in order to shove more electric cars onto a disinterested market the Obama administration is imposing a tough new Corporate Average Fuel Economy (CAFÉ) mandate intended to force manufacturers to sell cars and trucks that get an average 54.5 miles per gallon by 2025. And there isn’t any realistic way carmakers can meet this requirement without radically transforming their product lines, most particularly by slashing vehicle weight and going to more expensive all-electric or plug-in hybrid electric drive technologies. In fact even the most efficient hybrids on the market today won’t comply.
While 2025 may seem like a long way off, and the new standards will be reviewed in 2018, real consequences will occur rapidly. According to the Washington Examiner, major engineering and production arrangements for weight reductions and downsizing will need to commence immediately. This is essential even to meet an upwardly revised 35.5 mpg 2016 standards established by the EPA, California Air Resources Board (CARB) and the National Highway Traffic Safety Administration (NHTSA) as recently as 2010.
And how much fuel efficiency value will this provide? First, consider that battery recharging power for plug-ins doesn’t come free. In fact more than two-thirds of it now comes from coal or natural gas generators… and don’t expect that circumstance to change dramatically in the foreseeable future. However much anti-fossil “renewable energy” proponents might wish otherwise, the sun doesn’t shine at night when most of that recharging will go on, and wind power lacks essential capacity, reliability or cost economy to contribute significantly.
As for gas-electric hybrids, the gas mileage you actually get will depend a lot upon how, where, when and how far you drive. Consider seasonal weather for example. Although heaters are minimized to conserve battery range, Consumer Reports rated a Volt test car at a paltry average 25 miles of electric-only running before the gasoline engine kicked in under cold Connecticut winter conditions.
Hot summer driving with air conditioners on takes a heavy toll on battery range too, particularly during periods stalled in traffic jams. The CR test car got about 30 mpg on premium fuel, and about 27 mpg on high-test when the engine was running. Compare this with a conventional 6-passenger Honda Accord that gets 34 mpg on the highway, while a 4-passenger Volt typically costs about twice as much (including its tax break). In addition, you don’t have to wait hours to recharge the Honda’s gasoline engine when it runs out of juice.
So, in the final analysis, do plug-in electric vehicles have a big future? Only time will tell. Some people will certainly continue to find them ideal for their purposes, and they are likely to become more broadly appealing as battery technologies evolve to provide greater storage capacities. But, still, there are much larger questions.
Isn’t there something terribly wrong when our tax money is used to bribe consumers to purchase government-preferred vehicles that don’t fit their needs or desires… and when regulatory mandates, rather than free markets, determine what manufacturers produce?
Is this still America?
This article originally appeared in Forbes.