The company that owns more cars than any other in America is buying more electric vehicles.

Andy Taylor, who is chairman and chief executive officer of Enterprise Holdings, which owns the flagship Enterprise Rent-A-Car brand as well as Alamo Rent A Car and National Car Rental, said at a Washington energy forum today that the company is expanding its offerings of electric cars as fast as it can.

Andy Taylor of Enterprise Holdings

“We are finally getting the vehicles in some numbers,” Taylor said, at the National Summit on Energy Security, where he and Fred Smith, chairman, CEO and president of FedEx Corp.

Smith, too, made an impassioned plea to electrify the U.S.’s cars and light trucks. If the goal is to displace imported oil, Smith said, “there has never been a technology that offers this much opportunity,” he said.

While it’s great to see CEOs of big companies pushing electric cars, the numbers we’re talking about remain small. I emailed Lee Broughton, head of sustainability for Enterprise Holdings, and asked him how many vehicles the company is buying. He replied:

We have approximately 80 EVs today and just shy of a dozen Volts. By calendar year end we’ll have many hundreds of EVs and definitely many more Volts (provided they give them to us) and anticipate I-miev (Mitsubishi). We also have a dozen Peugeot i-on’s in London too. All with a charging station infrastructure across the locations receiving them.

…According to TreeHugger.com, Nissan has sold approximately 4,000 LEAFs in the U.S.; Enterprise has purchased 500, or 12.5% of all LEAFs sold as part of its roll out of the nation’s largest EV rental fleet.

Altogether, Enterprise owns more than 1 million cars and trucks, making it the world’s largest car rental company. Here’s the company’s announcement.

More significant than the numbers, perhaps, is the enthusiasm these companies are showing for EVs. Both CEOs said the economics of EVs is compelling, and that the climate and national-security benefits are real.

Taylor said his company will go ahead and purchase EVs with or without government incentives. He said customers want then, and Enterprise workers are excited by them.

“It is our family’s philosophy that, regardless of what the tax incentives are at this point, that this is coming, it should come and we should help it,” Taylor said. “If we don’t make money on these for some years, fine. Eventually, we’ll make money.” As the leader of a family-owned, privately-held company, he can afford to think long term. “We don’t have to worry about quarter to quarter.”

Fred Smith of FedEx

As a U.S. Marine Corps veteran who served two tours of duty in Vietnam, Smith has credibility talking about national security. Dependence on oil imports, he said, is “one of the greatest dangers this country faces….We’re still hostage to the vast majority of oil reserves owned by national oil companies, many of which are owned by governments that are antagonistic to our interests.” By contrast, there’s more than enough spare electricity generating capacity in the U.S. to power many millions of electric cars.

His company also has a lot at stake. FedEx, he said, burns about 1.5 billion gallons a year of petroleum fuels in its trucks and planes. Revenues last year were about $35 billion, so fuel costs matter. There’s also the history of FedEx to consider. “We were almost killed in the cradle by the Arab oil embargo.”

Smith is no treehugger. He strongly supports domestic oil and gas drilling. But, he says, electric vehicles can play a big part in reducing oil imports–and, more important, they are fun to drive.

“If you get into a Leaf or Volt, these are wonderful cars. They are terrific in every respect. They aren’t golf carts,” he said. Best of all, it costs 70 to 80% less per mile to operate an electric vehicle, depending on gasoline prices.

Battery prices will have to come down to make electric cars more competitive with conventional vehicles, Smith said, but he predicted that they would drop by as much as 40% in the next five years.

Taylor and Smith argued that government needs to help stimulate the growth of electric cars, by supporting EV charging infrastructure. Of course, the government is already subsidizing electric cars–with tax credits of up to $7500 for electric-car buyers as well as loans to battery makers like Ener1. Smith’s a political conservative, but he said that when the costs of electrifying the fleet, when compared with the benefits,  are “a pittance.”

This is a clean-energy technology that can’t arrive too soon.

An electric car motorcade

Detroit’s the Motor City. California’s car culture is unsurpassed. But when the electric car industry staged an “innovation motorcade” of electric cars and trucks today, it did so in Washington, D.C.–fittingly, because, without the government, there would simply be no electric car industry.

Indeed, the market for electric cars is so distorted by government subsidies that it’s all be impossible to determine the true cost of an electric car.

Notice that I said cost and not price; there’s a difference, and it’s relevant to any conversation about business and the environment. Coal-powered electricity is cheap but the price doesn’t reflect the costs of burning coal, including lung disease, mining accidents and greenhouse gas emissions. (See Fossil Fuels: A Legacy of Disaster from the Center for American Progress.) Hamburgers are cheap but the true cost of beef includes methane emissions, farm subsidies and, arguably, heart disease. Gasoline-powered cars externalize costs that include smog, carbon emissions and, some would say, a foreign policy that favors stability, i.e., autocracy over democracy in the Middle East.

Markets, needless to say, work better when prices reflect true costs.

So what’s the true cost of an electric car? Hard to say. Sticker prices are high–Chevrolet’s Volt has an MSRP of $40,280, while the Nissan Leaf is priced at $32,780–but buyers get a $7,500 tax credit that reduces the cost. The government even gives tax credits to buyers of the $109,000 Tesla Roadster.

The tax credits are merely the most visible form of federal support. Energy Secretary Steven Chu, who spoke at today’s event, said the government has invested $5 billion so far to electrify the nation’s transportation system. It provided loans of $2.6 billion to Nissan, Tesla and Fisker to established electric car factories, $2.4 billion in grants to establish 30 electric vehicle battery and component and another $80 million for advanced research and development. (Here’s a DOE report, PDF, download, with details.)

Virtually every car and component maker on display today in D.C. reflected your tax dollars at work. Ecotality, for example, which makes the Blink charging stations, is leading a $230 million initiative, half of which is funded by DOE, that plans to  install more than 15,000 EV charging stations in the coming months.

Steven Chu

What benefits are generated by all the subsidies? That was the focus of remarks by Secretary Chu and Ed Markey, the Democratic congressman from Massachusetts.

Jobs and economic growth, Chu said. “We’re in a global race to develop these technologies,” he said. “The prize is a multi, multi-billion dollar market.” The government stimulated and subsidized the development of semi-conductors, computers, the Internet, biotech and even the airplane, all of which delivered jobs and other untold benefits to Americans.

No more support for oil sheiks, according to Markey. “Americans are ready for an oil change,” he said. “It is time to break the monopoly that oil has on our transportation sector.”

Ted Craver, the chairman and CEO of Edison International, a utility company that stands to gain from the electrification of transportation, also cited energy security as a benefit of electric cars. “Nearly all of the electricity generated in America uses domestic fuel sources,” he said.

Perhaps because Republicans now control the House, and many are climate-change skeptics, little mention was made of the environmental benefits of electric cars. But even with today’s fuel mix for electricity, which is about 50% coal-generated, electric cars generate fewer emissions than gasoline-powered vehicles.

Do the gains outweigh the costs? Maybe, so long as we don’t subsidize electric-car owners in perpetuity.  (The $7,500 tax credit extends only to the first 200,000 electric-car buyers.)

I asked Secretary Chu and Ed Markey when they thought electric cars would be able to compete without subsidies.

Chu said two things have to happen–the range of batteries has to get longer, to perhaps 300 miles, and  battery costs have to come down. Some experts say battery costs could be cut in half in the next few years.

“Hopefully, by the end of this decade, we’re going to be at parity,” Chu said.

Very roughly, because the numbers are trade secrets, electric-car batteries cost up to $1,000 per kilowatt. The Leaf has a 24 kwh battery, the Volt a 16kwh hattery, so their upfront costs are thousands of dollars higher than comparable gas-powered cars. But because running a car on electricity costs much less than powering it with gasoline, operating costs are substantially lower.

“You can’t pick the exact year” when subsidies will not longer be necessary,” Markey said, “but Saudi Arabia helped us this past weekend by saying they’re going to keep the price of oil high.” Gasoline at $4 or $5 a gallon makes electric cars more appealing.

Today’s motorcade was impressive because it featured not just the well-publicized Chevy Volt and Nissan Leaf but cars from Toyota, Mitsubishi, Tesla, Think and Coda Automotive, along with  trucks from Eaton, Odyne, Smith Electric and Via Motors.  The event was organized by the Electric Drive Transportation Association (EDTA), which is holding its 2011 conference this week in Washington.

Tourists gather round a Tesla Roadster. Hey, they're paying for it.

Today, few words but a couple of videos instead, one from the left and one from the right (because we strive to be nonpartisan here at www.marcgunther.com).

The first, from the activist group Rainforest Action Network, is about the tragedy of mountaintop removal coal mining. RAN is running a campaign against banks that finance mountaintop removal, notably PNC, Citi and UBS. More here.

One thing I learned from the video: MTR coal accounts for just 7% of the coal burned in the U.S. Is this really necessary?

The second one-minute video comes from the conservative end of the political spectrum, namely, Fred Smith, the founder and CEO of FedEx. An advocate of electric cars, Smith is bothered by America’s dependence on imported oil.  He’s got a business agenda of course–high oil prices hurt FedEx–but the benefits of electrifying the U.S.’s transportation sector go well beyond cost to include reduced greenhouse gas emissions, air pollution and national security:

Thanks to Mitch Jackson for posting this on the FedEx blog. More info here. I’d encourage Fred Smith to talk to some of his Republican friends about why the threat of climate change is worth taking seriously.

Outside the door to General Motors’ Washington office is a photo of the Chevy Volt framed by the U.S. Capitol.

GM loves to market the Volt, the 2011 Motor Trend Car of the Year (“A car of the future you can drive today.”) It’s an engineering breakthrough, a darling of the “green” media and evidence that stodgy old GM knows how to innovate.

So why, I asked Mike Robinson, GM’s vice president of environment, energy and safety policy, is GM selling so few Volts? Just 321 in January, 281 in February, according to GM’s monthly sales report. By comparison, Chevy sold nearly 70,000 Silverado pickup trucks during those two months.

“We’re on target,” he assured me. “We’ve probably got orders for every one we can build in the next year.” Chevy plans to sell 10,000 Volts this year, and another 45,000 next year and, if all goes well, a lot more after that.

“This is not a science project,” he said. “We really want to build a mass-market vehicle. We  believe that electric cars are a better long-term solution than pure gasoline.”

Strong words from an executive at GM, which remains the No. 1 automaker by sales in the U.S., selling 2.2 vehicles last year. If GM believes in electric cars, chances are we’ll be seeing many more of them in the years ahead.

I was meeting Mike for the first time. He’s a straight-shooter who divides his time between Detroit and D.C., where he’s got an apartment. Mike, 56, is a native of Worcester, Mass. and a lawyer who was educated in  Jesuit schools and has worked for GM since graduating from Villanova Law  in 1984. Before that, he spent four years as an Air Force officer in Mississippi, Oklahoma and King Salmon, Alaska, where,  yes, the fishing was great. He loved the air force, he told me,  but didn’t care for the bureaucracy. Somehow he  wound up at GM. Go figure.

The good news, he said, is that post-bankruptcy, GM is a leaner company where young people, many of them passionate about sustainability, are being heard. “We’re a lot nimbler than we used to be,” Mike said.

On environmental issues, GM has a good story to tell. Worldwide, GM has reduced its energy usage by more than 40 percent between 2005 and 2009. It has cut water usage by 35 percent. More than half of its worldwide facilities are landfill-free, which is impressive.

In the end, though, GM’s sustainability commitment will be judged by the cars it makes and sells. That makes sense in a way, and yet it doesn’t: It seems to me that the most we can ask of a big auto company is that they offer a range of quality products, including cars that are small and fuel-efficient. You can’t blame GM or Ford if consumers ignore fuel costs (and carbon emissions) until gas prices get really high, just as you can’t blame Safeway if their shoppers load up in junk food instead of vegetables. In both industries, smart policy — a carbon price or gas tax in the auto business, subsidized vegetables instead of corn in the food business–would be the best way to drive change, but our policies for now are anything but smart. (I’ll save my critique of federal fuel-efficiency standards for another day.)

Mike did tell me that GM is better prepared than it used to be for a period of high gas prices. “We’ve worked for some time to balance the product portfolio,” he said.

One standout vehicle: The Eco version of the gas-powered Chevy Cruze which, with a manual transmission, delivers an EPA-estimated 42 mpg on the highway and 28 mpg on city streets. (That’s superior, as best as I can tell, to my pricier Honda Civic Hybrid.) GM sold more than 32,000 units of the Cruze in January and February, twice as many as the compact Chevy Cobalt that it replaced. “It performs better, it’s got more features and better fuel economy,” Mike said.

He’s most proud of the Volt, a project launched under then-CEO Rick Wagoner. “This vehicle was announced, and the timetable was announced, before we knew how to do everything we’ve done,” he said. “It was like a moonshot.” Others haven’t matched the battery-plus-gas technology because “it’s very, very hard to do.”

The Volt carries a steep suggested retail price of more than $40,000. (A $7500 federal credit will ease the sticker shock.) The Volt is pricier than the all-electric Nissan Leaf but it’s got an advantage–an internal combustion engine to supplement the batteries, which have a 40-mile range. So if they run out of juice, you can fill up at a gas station and go as far as you want. Goodby, range anxiety.

GM doesn’t think most Americans are ready for all-electrics. “We got to live through that experience in California,” Mike said, wryly. “They made a movie about it.”

Mike is convinced that the Volt “is a winner, for society and for consumers.” It’s good for climate change, reduces oil imports and over time, even with its upfront costs, should save money for owners who drive enough miles. EPA estimates 95 city/90 hwy mpg, but actual mileage will depend on how much the car is powered by gas and how much by electricity.

In the end, though, GM won’t decide the Volt’s fate.  The rest of us will. “This is America,” Mike says. “People have choice. In some places you might be able to dictate to the population what they are going to do, and not do.” Not here, thank goodness.

—

Note: If you want to learn more about electric cars, with a focus on the issues around infrastructure and charging, please join me and a group of industry experts today (Thursday, March 24) for a free Energy Collective webinar called The eMobility Challenge: Electric Cars and How to Keep them Charged. The conversation begins at 1 p.m.

With all the dismal environmental news of late–from the nuclear crisis in Japan to the Republican attacks on EPA in Congress–it will be a pleasure this week to turn my attention to one of the most exciting developments on the sustainability front: the arrival of electric cars in the U.S.

To be sure, the sales figures so far for the Chevy Volt and Nissan Leaf are tiny–Chevy sold 281 Volts in February and Nissan sold fewer than 100 Leafs–but both vehicles are, for now, available only in limited quantities and locations. What’s more, there are few places outside of their homes for owners to charge the cars.

On Thursday, I’ll be moderating a free webinar on the charging issue for The Energy Collective. It’s called The eMobility Challenge: Electric Cars and How to Keep Them Charged, it’ll be held at 1 p.m. ET/10 a.m. PT, and your can sign up here. We’ll take questions from listeners throughout the hour. Here’s info on details and panelists:

Electric vehicles offer a major opportunity for more energy-efficient transportation, as well as reduced dependency on carbon-producing fuels. However, the cars themselves are only half the solution. We must create a new charging infrastructure to get those cars the power they need.

In this webcast, The Energy Collective explores the challenge and opportunity of widespread EV adoption. Our expert panelists will discuss the various charging network options and their impact on the electric grid. Join us as we tackle these essential questions:

• Will charging infrastructure precede EV adoption, or will adoption drive demand for infrastructure?
• Is standardization of charging systems needed, or are clear “winners” emerging?
• How will charging infrastructure be financed?
• What changes to electric grids are necessary to accommodate EV charging?

Jim Greenberger is the Executive Director of NAATBatt, a trade association of companies in the advanced battery industry working to grow the market for advanced batteries in the United States, primarily in automotive and grid-connected energy storage applications. Prior to leading NAATBatt, Mr. Greenberger practiced law in Chicago for more than 25 years, most recently as a partner at Reed Smith LLP, where he led its cleantech practice group. He serves on the Executive Committee of the Illinois Wind Working Group and is the founder of the annual Midwest Energy Forum at the University of Chicago Booth School of Business.

Steve Rosenstock is the Manager of Energy Solutions at the Edison Electric Institute. For EEI, Steve works with member companies on the issues of appliance energy efficiency standards, building codes, national key accounts, Smart Grid, and Electric Transportation. He holds a B.S. degree in Mechanical Engineering from the University of Maryland and is a registered Professional Engineer in the State of Maryland. He is a member of the Tau Beta Pi Engineering Honor Society, the American Society of Mechanical Engineers (ASME), American Society of Heating, Refrigeration, and Air-Conditioning Engineers (ASHRAE), and the Association of Energy Service Professionals.

Rob Peterson is the manager of Chevrolet Volt and Electric Vehicle Technology Communications for General Motors. His responsibilities include the creation and execution of the strategic communication plans for building awareness and acceptance of electric vehicles, such as the Chevrolet Volt, among consumers, industry stake holders, policy makers and NGOs. Peterson joined the Volt Development Team at its onset in May of 2006 and has remained a key member of the Global Electric Vehicle Development Leadership team since. Prior to his current assignment he was a Global Product and Brand manager in which he supported the cross-regional launches of several Cadillac and Hummer vehicles.

Luis Giron is responsible for Electromobility marketing at Siemens Energy’s Smart Grid Applications business in Raleigh, NC. Giron received an MBA from Duke University and a BS in microbiology from North Carolina State University. His prior experience includes marketing, research and development and manufacturing positions within Lenovo Group Limited and Diosynth Biotechnology. Siemens’ Electromobility group focuses on bringing smart solutions to the utility, industrial, municipal, fleet, automotive and residential customer markets.

CODA sedan

No one said it would be easy for CODA Automotive, the California-based startup that makes all-electric cars and battery systems.

Two months ago, CODA delayed the introduction of its first car and said that its dynamic chief executive,  Kevin Czinger, was stepping down. Even before then, pundits wondered whether the company could survive (here and here).

When, after all, was the last time a U.S.-based startup broke into the capital-intensive automobile industry?

But, while CODA has a tough road ahead, it turns out that some smart money is betting on the privately-held firm: Last week, CODA announced that it raised another $76 million and brought in two new venture investors, Harbinger Capital Partners and Riverstone Holdings. Previous investors include Hank Paulson, the former treasury secretary and CEO of Goldman Sachs; Thomas “Mack” McLarty, Bill Clinton’s former chief of staff, whose family owns auto dealerships; and John Bryson, the former CEO of Edison International.

The company has now raised about $200 million, and hopes to raise another $50 million soon, says Steven “Mac” Heller, an investor, co-chairman of the board and now the company’s interim CEO. Heller spoke today (on a panel with GE’s Jeff Immelt) at the Brookings Institution, and we sat down afterward to talk about CODA.

Steven "Mac" Heller

Heller, who worked for 20 years as a top investment banker at Goldman Sachs, said the company  plans to introduce its CODA sedan in California during the second half of 2011, by which time it should have a new CEO. “I’m not a candidate,” he said flatly. Heller lives in Greenwich, Ct., while CODA is headquartered in Santa Monica, CA.

The company isn’t dependent on sales to consumers, Heller explained. It has agreements to sell cars to Hertz and Enterprise, and also hopes to sell to fleets run by utility companies, governments and corporations. More important, CODA makes lithium-ion batteries, both for the automotive and utility-storage makers; it’s in a joint venture with Lishen Power Battery, a Chinese firm owned in part by  China National Offshore Oil Corporation (CNOOC). Last year, CODA applied for a U.S. Department of Energy loan to build a battery manufacturing plant in Columbus, Ohio.

Electric cars are all about the battery–that’s where the costs are, and where the key design decisions must be made–and it’s CODA’s battery pack that will ultimately give the company a competitive edge, Heller told me.

The battery pack is the major reason why CODA’s sedan, with a sticker price of $44,900, before a $7,500 federal rebate, costs more than the Nissan Leaf (MSRP $32,780) or the Chevy Volt (MSRP $42,280). But you get what you pay for, and so CODA’s batteries should pack more punch. It carries a 34-kWh battery pack; the Leaf’s is 24 kWh and the Volt’s is 16 kWh. CODA also provides what’s called “active thermal management” of its batteries, meaning they operate at an optimal (i.e., warm) temperature.

What that means, Heller says, is that CODA will have more range than the Leaf, and it will charge faster. It should also have more power and work better on cold days.

“It’s a more highly-engineered car,” he says.

CODA claims a range of 120 miles, while the Leaf’s advertised range is 100 miles. Nissan achieved 73 miles on an EPA test, and that number will go on its sticker.

As for Chevy’s Volt, it can go much farther on a single battery charge because of it also has a gasoline-engine “range extender,” but CODA’s advantage there may be–may be–that it burns no gas.

“Consumers talk to us about a desire to reduce our independence on foreign oil,” Heller says. “It is a matter of patriotism for them. They worry about us shipping billions of dollars overseas for oil, and that money is not coming back.”

“Our consumers tells us that they don’t want to be part of the petroleum industry,” he added. They want to buy an electric car from an electric car company.”

The thing to remember is that we’re at the very beginning of what could be a long transition to electric cars. Just as automakers offer a variety of choices, prices, styles and options when selling gas-powered cars, they are likely to do so with EVs and hybrids. Look at the vast gap between the Tesla Roadster (MSRP $109,000) and the Toyota Prius hybrid (MSRP $22,800.)

CODA sits in the middle, with hopes of selling 14,000 cars in its first year of production. It doesn’t have to become the market leader to survive. To the contrary, if Nissan sells lots of Leafs and Chevy sells its Volts, the category will be become better established and more car buyers will take a look at CODA.

“We want to see EVs on the road,” Heller says. “We believe that consumers are more than ready for an EV revolution.”

BYD's e6 electric car

Great companies have a purpose that goes beyond making money. Google wants to organize the world’s information. Walmart seeks to save people money so they can live better. The Walt Disney Co. tries to make people happy. (Or at least it used to; Disney’s current mission statement is a bunch of gobbledygook.)

Purpose matters. It’s a big reason why people go to work every day.

BYD, the Chinese company that makes electric cars, batteries and solar panels, has a grand purpose: It wants to save us all from climate change, which it calls “slow suicide.”

In a new company video (below), BYD says:

Glaciers are melting. Sea levels are rising. Who can guarantee that the next victims won’t be us?

Where is Noah’s ark to save human beings?

Where, indeed?

I’ve been fascinated by BYD — the letters are the initials of the company’s Chinese name, but they have come to stand for Build Your Dreams — since writing a FORTUNE cover story about the company in 2009. Two years ago, I visited BYD in Shenzhen, met with its founder and chief executive, Wang Chuan-Fu, and spoke about the company with Warren Buffett, Charles Munger and especially David Sokol of Berkshire Hathaway, who sits on the BYD board. Through its MidAmerican Energy subsidiary, Berkshire Hathaway bought 10% of BYD for $230 million in 2008. Despite some recent stumbles at BYD, the company’s market capitalization has grown to about $33 billion, so Berkshire’s stake is now worth about $3.3 billion. Not too shabby.

Lately, I’ve been in contact with  U.S. investors  who are bullish about the firm. One of them, Shai Dardashti, a Buffett admirer who runs a small money management firm, pointed me towards this seven-minute company video. It’s worth watching (although it ends abruptly for reasons that I haven’t been able to determine).

This video is fascinating in light of  BYD’s remarkable but brief history. Since 1995, it has evolved from a manufacturer of cell-phone batteries into one of China’s largest automobile companies and it is now making a major push into clean energy, both with the manufacturing of solar panels and  utility-scale batteries to store energy. (For more on BYD’s energy storage plans and MidAmerican Energy, see Warren Buffett’s Big Battery Play at GreenBiz. Recently, the city of Los Angeles’s Department of Water and Power (LADWP) and BYD said they would work together to develop a grid-scale battery project for renewable energy storage.

In an email this week, Stella Li, a senior vice president of BYD, told me that solar power and utility-scale energy storage are key parts of what she calls “BYD’s 0-emission solution” and “total green solution.” The idea is to generate energy from the sun, store it in batteries until it is needed and then use the electricity to power BYD’s electric cars and buses.

As the company’s video says:  “How to transform the unaffordable [solar, battery, electric car] technology into affordable and high quality products: This is BYD’s responsibility and its mission as well.”

BYD has its skeptics. The company postponed the introduction of its e6 electric car. BYD’s auto sales, earnings and share price fell this fall, according to Reuters. In October, BYD was fined $443,000 by China’s Ministry of Land and Resources and seven of its factories were seized by the government because the company illegally built them on land set aside for agriculture; the factories were for future production, the company told Bloomberg.

Given the companies outsized ambitions, more stumbles surely lie ahead.

But there are good reasons to believe in BYD. Among them:

Low-cost brainpower. Chinese manufacturers  are the low-cost providers of electronics, toys and textiles because factory workers are paid so little.  BYD’s more significant competitive advantage comes because the company  can hire skilled engineers at a fraction of what they would be paid in the U.S. or Japan, probably less than $1,000 a month. The company employs more than 30,000 engineers. They come from top universities and only those that make it through a challenging, competitive probationary period stick with the company. Its R&D operation, as a result, is vast. BYD can afford to make mistakes.

Battery technology: In BYD’s first business, cell phone batteries, the company dislodged entrenched, global leaders like Sony and Sanyo. Batteries remain central to BYD. Much of the due diligence carried out by Berkshire Hathaway’s Sokol focused on batteries. If BYD can continue to improve on battery costs and efficiency–a big if–the company will improve its competitive edge in three different businesses–rechargeable batteries for consumer electronics, electric cars and energy storage.

The China factor: It’s hard to know what the government’s crackdown on BYD over its factories really means; if the company falls out of favor with the authorities, all bets are off.  But Chinese-owned green businesses like BYD are sitting pretty today. While China’s economy isn’t as centrally managed as it once was, the country still produces five-year plans; as my colleague Brian Dumaine recently reported in FORTUNE, the “government recently decreed that 5 million electric cars will be traveling the nation’s roads by 2020 — up from basically none today.” The government provides all kinds of support (cheap land, tax breaks, low cost loans) to favored companies.

Wang Chuan-Fu

The X-factor at BYD is the chairman and founder, Mr. Wang. He’s obviously an accomplished, driven and brilliant leader. As Charlie Munger, Buffett’s partner at Berkshire, told me back in 2008:

This guy is a combination of Thomas Edison and Jack Welch – something like Edison in solving technical problems, and something like Welch in getting done what he needs to do. I have never seen anything like it.

What’s not clear is how deep and strong the management bench is at BYD. Without speaking Chinese, analysts, investors or reporters can’t get much of a read on the senior managers at the company.

BYD is trying to do so much that Mr. Wang can’t possibly manage it all.

But it’s hard not to root for a company that’s pursuing such big dreams.

–

Hat tip  to Shai Dardashti and Scott Rombach for keeping me up to date on BYD. BYD matters because the world desperately needs low cost solar power, battery storage and electric cars.  Given the lack of progress in Washington and, more recently, in Cancun around the climate issue, we’ve got to hope that companies like  BYD deliver the breakthrough clean technologies needed to avert a climate catastrophe. I don’t see any reason why they can’t…

And on that semi-optimistic note, I will close out this blog for 2010. By my unofficial count, I posted 195 times during the year, including guest posts. It’s been fun, but it’s time for week off.

Thanks for reading.

Enjoy the holidays.

See you in 2011.

If you are someone who watches your dollars and cents, you probably don’t own a plug-in hybrid. Sure, they deliver good gas mileage but it’s not good enough to offset the higher sticker price needed to cover the costs of the battery. (That’s why I own a Honda Fit.) Cars like the Toyota Prius and Honda Insight are expensive ways to say, ‘I’m green.’

Nissan Leaf

Electric cars are another story, and that’s why the arrival of the Nissan Leaf and the Chevy Volt in just a few months could become a watershed moment for the auto industry, as well as for the environmental movement. Unlike the Prius, the Leaf and Volt are not aimed at the early-adopter, eco-conscious, well-to-do niche buyers on the coasts and in places like Amherst, Ma., and Ann Arbor, Mi. They are being built for the mass market.

The economics make all the difference.

That, at least, is my takeaway from a discussion about electric cars held earlier today at a Washington Post Live event called Energy Now. (Video will be posted on the site, the newspaper says.) The panel was stacked with electric-car enthusiasts–Tony Posawatz from Chevy, Carlos Tavares of Nissan, David Crane of NRG Energy, David Vieau of battery-maker A123 Systems and a lone skeptic, Alan Crane of the National Research Council. But with the exception of Alan Crane, they all argued that electric cars will be not only fun to drive, not only convenient (because you don’t need to drive to a gas station to refuel) and not only good for the climate and for U.S. energy security, but also cheaper to own over the life of the car.

Chevy Volt

That’s essentially because (1) electric car engines are more efficient than internal-combustion engines and (2) generating electricity from a big coal, natural gas or nuclear plant is more efficient than burning gasoline in millions of cars.

This isn’t a new argument. I’ve heard it from people like David Sokol of Berkshire Hathaway and BYD, and from Shai Agassi (See Electric cars: all systems go) but David Crane’s explanation today laid out the math in clear terms.

Describing NRG’s plans in Houston (see Why the Petro Metro wants electric cars), Crane said the NRG-owned utility company, Reliant Energy, is working with Nissan and plans to offer Leaf owners an all-you-can-eat model for buying electricity to power the car. Here’s the selling proposition:

First, NRG would buy and install a Level 2 car charger for the home. Those are worth $1,500 to $2,000, Crane said, and they can fully charge a Leaf, which has a range of about 100 miles, in four to eight hours. “You come home from work, you plug it in, and in the morning it’s ready to go again,” he said. Second, NRG will build a network of charging stations around the city of Houston. “At no point will you be more than five miles away from a fast charge,” he said. )The business model for sustaining the stations remains uncertain.)  Third, NRG will offer  unlimited mileage for three years at a price still to be determined, but estimated at $70 to $80 a month, added to the utility bill. After the three years, the price would drop because by then NRG will have recouped the cost of the charging station and would only need to pay for the electricity.

So how does the math look? At $80 a month, fuel costs for the Leaf would be $960 a year. By comparison, assume that you drive a conventional car 15,000 miles a year and get 20 mpg. You’ll buy 750 gallons of gas. At $2.58 per gallon, the current average price on the Gulf Coast, you’ll pay just under $2,000 a year.

You can challenge my assumptions, but that $1,000 a year in fuel savings will over time offset the upfront cost of the Leaf, which is roughly $25,000 after a federal rebate in most places and $20,000 in California which offers a state rebate as well. If gas prices rise, the deal looks sweeter. It looks better yet if, as seems likely, the costs of batteries (and the sticker price) falls.

Then there are the psychic benefits. A123′s Vieau said the company has already hired 300 people at the battery-making plant it just opened in Livonia, Mi., and expects to hire many more. “We’re shifting dollars spent on oil overseas to create jobs at home,” Vieau said.

People who care about the environment, meanwhile, can take pride in the fact that they are driving cleaner cars.

“American’s want to make a difference if they can,” NRG’s Crane said. “Look at the organic food business.”

Now, a couple of caveats: Today’s electric car business is heavily subsidized, it must be noted. Buyers get tax breaks. Battery maker A123 got a $249-million stimulus grant, a federal loan guarantee and state subsidies and Nissan was given a $1.4 billion energy department loan guarantee to retool a plant in Smyrna, Tennessee. GM, of course, got bailed out.

The second caveat is that it will take years for electric cars to have a major impact. The Chevy Volt will be available in only seven states at first, Posawatz told me that Chevy will make only “thousands” of the cars in the first model year, and “tens of thousands” after that. “If the demand is there, we’ll keep building more,” he said.

Nissan will make about 60,000 Leafs in  Japan during 2011, for the world market. Nissan had been taking pre-orders for the Leaf on its U.S. website, but stopped today because 20,000 have been ordered. The company will be able to build more starting late in 2012 when it opens the Smyrna plant, which has a capacity of 150,000 units a year.

To put that in context, there are more than 250 million cars on the road today in the U.S.

Still, I received an interesting 62-page report earlier today from HSBC Research called Sizing the Climate Economy. (If you Google it, you can download a PDF.) Its best guess is that the market for low-carbon vehicles — essentially, electric cars — will grow to $473 billion worldwide by 2020, making low-carbon transport business a bigger investment opportunity than low-carbon energy.

Electric cars, in other words, are going to be a very big deal.

The Edison2 Very Light Car

Here’s a surprise: The biggest winner in the $10-million Progressive Insurance Automotive X PRIZE competition, which is designed to inspire a new generation of low-polluting cars, is not an electric car, but a car that weighs less than 1,000 pounds and is powered by an internal combustion engine.

The car is known, fittingly, as the Very Light Car #98, and it won the $5 million prize in the “mainstream” category, which required cars to seat four people, run on four wheels and have a driving range of at least 200 miles. The Very Light Car runs on E85, a blend of ethanol and gasoline, and it was built by a team known as Edison2, led by a German-born entrepreneur named Oliver Kuttner and based in Charlottesville, Va.

The Edison2 Very Light Car bested 111 competing teams and 136 cars from around the world. All sought to build practical safe and super fuel-efficient vehicles capable of achieving 100 miles per gallon or the energy equivalent—a threshold that the Very Light Car just managed to achieve, performing at 100.3 MPGe.

The team that developed the Very Light Car, which includes race car drivers who have won at  Le Mans, Daytona, and Sebring winners, decided to stick with an internal combustion engine because batteries add weight, as well as cost. While praising electric cars as “here to stay” on its blog, Edison2 says:

Currently, however, electrics cars have real issues. Batteries are heavy, big and costly. With electric drives cars get heavier, performance suffers and costs go up.

Kuttner, a race car driver, said the car, which is made of low-cost and recycleable materials, could potentially go on sale for $20,000 – if it reaches the market. There are no current plans for mass production, but Kuttner said he’s talked with several big companies, including General Motors, which tested the Edison2 in its wind tunnels. One obvious hurdle to be overcome is safety–the car isn’t equipped with air bags or other standard safety features and, presumably, it would come out on the losing end in a crash with a much heavier car or truck.

Li-Ion Wave II

Two battery-powered cars each won $2.5 million each in prize money. Li-ion Motors Corp.’s Wave II, built by a startup based in Charlotte, N.C., won in the “alternative side-by-side” category with a car that delivered 187 MPGe. This category included two-seaters where the driver and passenger sit side by side.

A car known as the E-Tracer 79, built by a Swiss company called X-Tracer and created by Arnold Wagner, a former SwissAir jumbo jet pilot and aircraft designer, won in the “alternative tandem class.” This category also includes cars that seat two people, but one can sit behind the other. While the E-Tracer may look more like a motorcycle than a car (see below), it has two additional wheels that fold into the car; they drop down at slower speeds to provide stability.

The E-Tracer was the efficiency king of the competition, registering an eye-popping 205.3 MPGe. (Results were verified by experts including U.S. Department of Energy labs.) It looks like the E-Tracer could be fun to drive, too!

This morning, I attended the X-Prize awards ceremony, which was held outdoors in Washington and, oddly, featured a bunch of dignitaries, including House Speaker Pelosi, long-winded Congressman Ed Markey, and a DOE official, most of whom had little or nothing to do with the prize.

The contrast was unintended but hard to miss—between a national government that is paralyzed when it comes to climate and energy, and the inventiveness, creativity and energy of startups, engineers and entrepreneurs unleashed by a mere $10 million prize, which amounts to chump change in the federal budget.

Offer the right incentives, in other words, and human ingenuity can do wonders.

“We’re living in a day and time where literally anything is possible,” said Peter Diamandis, the X PRIZE Foundation Chairman and CEO. “A man or woman can go out and build a spaceship or a 100 mile per gallon car. This is only the beginning.”

Not to belabor the point, but neither of the government-backed automakers, GM or Chrysler, got into the contest.

Then again, the winners are in no sense amateurs or garage mechanics. The aerodynamic steel frame of the Edison2 car, for example, was designed by Barnaby Wainfan, a Northrop Grumman aerodynamics fellow, while the head designer for the team was Ron Mathis, who worked on the R10 for Audi Sport North America. The X-Prize judges said of the car:

More like an airplane than a car, Edison2 uses a highly innovative light-weight, low mass hub-mounted suspension for its aerodynamically flared four wheels. Its low total mass of 830 pounds – nearly a quarter of the average car weight- is a tribute of engineering strength and packaging utility.

Let’s hope Diamandis is right that this is just a beginning. The X-Prize’s first prize, for personal space transportation, gives reason for hope: It was awarded in 2004, and has since inspired an industry. Just today, Boeing said it has plans to fly tourists into space.

Below are a couple of snapshots I took at the X-Prize ceremonies. If you are reading this on Thursday, you can watch a one-hour documentary called “X PRIZE Cars: Accelerating The Future” tonight (September 16) at 9PM ET/6PM PT on the National Geographic Channel.

The Edison2 Very Light Car

E-Trace

Why on earth would Houston, the city of drill-baby-drill, the fossil-fuel capital of America, the city whose NFL franchise used to be called the Oilers, embrace the electric car? For good reason, it turns out–so says the city’s mayor, the local utility company, Reliant Energy,  its parent company NRG Energy and NRG’s CEO, David Crane.

“Houston’s not a natural market for electric cars,” Crane admitted, when we met the other day. “But electric cars are good for our business in all kinds of ways,” he added. So NRG and Reliant is working with officials Houston, America’s 4th largest city, to persuade Nissan to make Houston one of the leading launch markets for the Nissan Leaf, the all electric vehicle that the Japanese automaker plans to start selling later this year.

Houston's skyline at night

“We are the Petro Metro, but we are also a car city,” said Houston’s newly-elected mayor, Annise Parker, at an event earlier this month to welcome Nissan to the city. Certainly there’s a sizable market awaiting Nissan in the city. Houston is home to 4.5 million vehicles that travel 86 million miles a day, according to Reuters.

The problem for Houston–and for most other cities that want to welcome electric cars–is that it lacks an infrastructure of charging stations where electric car owners can fill up their cars with, er, electricity. This winter, Nissan took the Leaf on a three-month, 24-city tour designed to spark excitement about the car, a five-passenger car that the company says will travel about 100 miles on a single charge.

But because the Leaf will be produced in limited numbers, at least at first, the tour was also a way for Nissan to solicit partners, mostly cities and utility companies, that will assume the costs of building charging stations that will allow electric car drivers to overcome what is known as “range anxiety”–the feeling that they might run out of electricity without a charging station nearby.

Nissan has persuaded a number of cities to build charging stations, including those that are part of the EV Project, which the company says is the world’s largest EV infrastructure deployment. Nissan says:

The EV Project, funded by a $98 million grant from the Department of Energy and led by EV infrastructure provider eTec, a division of Ecotality, will provide an unprecedented number (6,510) of public charging stations across the 5 participating markets and will provide home charging stations for up to 4700 Nissan Leafs sold in those markets. The public stations will include both Level 2 (240V) and Level 3 DC fast chargers.  The EV Project markets are Seattle, Oregon, Tennessee (Knoxville, Nashville and Chattanooga), Phoenix/Tucson, Ariz., and San Diego.

You’ll note that Houston isn’t on that list. That’s where Crane, NRG and Reliant come in. Last fall, Reliant and Nissan said they’d work together to build a network of charging stations. Reliant also launched an EV pilot project with 10 city-owned Toyota Prius cars that have been converted to plug-in hybrids. “Those are just a taste of what’s ahead,” Crane told me.

Crane’s one of the liveliest and most likable energy executives around. The Princeton- and Harvard-educated CEO is smart, straightforward and funny. As CEO of NRG, he leads an independent power producer (meaning that its electricity is usually sold to consumer-facing utilities, not directly to homeowners or businesses) that is investing in an array of low-carbon energy sources–nuclear power, utility-scale solar thermal plants and solar photovoltaic arrays. NRG is exploring offshore wind energy and so-called clean coal, too.

For electric power companies like NRG, which have seen demand for electricity slip during the recession, the electric car represents a new business opportunity, at least in theory. As  Kevin Book, managing director of research at ClearView Energy Partners LLC, told Reuters: “What a salvation the electric car revolution would be for generators that are well below their capacity margins and trying to figure out how to make money.”

While Houston may lack the green culture of, say, Portland, Oregon, the city wants to welcome electric cars for a couple of reasons, Crane explained.

First, west Texas has an abundance of cheap wind energy (See my blogpost, Electricity That’s Cheaper Than Free) that is available overnight and during periods of low demand to recharge electric cars at a low cost.

Second, Houston has a serious smog problem. The EPA is proposing tougher limits on ozone pollution, which contributes to smog, and those limits “will force Houston to make deeper emissions cuts just as the former smog capital met the previous standard for the first time,” according to The Houston Chronicle. Cities that fail to comply with EPA air pollution rules run the risk of losing federal highway funds.

No wonder Houston’s civic and business establishment are eager to welcome the Leaf, which markets itself a Zero Emission Car, apparently choosing not to count the emissions created when coal or natural gas is burned to make electricity.

Nissan Leaf

All this, in the end, will be driven by the compelling economics of electric cars. (See Electric Cars: All Systems Go.) In the U.S., assuming $3 a gallon gas, fuel costs for a mid-sized car with an internal combustion engine are about 12 to 14 cents a mile. For an electric car, with its more efficient engine, electricity costs are 2 to 4 cents a mile. That doesn’t include the substantial cost of amortizing the battery but, even so, as Crane put it: “There’s a big delta in there that you can use to pay for other services.”

He envisions Reliant helping Nissan to sell the Leaf by providing a Level 2 (medium-fast) charging station for the home and then selling the new car owner a contract to buy as many miles as desired. “Think of the electric car as a cellphone,” Crane says, where the utility is the equivalent of A&T or T-Mobile, selling access to a network and minutes instead of miles. Crane can get even more excited talking about V2G, or a network of electric vehicles tied to a smart grid, where owners could buy cheap, clean, wind-powered electricity at night and sell it back to the grid during the day when demand peaks.

A futuristic vision? Maybe. Then again, Crane gets around his home town of Princeton, N.J., in a Tesla that he’s been driving for seven months. It’s too small to ferry his kids to their hockey games but otherwise it’s been trouble free, it’s got a range of more than 200 miles, and it charges overnight.

“Your garage,” he says, “is the service station of the future.”

I’m pleased that David Crane will be joining us again in April at FORTUNE’s Brainstorm Green conference on business and the environment, where he’s talk about electric cars, NRG’s nuclear ambitions and the Washington scene.