Will electric cars enter the mainstream?

Nissan Leaf

Nissan Leaf

Of all the clean technologies out there, few generate as much buzz as electric cars. If only they generated more sales.

My story for Guardian Sustainable Business this week looks at electric cars, why they have been so slow to enter the mainstream and what the prospects are for quicker uptake of electric vehicles.

Here’s how it begins:

Pardon my metaphor, but is the tank half-empty or half-full when it comes to electric cars?

The bad news: start-up electric-car makers Aptera, Better Place, Coda and Fisker are out of business, or close to it. Of the 14.4m cars sold last year in the US, only 52,835 – one out of every 270 cars sold – were plug-in hybrids, like the Chevy Volt, or pure electric cars like the Nissan Leaf. Even with generous government subsidies, including a $7,500 (£5,000) tax credit for electric-car buyers, there is no hope of getting a million electric vehicles on the road by 2015, a goal set by president Obama in his 2011 State of the Union address.

And yet, virtually all the big auto-makers are charging ahead, with GM, Ford, Toyota, Honda, Volkswagen and BMW expanding their electrified offerings. So far this year, sales of electric cars are up by 123% over 2012, the Electric Drive Transportation Association (EDTA) reports. Influential publications such as Consumer Reports and Motor Trend rave about electric cars – in particular the new Tesla S. And all indications are that electric car owners are pleased with their vehicles.

“There is no buyer’s remorse,” says Arun Baskota, owner of a pure electric car and, more importantly, the president of eVgo, a startup company owned by utility NRG Energy that is building out electric-car charging infrastucture.

To get a sense of where the market is going, I sat down with Baskota after EDTA’s annual convention in Washington, and spoke by phone with Siddiq Khan, the co-author of a new report called Plug-In Electric Vehicles: Challenges and Opportunities, from the American Council for an Energy-Efficient Economy (ACEE). Both are optimistic about the future for electric cars, but they caution that mass adoption will take longer than most people (including, evidently, the president) expected.

The story goes on to argues, as I have before [See my blogpost, If electric cars are the answer, what's the question?] the the electric-car industry has yet to give car buyers a compelling reason to go electric. And the economics remain a challenge. With a very few exceptions–notably, the all-electric Nissan Leaf–the fuel savings that come from driving an electric vehicle are not big enough to pay back the higher initial costs of the vehicle.

Of course, predicting the future is very hard. Battery costs could drop, and battery performance could increase; in fact, they almost surely will. But until they do, electric cars will remain a niche product.

You can read the rest of the story here.

If electric cars are the answer, what’s the question?

An eVgo charging station

An eVgo charging station

Like many environmentalists, I’d love to see lots of people driving electric cars. If  broadly adopted, electric cars will go some way towards limiting air pollution, reducing greenhouse gas emissions and undermining the power of oil oligarchs in the Arab world and elsewhere. Electric cars produce what economists call “positive externalities,” that is, consequences that benefit people other than their owners.

But what problem to do they solve for electric-car owners? That question has been on my mind since my recent visit to Israel, when I drove a Better Place car and experienced, first-hand, one of the obvious drawbacks of electric vehicles: They don’t go very far without refueling. [See my January blogpost, Better Place is alive but not well.] This is a problem not just for Better Place, but for other sellers of pure electric cars, like the Nissan Leaf and the Tesla Model S.

Today, I took a closer look at Better Place in a story for the YaleEnvironment360 website. Here’s how it begins:

If you want to sell electric cars, Israel looks like a great place to start. It’s a small country, with most people clustered around Tel Aviv and Jerusalem. Gasoline costs more than $7.50 a gallon, and oil revenues help support Israel’s Arab foes. So it’s easy to understand why Shai Agassi, an entrepreneur who was born in Israel and made a fortune in Silicon Valley, chose to launch his Better Place electric-car company in Israel, while preparing plans to expand in Europe, Australia, Japan, China, and the U.S.

What’s harder to understand is why things have gone so badly. Better Place, which staked out its position in the electric car market with an innovative battery-swapping technology, has sold only about 750 cars in Israel, while piling up losses of more than $500 million. Agassi was forced out of Better Place in October, his successor as CEO quit in January, and the company has put its global rollout on hold. Better Place needs to raise more money this year, and that won’t be easy, insiders say.

Start-ups often stumble, of course, but Better Place’s woes raise questions that matter to anyone who cares about electric cars and their future in a low-carbon economy. Has Better Place sputtered because of its own mistakes, or are the company’s difficulties a sign of the broader challenges facing electric cars?

As part of my reporting (much of which didn’t make its way into the story) I spoke to executives at General Motors, Nissan, the charging network eVgo and others, to see how electric cars are faring here in the U.S. Last year, Americans bought 52,000 all-electric cars or plug-in hybrids–vehicles, that is, designed to run primarily on electricity, like the Leaf,  the Chevy Volt and the Tesla. That’s about 0.35% of U.S. car sales, which topped 14.5 million in 2012. By comparison, the best-selling passenger car, the Toyota Camry, sold 405,000 units, without, incidentally, the benefit of the billions of dollars in government loans, grants and tax credits that have flowed to the electric car industry. EVs have attracted lots of attention but they have been slow to penetrate the mainstream. [click to continue...]

Better Place is alive, but not well

A Better Place battery switching station

A Better Place battery switching station

I’m driving a Better Place Renault Fluence all-electric car from Tel Aviv to a kibbutz in the northern Negev, about a 60-mile trip. I can’t decide whether to keep my eyes on the road, on the GPS system to make sure I don’t miss my exit or on the data flowing out of my 22 kWh  battery, telling me how much electricity I’m using at any given moment, how much remains and how much, in theory, I’ll have left when I reach my destination. A wrong turn or two, and I could run out of juice–and without an internal combustion engine in the car, a nearby gas station will be no help at all.

Suddenly, I understand “range anxiety.” Breathe slowly and deeply, I tell myself, trying to recall a meditation DVD I’d listened to a few days before.

Eventually, I relaxed and, by the time I’d made it to the kibbutz and back to Tel Aviv, I’d thoroughly enjoyed the trip. The Renault all-electric car ran smoothly, and silently, and it was fun to drive.. The ingenious, fully-automated battery-switching technology that the company has designed to make long-distance driving easier worked (almost) flawlessly. Better Place’s customer service, which I called upon on couple of times, was first-rate.

Having said that, Better Place appears to be running out of gas, er, electricity, well, actually, money and time. That’s a shame. This is a very cool company that set out to change the world. [click to continue...]

What’s the true cost of an electric car?

 

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. [click to continue...]

GM’s sustainability chief: charged up about the Volt

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. [click to continue...]

NRG’s David Crane: straight talk about energy

Washington may be stuck in neutral–or worse–when it comes to climate policy, but NRG Energy and its chief executive, David Crane, are aggressively pushing clean energy.

NRG Energy is investing in nuclear power, solar energy (photovoltaic and utility-scale solar thermal) and electric cars. It’s powering the Empire State Building. It’s even helping to finance off-the-grid solar power in Haiti.

“Washington is not filled with people who are going to lead,” Crane says. So it’s up to business to show the way.

I interviewed David Crane at the State of Green Business 2011 forum in Chicago. He’s always a pleasure to talk to because he’s brimming with ideas and tells it like it is. Based in Princeton, N.J., NRG is a $9 billion a year independent power producer that operates coal, nuclear, natural gas, wind and solar plants.

Here are some highlights from our conversation:

On nuclear power: “Nuclear is the ultimate green solution, if what we are solving for is climate change,” Crane said. NRG wants to build a new 2,700 MW nuclear faciity in Bay City, Texas, next to an existing plant. It would supply enough energy to power 2 million Texas homes. The project requires federal loan guarantees and progress through the regulatory system has been slow.

Despite strong support for nuclear from President Obama, Energy Secy Chu and Republicans in Congress, the U.S. is likely to build no more than two new nuclear power plants in this decade, “which is not exactly a nuclear renaissance,” Crane said. [click to continue...]

CODA electric cars, charging ahead

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. [click to continue...]

Five myths about electric cars

Mary Ann Wright

Today’s guest post comes from three co-authors. Mary Ann Wright is vice president of technology and innovation for Johnson Controls Power Solutions, the largest maker of automotive batteries, including traditional lead acid batteries as well as advanced batteries for hybrid and electric vehicles. Evan Hirsh and Kasturi Rangan are a partner and principal, respectively, with Booz & Company, the big consulting firm.

It’s timely because Nissan has just introduced the all-electric Leaf to the U.S. market, and Chevrolet has introduced its Volt. On a personal note, I’ve been thinking about electric and hybrid-electric cars recently, too, because my beloved Honda Fit was totaled in an accident a couple of months ago. I was attracted to the idea of the Leaf or Volt but replaced my car with a lower-cost 2008 Honda Civic Hybrid–largely because I calculated that I’m unlikely to recoup the added costs of  the battery, even if gas prices rise, because I drive so little (roughly 6,000 miles) a year.

This points to a problem with all-electric cars that the authors highlight below. (See Myth 3) The limited range of electric cars means that they will appeal to customers–city dwellers, those who live in close-in suburbs, people who commute using public transport or work-at-home types like me–who have not not have to drive much each day. But  the higher upfront costs mean that the economics of electrics work better for people who drive a lot of miles.

Consumers want greener, more fuel-efficient vehicles for all the right reasons. Gasoline leaves a carbon footprint. It comes mostly from politically unstable regions, which puts our economic security at risk. Perhaps most of all, it’s become expensive over the last few years, and future prices are unpredictable.

Kasturi Rangan

But is the much-talked about all-electric vehicle (EV) the right alternative? Governments are providing incentives, carmakers are introducing new all-electric models, and the media has generated quite a bit of buzz, giving the impression that the widespread adoption of the EV is a done deal.

Much of the faith in a future of EVs, however, is based on five ideas that have more to do with myth than math. The facts point to a different outcome, especially in the U.S., over the next decade: that the winner of the alternative vehicle sweepstakes will be the gas-electric hybrid – not the all-electric car..

Myth 1 – The desire to go green will drive EV sales

Vehicle buyers want to be environmentally responsible, but they don’t want to pay a lot for it. It’s well documented that the vast majority of people are highly rational when they buy an automobile (typically their second largest purchase after a home). They are sensitive to sticker prices (including taxes, rebates and subsidies) and pay close attention to operating costs, such as fuel and maintenance. They make decisions based on the sum of all those parts – what experts call the Total Cost of Ownership.

In fact, pure electric vehicles, due to the expense of their large batteries, can cost more than twice as much as a comparable internal combustion engine vehicle. The initial price tag is a big deterrent, and the savings in operating costs aren’t enough make up the difference. Although environmental responsibility will drive some sales, mass adoption will come only if the total cost falls much further. [click to continue...]

How electric cars will save you money

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.

Why the “Petro Metro” wants electric cars

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

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. [click to continue...]