PrintNovember 3, 2010
Low Volts, Falling Leafs
As the launch dates for the Chevy Volt and the Nissan Leaf approach, we need to ask how big a role the electric vehicle will have in America's future. Certainly, a great deal of hype surrounds the launch of these new models, but how successful will the Volt and Leaf actually be?
GM has already admitted that it may not turn a profit on EVs for years to come. This is understandable, considering the fact that the typical EV battery costs over $15,000. That fact alone explains much of the cost differential between an EV and a comparable gas-powered vehicle. Unless battery prices come down, EVs will always cost more than conventional models. If they cost more, fewer will be sold. And if fewer are sold, a lower probability exists that they will become profitable.
How many Volts and Leafs will be sold in the foreseeable future? GM assures us that they will be selling "tens of thousands" of Volts in 2011. As for Nissan, the company confirms that a "refundable deposit" of $100 has been received on the first 20,000 Leafs, the total projected sales during the first year.
Taking a conservative figure, one could see U.S. sales of 40,000 EVs in 2011. That would be encouraging, but it does raise several thorny issues. First, as a percentage of overall sales, 40,000 is only about one third of one percent of what vehicle sales were in 2007 during a healthy economy. As such, since the entire EV program is based on the premise that the shift to electrics will reduce carbon emissions and thus lower global warming (a highly questionable assumption to begin with), how much will a 0.375-percent shift to EVs really accomplish? Especially since under CAFE rules, the production of high-mileage electrics will afford car-makers the right to produce more large SUVs and trucks.
Second, how do taxpayers feel about the prospect of continuing to subsidize EVs indefinitely to the tune of more than $7,500 per vehicle? Not counting the billions in stimulus money directed toward new battery technology, charging stations, and other incentives, subsidies for 40,000 cars will cost taxpayers $300 million in 2011 alone. Presumably, the number of vehicles and the amount of subsidy will increase over the next decade. But at a time when Democrats plan to cut Medicare spending by half a trillion dollars, do these subsidies really make sense? Clearly, without subsidies -- a distinct possibility in the era of a GOP Congress that may be less favorably disposed toward alternative energy -- EVs will be less viable.
Just how important are government subsidies to the success of EVs? The $7,500 subsidy brings the purchase price of the Volt down from $41,000 (before taxes and other fees) to $34,000. But $7,500 is only the start. Several states are offering to assist buyers in purchasing home charging stations, and state and federal programs are subsidizing public charging stations as well, at a cost of over $3,000 per station. This may not sound like a lot, but most of these stations are slow home charging stations requiring about seven hours for a full charge. Considering all the money that has been spent, the total embedded cost of the average electric vehicle will be somewhere between $40,000 and $45,000 -- and this for a vehicle the size of a Cruze or a Nissan Versa.
One also has to ask what sources will generate the additional electricity necessary to power a fleet of EVs. At present, those sources are coal (45%), natural gas (25%), nuclear (20%), hydro (7%), and other sources (3%). To a large degree, EVs simply shift the usage of fossil fuels from the tank to the power plant. It's nice to pretend that one is driving around carbon-free ("taking emissions out of the driving experience," as Nissan puts it), but almost nowhere in America will that be the case.
The case for EVs also raises the question of whether the vehicles themselves are really fully electric. The Leaf is. But as GM recently revealed, the Volt will under certain conditions employ a gas engine to directly power the vehicle. This makes the Volt, at least to some extent, a hybrid rather than a purely electric vehicle.
The real future of EVs, of course, depends on demand. Over the long term, no amount of government subsidy or regulation -- short of outlawing the internal combustion engine altogether -- can force their acceptance. As long as a free market exists -- and it still exists to some extent despite all that the left has done to regulate automobile mileage and subsidize electrics -- consumers will buy vehicles that best serve their needs and suit their tastes. If government were wise (ha!), it would get out of the way and allow American car-makers to build the vehicles that Americans want.
No one can really predict how well EVs will do. This is as it should be, since the success of any new product or service depends on the individual choices of hundreds of millions consumers, here and abroad. I suspect that many consumers will find electric vehicles attractive, either because the EV serves their needs or because they wish to believe they drive carbon-free.
For others, the limited range of the EV will make for an insurmountable hurdle. And if and when subsidies are withdrawn, cost may be prohibitive. The truth is that we may be stuck with the internal combustion engine for a long time. It might be wise for the political elite to consider what a remarkable contribution that engine has made to our lives and to stand aside and allow auto companies to focus on making it better.
Jeffrey Folks is author of many books and articles on American culture and politics.
