CCNet – 25 September 2012
The Climate Policy Network
Who Is Killing The Electric Car?
It's Official: Electric Car Subsidies Are A Waste Of Money
And that's the real problem with electric cars: So far, not too many consumers are lining up to buy them. That means electric cars might be doomed -- no matter how much the Department of Energy wants to see them happen. --John Rosevear, Daily Finance, 17 September 2012
Who killed the electric car? This time round, Toyota did. It said today it will not release its proposed mass-market mini e-car, the eQ. The reason: there's no demand for it, not while battery technology is failing to provide comparable range to a tank of petrol. The natural gas boom in the US has seen prices of the fuel plummet, in turn reducing the cost of electricity generated by burning it. The Japanese car maker said today it will release 21 hybrid gas-electric models in its line-up by 2015. --Tony Smith, Hardware, 24 September 2012
Toyota Motor Corp has scrapped plans for widespread sales of a new all-electric minicar, saying it had misread the market and the ability of still-emerging battery technology to meet consumer demands. “The current capabilities of electric vehicles do not meet society’s needs, whether it may be the distance the cars can run, or the costs, or how it takes a long time to charge,” said, Uchiyamada, who spearheaded Toyota’s development of the Prius hybrid in the 1990s. --Yoko Kubota, Reuters, 24 September 2012
The Chevy Volt, once touted as the company's Great Green Future, needs thousands and thousands worth of incentives to move a unit … and even at that, is selling so few that they've temporarily shut down the assembly line where they're made. The company's stock price has been stuck in the low twenties for months--which means, for those following along at home, that if the government sold its GM shares today, taxpayers would lock in a $15 billion loss on the money we gave them. --Megan McArdle, The Daily Beat, 24 September 2012
I think incentives for electric-vehicle buyers are dumb. New reports from the U.S. and U.K. back that view. Two non-partisan government agencies — the Congressional Budget Office in Washington, D.C. and Parliament’s Select Transport Committee — conclude that during the next decade at least, the giveaways will have little impact on sales of plug-in hybrid and all-electric vehicles, or on gasoline consumption and greenhouse-gas emissions. Their main beneficiaries: affluent purchasers who’d buy the vehicles anyway. --Peter Gorrie, Wheels, 24 September 2012
The £11m of public money used to promote electric vehicles is mostly just helping rich Brits buy a second car, a group of MPs said. The Transport Select Committee has published a report questioning the value of spending millions trying to get electric cars on the road, claiming the money is only benefitting a "handful of motorists". "We were warned of the risk that the Government is subsidising second cars for affluent households; currently plug-in cars are mostly being purchased as second cars for town driving," committee chair and Labour MP Louise Ellman said. --Brid-Aine Parnell, The Register, 20 September 2012
The frenzy over shale gas deep under Ohio and other states has the makings of a different kind of rush on the nation's highways. Businesses, cities, metropolitan transit systems and even school districts across the nation are edging toward a switch from diesel and gasoline to natural gas. Converting cars and light trucks to use either gasoline or natural gas is expensive. And heavy trucks designed specifically for natural gas also cost more than conventional diesels. But at current prices, engines that can run on natural gas cut fuel bills in half or better. --John Funk, Cleveland Live, 24 September 2012
For Fiat SpA, Italy's austerity efforts have meant falling sales, stubborn losses and layoffs for thousands of workers. One business, though, has benefited mightily: the division that makes vehicles fuelled by natural gas and propane. Deliveries of those cars in Italy surged 90 per cent, to 114,226 vehicles through August, accounting for 11.6 per cent of the market, compared with 4.9 per cent a year ago. Almost every auto manufacturer that sells in Europe has increased its offerings of natural gas-powered vehicles in Italy, the region's biggest market for such cars. --Tommaso Ebhardt and Craig Trudell, Bloomberg, 25 September 2012
Cheap, abundant natural gas is changing the game for energy in the U.S., and that means a renewed push for natural gas cars. According to Pike Research, there will be a total of 25 million natural gas vehicles on the roads worldwide by 2019, and the amount of natural gas vehicles sold in North America will grow around 10 percent a year between now and 2019. GE estimates there are 15 million natural gas cars globally today, and around 250,000 in the U.S. --Katie Fehrenbacher, Gigaom 18 July 2012
1) Toyota Kills Electric Mini-Car - Hardware, 24 September 2012
2) Toyota Scraps Electric Car Plan - Reuters, 24 September 2012
3) Is the Electric Car Revolution Doomed? - Daily Finance, 17 September 2012
4) Congressional Budget Office: Electric Cars Are A Waste Of Money - Business Insider, 24 September 2012
5) Electric Car Funding: Another Subsidy For The Rich, Say MPs - The Register, 20 September 2012
6) Peter Gorrie: Why Electric Car Subsidies Are A Waste Of Money - Wheels, 24 September 2012
7) A Real Transport Revolution: Natural Gas Fuels Fiat - Bloomberg, 25 September 2012
1) Toyota Kills Electric Mini-Car
Hardware, 24 September 2012
Who killed the electric car? This time round, Toyota did. It said today it will not release its proposed mass-market mini e-car, the eQ.
The reason: there's no demand for it, not while battery technology is failing to provide comparable range to a tank of petrol.
"The current capabilities of electric vehicles do not meet society's needs," said Toyota vice-chairman, Takeshi Uchiyamada, Reuters reports, "whether it's the distance the cars can run, or the costs, or how it takes a long time to charge."
Toyota will instead focus on hybrids, which usefully tap battery power for short-distance travel but have a petrol-burning capability to extend their range. They allow drivers to take advantage of electric power without succumbing to its limitations.
The natural gas boom in the US has seen prices of the fuel plummet, in turn reducing the cost of electricity generated by burning it. Cheaper electricity will increasingly favour plug-in hybrids over other types, and over petrol- and diesel-only vehicles.
The Japanese car maker said today it will release 21 hybrid gas-electric models in its line-up by 2015, 14 of the new hybrids will be entirely new lines. The rest will be Prius derivatives. It said it will offer hybrid versions of all its vehicle families.
The eQ was announced in 2010, the result of its efforts designing the 2008 EV I and 2009 EV II mini e-car concept cars. Toyota said the e-car would go on sale in the US in 2012. It still will, but in numbers too small to be viewed as a true mass-market roll-out
2) Toyota Scraps Electric Car Plan
Reuters, 24 September 2012
Toyota Motor Corp has scrapped plans for widespread sales of a new all-electric minicar, saying it had misread the market and the ability of still-emerging battery technology to meet consumer demands.
Toyota, which had already taken a more conservative view of the market for battery-powered cars than rivals General Motors Co and Nissan Motor Co, said it would only sell about 100 battery-powered eQ vehicles in the United States and Japan in an extremely limited release.
The automaker had announced plans to sell several thousand of the vehicles per year when it unveiled the eQ as an pure-electric variant of its iQ minicar in 2010.
“Two years later, there are many difficulties,” Takeshi Uchiyamada, Toyota’s vice chairman and the engineer who oversees vehicle development, told reporters on Monday.
By dropping plans for a second electric vehicle in its line-up, Toyota cast more doubt on an alternative to the combustion engine that has been both lauded for its oil-saving potential and criticised for its heavy reliance on government subsidies in key markets like the United States.
“The current capabilities of electric vehicles do not meet society’s needs, whether it may be the distance the cars can run, or the costs, or how it takes a long time to charge,” said, Uchiyamada, who spearheaded Toyota’s development of the Prius hybrid in the 1990s.
Toyota said it was putting its emphasis on that technology, an area in which it is the established leader. Toyota said on Monday it expected to have 21 hybrid gas-electric models like the Prius in its line-up by 2015. Of that total, 14 of the new hybrids will be all-new, the automaker said.
Toyota has previously said that it expects to have a hybrid variant available for every vehicle it sells. In a gas-electric hybrid like the Prius, a battery captures energy from the brakes to provide a supplement to the combustion engine, boosting overall mileage, particularly in stop-and-go city traffic.
Pure electric vehicles, like the Nissan Leaf, carry only lithium-ion batteries. Consumer demand for the vehicles has been capped by their limited range and the relatively high cost of the powerful batteries they require.
FAR FROM TARGET
The decision to drop plans for more extensive rollout of its eQ city car leaves Toyota with just a single pure EV in its line-up. The automaker will launch an all-electric RAV4 model in the United States that was jointly developed with Tesla Motors .
Toyota expects to sell 2,600 of the electric-powered sports utility vehicle over the next three years. By comparison, Toyota sold almost 37,000 Camry sedans in August alone in the United States, the automaker’s largest market.
Toyota is also far from its plug-in hybrid sales target. The automaker planned to sell between 35,000 and 40,000 Prius plug-in hybrids in 2012 in Japan. So far it has sold only 8,400, or about 20 percent of its target.
3) Is the Electric Car Revolution Doomed?
Daily Finance, 17 September 2012
It depends on whom you ask:
Year-to-date sales of the electric Nissan Leaf are down over 30%.
Ford had sold just 177 of its electric Focus through August.
At the same time, production of Tesla Motors' hot-looking -- and expensive -- Model S sedan is sold out for months to come.
Meanwhile, the Chevy Volt is selling a bit better lately -- but that's a mixed blessing for General Motors.
How to Lose Money on a $39,995 Sale
Why are improving sales for the Volt a mixed blessing? It turns out that those sales are expensive ones: Reuters recently reported that GM is losing a bundle on each Volt it sells -- despite the little plug-in hybrid's steep $39,995 base price.
While GM took issue with Reuters' math, it's clear that the innovative car isn't a moneymaker for General Motors. With sales of just a few thousand in the best of months, it'll be many years before the car manages to repay its development costs, estimated at over $1 billion.
Now, that's not necessarily a bad thing, at least in GM's view. Like other automakers, GM is looking ahead toward the next decade, when fuel-economy rules will be much stricter. From the General's perspective, the Volt represents an early investment in the kind of technology that GM -- and other automakers around the world -- will need to perfect before those rules go into effect.
There's some validity to that argument. But that hasn't stopped GM's critics from complaining that electric-car technology is turning into an expensive boondoggle.
Will Electric Cars Ever Take Off?
A Washington Post editorial this week took the Volt to task, as part of a larger argument against the U.S. government's subsidies of electric car technology. The Department of Energy said in 2011 that there could be 1 million electric cars on U.S. roads by 2015, but as the Post points out, that's looking pretty unlikely right now.
The Department of Energy's conclusion was based on a study that made some assumptions that look kind of silly now. It expected Nissan to sell 25,000 Leafs this year. But through August, the automaker had sold fewer than 5,000 here in 2012. It also predicted that GM would sell 120,000 Volts this year. The reality: Fewer than 14,000 Volts had been sold through August in the U.S. in 2012.
Both of these cars, like much of the still-emerging U.S. electric-car business, were heavily dependent on government aid. GM's massive bailout is no secret, but some of the other Department of Energy aid programs are less well-known: Among other grants and loans, Nissan received $1.5 billion in low-cost loans to refurbish the Leaf's Tennessee factory, and Tesla got a $465 million line of credit to help get the Model S into production.
And what are taxpayers getting for all that? Not a whole lot.
'Success' for Electric Cars Is Relative
So far, Tesla is the big success story in the electric-car game -- but that success is relative. Tesla has more than 10,000 orders in hand for the Model S, a luxury sedan with the best range in the electric-car business.
That's huge for the Silicon Valley automaker. But it's just a drop in the bucket in terms of the overall automotive market: Tesla may sell 20,000 cars next year -- and it'll be considered a big success if it does -- but that's fewer than half the number of F-series pickups that Ford sells every single month.
That's a long way from the million a year that the government anticipated, and it's a long way from making any sort of difference on the environment.
A Dire Trend
And that's the real problem with electric cars: So far, not too many consumers are lining up to buy them. Eco-conscious drivers still prefer hybrids like Toyota's popular Prius, which can be refueled at any gas station -- and that doesn't seem likely to change soon.
That means electric cars might be doomed -- no matter how much the Department of Energy wants to see them happen.
4) Congressional Budget Office: Electric Cars Are A Waste Of Money
Business Insider, 24 September 2012
The Congressional Budget Office (CBO) did a good job of shredding the electric car industry and the government’s role in its evolution with this report (Link).
I’m not knocking electric cars, I’m knocking DC’s role in this industry. Washington has provided the loot necessary for research on battery design, it has committed to up to $25Bn of soft loans to the auto industry and it is subsidizing every electric car that is sold. Without the massive support from our “rich” Uncle Sam there would be no electric car industry in the USA. The question is, “Is this money well spent?”
The government’s role with electric cars goes back to the 2009 emergency spending program ARRA (American Recovery and Reinvestment Act):
ARRA provided $2 billion in funding to the Department of Energy (DOE) for grants under that program. Of that amount, $1.5 billion was awarded to battery producers, intermediate suppliers for those producers, and recyclers of vehicle batteries; the other $500 million was awarded to manufacturers of components for electric vehicles and intermediate suppliers of that manufacturing.
DOE’s Transportation Electrification Initiative has made commitments for $400 million in grants for demonstration, deployment, and education projects involving electric vehicles. (Party Time!)
I think it’s important to note that the original objective of supporting electric car production was that it was a plain old economic stimulus. This was dropping money from a helicopter in the hope that it (and all the other money) would stabilize a rapidly declining economy. Another motivation for the federal investment/subsidy was that it created a back-door support package for the auto industry that was falling off a cliff back then.
Washington also agreed to provide $25Bn in cheap loans to the companies who make electric cars. So far, $8.4Bn has been committed. The rest of the money will be doled out before 2019. The money is being lent by the Federal Financing Bank (FFB). Because the loans are guaranteed by DOE, there is no risk of repayment to FFB. As a result, the loans are excluded from the calculation of the debt limit. The 25 ‘large’ is all “off balance sheet”. A very neat trick indeed!
Who is getting the billions of soft loans? What are the terms for these advances? From the FFB (Link):
The CBO has concluded that electric cars are not a “smart” choice for consumers. From the report:
Because of differences in vehicle design and technology, electric vehicles cost thousands of dollars more to purchase than conventional vehicles of comparable size and performance.
Okay, the cars cost too much. What does the government do? It subsidizes the inefficiency. It pays a cash incentive for each vehicle sold. The subsidy is based on the size of the battery; it ranges from $2,500 to $7,500. But the subsidy is still not enough to make electric cars competitive:
Given current prices for vehicles and fuel, in most cases the existing tax credits do not fully offset the higher lifetime costs of an electric vehicle compared with those of an equivalent conventional vehicle or traditional hybrid.
The tax credits would still need to be about 50 percent higher than they are now to fully offset the higher lifetime costs of an all-electric vehicle.
I know that someone is thinking that gas prices are going up, and when they do, electric cars will prove to be a smart thing. I’m not so sure. The CBO provided a breakeven on this line of thinking. If gas prices go north of $6, electric starts to make sense. When gas goes to $10, all of the vehicles break even to conventional autos. The problem I have with this line of reasoning is that if gas were to go to $8, the US economy (and the rest of the world) would come to an economic halt. In that environment a fellow would be grinning if he had an electric car, but he would probably be out of work, and most of the stores he would want to drive to would be closed. What good does the electric car create for him if things go very bad? Not much.
There is a final argument that could be put forward in support for the mega investment the taxpayers are making in electric vehicles. The environment. Electric cars are “good” for the environment because they don’t produce CO2 gases, right? Actually, that’s wrong. The conclusion from the CBO:
In the short term, the tax credits are likely to have little or no impact on total gasoline consumption and greenhouse gas emissions.
In the long term, the credits might decrease gasoline use and emissions, but how cost-effectively they would do so is unknown.
DC is on all sides of this mess. It is paying subsidies for inefficient and over priced cars. It is creating free grants to support an uncompetitive product. It is lending very big money (with long maturities and at low rates) to industry players. Please don’t tell me that car companies don’t go bankrupt. These loans go out to 2034.
The CBO had a few recommendations on what to do with Washington’s headache with electric cars. The one that will probably be adopted is this one:
A larger tax credit is needed to make electric vehicles cost-competitive with higher-fuel-economy conventional vehicles.
That’s the solution? It’s just sending more money down a rat hole.
5) Electric Car Funding: Another Subsidy For The Rich, Say MPs
The Register, 20 September 2012
The £11m of public money used to promote electric vehicles is mostly just helping rich Brits buy a second car, a group of MPs said.
The Transport Select Committee has published a report questioning the value of spending millions trying to get electric cars on the road, claiming the money is only benefitting a "handful of motorists".
"We were warned of the risk that the Government is subsidising second cars for affluent households; currently plug-in cars are mostly being purchased as second cars for town driving," committee chair and Labour MP Louise Ellman said.
The committee also accused the government of shoddy record-keeping when it comes to the electric car pot, saying there was no list of chargepoints installed at the public's expense and anyway no-one knows if the plug-in points encourage electric car sales or not.
"The Government must do more to show that its plug-in vehicle strategy is a good use of public money. Carbon emissions from transport must be reduced if the UK is to meet its climate change targets, but public money must be targeted on effective policies," Ellman said.
The scheme offers grants of up to £5,000 to people willing to switch to plug-in vehicles and has set up a network of chargepoints to help electric motorists. The government was hoping to get tens of thousands of the cars on the road by 2015, but the committee found that only 1,052 eligible cars were registered since the programme started in January 2011.
The committee urged the government to sort out the scheme in its report and make sure that a public registry of chargepoints be created with the next six months so folks know where to go and private companies can add their data.
"The Government must avoid creating instability in the plug-in vehicle market through a lack of consistency between departments in their approaches to financial incentives for plug-in vehicles and adopt a more coordinated approach to these incentives across Whitehall," it said.
"We recommend that as part of the next spending review, the Government set milestones for the numbers of plug-in cars it expects to see on the roads so that the success of its low carbon vehicles strategy can be assessed within that spending review period."
Plug-in cars don't just benefit from direct government purchase subsidy: their generally wealthy owners also avoid many governmental charges and levies as paid by ordinary motorists. These include vehicle excise duty (road tax), parking fees, congestion charging and the swingeing taxes on motor fuel.
See also: Electric car grants worth £5,000 'benefit the well off'
6) Peter Gorrie: Why Electric Car Subsidies Are A Waste Of Money
Wheels, 24 September 2012
I think incentives for electric-vehicle buyers are dumb.
New reports from the U.S. and U.K. back that view.
Two non-partisan government agencies — the Congressional Budget Office in Washington, D.C. and Parliament’s Select Transport Committee — conclude that during the next decade at least, the giveaways will have little impact on sales of plug-in hybrid and all-electric vehicles, or on gasoline consumption and greenhouse-gas emissions. Their main beneficiaries: affluent purchasers who’d buy the vehicles anyway.
I’d say the same for Ontario, where, depending on battery size, the government pays as much as $8,500 on the first 10,000 plug-in vehicles sold in the province.
The American incentive is an income-tax credit to a maximum $7,500 that applies to the first 200,000 plug-in units sold by each automaker.
Britain repays 25 per cent of an EV’s price, up to the equivalent of $8,000.
The Budget Office estimates the American program could cost $2 billion to 2019. The theoretical tab for Ontario is $85 million.
Actual outlays should be lower since many vehicles qualify for less than the full subsidy and sales won’t likely hit the programs’ limits by the end of this decade.
(The latest estimate from Pike Research: About 400,000 American plug-in sales by 2020.)
But the real issue is, whatever the amount, the money is wasted.
The incentives don’t move plug-ins, in part because they don’t cover the extra cost of owning most — up to $12,000 in the U.S. — compared with internal-combustion cars. Generally, the bigger a plug-in’s battery, the more added expense.
The incentives also don’t overcome concerns about reliability, and in the case of pure EVs, range.
With so few plug-ins on the road, and some still burning gasoline while none is free of carbon-dioxide emissions, they’ll account for only modest reductions in fossil-fuel consumption and greenhouse-gases, the reports agree.
That means, the Budget Office says: “In the short term, the tax credits are likely to have little or no impact. . . . In the long term, the credits might decrease gasoline use and emissions, but how cost-effectively they would do so is unknown.”
Regulations that require substantial fuel-efficiency gains by 2016, and tougher proposed standards for 2025, could further weaken incentives’ impacts.
As gasoline burners get more efficient, plug-ins’ cost disadvantage grows.
And if plug-ins succeed, they could simply put more gas-guzzlers on the road. “Automakers … are expected to produce a mix of vehicles that, on average, meets the standards but does not significantly exceed them,” the Budget Office explains. “Consequently, the more electric … vehicles that are sold because of the tax credits, the more low-fuel-economy vehicles that automakers can sell and still meet the standards.
“Therefore, putting more electric … vehicles on the road will produce little or no net reduction in total gasoline consumption and greenhouse gas emissions.”
Even worse, the Budget Office says 70 per cent of plug-in sales would happen without incentives, so “only about one-third of the credits will produce energy or environmental benefits.”
That figure also suggests the incentives mainly redistribute money upward.
Sure enough, the British report suggests most plug-ins go to affluent households as second vehicles for urban driving and the U.S. system seems designed to ensure a similar result. Since the incentive is an income-tax reduction, only those who owe the Internal Revenue Service $7,500 or more can get the full amount. That, the Budget Office says, is just the top 20 per cent of tax-filers. Only 40 per cent owe sufficient tax to receive the minimum credit, $2,500.
“Most purchases of electric vehicles,” it states, “will probably be made by people who have enough tax liability to apply the full value of the tax credit.”
So, scrap the incentives.
7) A Real Transport Revolution: Natural Gas Fuels Fiat
Bloomberg, 25 September 2012
Tommaso Ebhardt and Craig Trudell
For Fiat SpA, Italy's austerity efforts have meant falling sales, stubborn losses and layoffs for thousands of workers. One business, though, has benefited mightily: the division that makes vehicles fuelled by natural gas and propane.
Deliveries of those cars in Italy surged 90 per cent, to 114,226 vehicles through August, accounting for 11.6 per cent of the market, compared with 4.9 per cent a year ago. That's good news for Fiat, which says it has 90 per cent of the market for natural gas cars and 47 per cent of the propane car market in its home country.
The boom takes some of the sting out of the 20-per-cent plunge in the Italian car market, to its lowest level in more than 30 years. Fiat is determined to export its advantage to the United States, where regulatory changes are poised to boost interest. The spread of natural gas and propane vehicles is critical for Fiat, which has been developing the technology since the 1990s, because it doesn't have an advanced electricvehicle strategy.
Almost every auto manufacturer that sells in Europe has increased its offerings of natural gas-powered vehicles in Italy, the region's biggest market for such cars.
"The competition is higher as every carmaker is now trying to surf the wave," said Daniele Chiari, Fiat's head of European product planning.
"We want to strengthen our leadership with new models," such as natural-gas versions of the Panda city car.
Under new U.S. rules, automakers receive an incentive to sell naturalgas-powered vehicles. The changes boost Fiat CEO Sergio Marchionne's plan to install the technology in Chrysler Group LLC vehicles.