CEOs endorse 'foothold strategy' for electric cars

November 16, 2009 9:42 AM PST
CEOs endorse 'foothold strategy' for electric cars
by Martin LaMonica

A group of CEOs on Monday came out favor of a regional roll-out of electric vehicles in up to eight cities to demonstrate the viability of the technology and incubate the fledgling industry.

The Electricifcation Coalition held a press conference in Washington, D.C. and released an Electrification Roadmap, which prescribes the business and policy steps required to ramp up electric vehicle adoption.

There are 13 members of the coalition, including the CEOs of Nissan Motor, FedEx, Pacific Gas & Electric, and battery maker A123 Systems. The coalition was spun out of Securing America's Future Energy, a lobbying group focused on reducing U.S. imports of oil.

Photos: Plug-in vehicles in Motor City
The Electrification Coalition argues that light-duty electric vehicles are the only technology that can cut oil imports and reduce carbon emissions in the near term. Its report (click for link) focuses on what's required to make electric cars available at large scale.

"I think we have the conditions for the mass market. But it's going to take more time," said Carlos Ghosn, the president and CEO of Nissan. "The investments to be made are huge. To make 50,000 batteries is a $250 million investment."

Of all the major automakers, Nissan is the most bullish on electrification. It is releasing an all-electric family sedan called the Leaf in the U.S. and Japan next year. It projects that 10 percent of new cars sales in 2020 will be electric, which is higher than most analysts' projections.

The shift presents challenges to auto makers that are unsure of consumer acceptance. Utilities and municipalities need to prepare in order to make these vehicles more consumer-friendly but they, too, are unsure what the volume of sales will be.

To take some uncertainly out of the picture, the Electrification Coalition advocates a "foothold strategy." Six to eight cities would create a number of incentives for electric vehicles, such as preferential parking and public charging stations. They would apply for government incentives and then test out the system to help bring electric cars to "critical mass," explained David Crane, the president and CEO of power generator NRG Energy.

In the first phase, the plan calls for getting 50,000 to 100,000 light-duty plug-in vehicles on the road per year in certain areas starting next year and then expand to 25 cities. Its report sets a target of having 25 percent of new vehicle sales be plug-ins by 2020, which is 5 million vehicles. A jump to 90 percent of new vehicle sales being plug-ins by 2030 would represent roughly 17 million units, according to data from consulting company PRTM Analysis.

For consumers, batteries should be owned and financed separately from the car itself, Crane said. Because batteries are an expensive component that makes it more expensive than a comparably-sized gasoline car, auto makers, including Nissan, are looking at ways to keep monthly car payments roughly the same by leasing batteries.

Governments around the world have established financial incentives for electric vehicles because it improves national security and addresses environmental problems, Nissan's Ghosn said. He noted that France, the U.S., and Japan each have established a tax credit of about $7,500 to consumers who buy an electric car.

In addition to federal tax credits, the coalition endorses incentives for municipalities dedicated to bringing in electric vehicles. Also required is technology to allow consumers to charge at off-peak times.

Speakers at the coalition launch also underscored the economic reasons for which governments are pushing electrification. Reducing oil imports would mean that billions of dollars of U.S. wealth would stop being exported, said Crane.

Government programs to drive investing in electric vehicle manufacturing also help the U.S. auto industry adapt to emerging technologies.

"We can do this. This is something we have the ingenuity for--we have enough innovation. What we need to do is capture that and use that to our advantage to build factories," said David Vieau, the CEO of A123 Systems.

(Credit: Electrification Coalition) Updated at 11:40 a.m. PT with corrected figure for sales projections.

Martin LaMonica is a senior writer for CNET's Green Tech blog. He started at CNET News in 2002, covering IT and Web development. Before that, he was executive editor at IT publication InfoWorld. E-mail Martin.

Topics: Policy, TransportationTags: Plug-in electric vehicles,PHEVs,Electrification CoalitionShare: Digg Del.icio.us Reddit Yahoo! BuzzFacebook

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Study boasts the uses of aluminum over steel Add a Comment (Log in or register) (13 Comments) prev 1 next by sartor1 November 16, 2009 10:12 AM PST
"(Nissan) . It projects that 10 percent of new cars sales in 2020 will be electric, which is higher than most analysts' projections."

Only 10 percent? I was hoping to see 50 pct by then, as well as the demise of OPEC!

Like this Reply to this comment by Hernys November 16, 2009 7:04 PM PST
I don't get it either. Most battery designers predict at least doubled battery capacity and halve the per KWh cost for batteries in ten years. At that price and range, electrics would be price and range competitive with cars for well over 25% of the fleet. Add to that the fuel savings, the ecological impact, the higher reliability and better performance of electric cars (especially those that will be available at the time), it makes no sense that only 10% of their sales will be electric.
I'm betting 10% of OVERALL car sales by then will be electric, and that's including markets and formats that do not work well with electrics (such as freighters). By 2015, over 50% of sales should be electric. Unless every single battery development front stagnates for ten years, it makes no sense at all that their estimates are so low.

Like this by aka_mythos November 16, 2009 10:43 AM PST
Corporate ownership and your leasing or financing your cars' battery has advantages but most of them are enjoyed by the corporation. First it will cost you more and you'll likely see an interest payment tied to it. Allowing them to apply what becomes an open ended cash flow from the consumer. With batteries being as expensive any deal involving them would likely tie the vehicle purchaser down with many of the same sorts of limitations placed on individual leasing entire vehicles, ie max milleage or recharges per week. If consumers don't outright own it they're will be limitations. If you thought having to get an IPOD's battery replaced this will be worse.

Like this Reply to this comment by Mergatroid Mania November 16, 2009 11:25 AM PST
What you say makes sense. If I was interested in purchasing an electric vehicle at the moment, and found that I would have to lease the battery, and that even after the vehicle is paid off I would still have to make payments to the battery company, well lets just say this would be a deal breaker.

I'm not interested in leasing my batteries or paying a contract ala cell phone companies. I'm a big booster of electric vehicle tech but this would be a good way to get me off side.

A better way would be to make the batteries swappable, and every time you swap a battery for a fully charged one, then they could charge me a fee. Since my out-of-town trips are few and far between, I could see going many years before I would need a battery swap.

For people who do a lot of long distance driving, perhaps a hybrid would be a better choice unless they can get service stations along highways to tool up for the battery swaps.

Like this by dbargen November 16, 2009 11:09 AM PST
*It's the product, stupid.*

The "foothold" strategy is a tired method in my area- tried and failed, that is. I've got a feeling any such trials with electric cars are going to run into similar, if not worse, problems around here.

'Smart' cars have been selling out of a dealership not 3 blocks from where I sit for the last couple of years. In this timeframe, the only cars of this type you see driving anywhere within 100 miles of our metro area are merely mobile advertisements for local businesses. I can think of seeing less than 10 of these models being driven that didn't have decals plastered up one side and down the other.

The cars are advertised, they have their 'foothold' in the area, but why hasn't there been any real growth? They lack the features that customers want in a vehicle. Their passenger and cargo capacity is too small, they sit *very* low on the road, and their little tires make them next-to-useless during snow or rain. Despite their excellent construction techniques, people are leery of driving them on the highway. Not to mention, for as little as you get, the price seems quite high.

Electric cars, as the ones pictured above, would face some of the same problems. They're smaller, can't range as far, and face the additional hurtles of no on-the-road infrastructure for recharging, and being prohibitively expensive for people who want a smaller car.

As far as I can tell, electric recharging stations have made their way into a few heavily-populated parts of europe. Small size isn't an impediment there as well as gas being far more expensive, people don't travel as much, and you know that if there was any place on earth that would use gov't subsidies for a product like this, it'd be there, but there's been no growth their either. Sales are actually down last year over the year previous (so don't go blaming our global recession). Europe has their foothold, and it's grinding down to the last toenail.

I put all of this out there to say just because you have a foothold, especially an artificial one, doesn't guarantee success. For these reasons, I'd call that 10% wildly optimistic.
Like this Reply to this comment by Mergatroid Mania November 16, 2009 11:34 AM PST
I think they're counting on fleet sales to begin with. Delivery trucks and cars, company vehicles, taxis, commissionaires, and other such vehicles.

I see a lot of hybrid vehicles in my home town right now. All those I mentioned plus consumers. This would be just a start to get all the infrastructure built. After that's done I'm sure we will see consumer sales pick up.

Some of the hurdles you mention can be overcome.
The range will be extended, and most people don't need that much range on a daily basis. The infrastructure will be built to accommodate the fleet vehicles so it will be there by the time consumers start purchasing. The cost could be addressed by government subsidies or a levy on gas hog vehicles to subsidize electrics.

It will all work out eventually.
Like this by Mr_fleabite November 16, 2009 12:28 PM PST
I think the Nissan Leaf is supposed to go 100 miles on a charge 100% electric. (if that's hwy, city, or a combination I don't know).
As far as charging stations go, its a bit of the cart before the horse. Why would someone build a facility that would see little use currently (no pun intended), as more EV's hit the road the recharging stations will come (whatever form that may be).

Like this by Hernys November 16, 2009 7:10 PM PST
You are generalizing based on A SINGLE PICTURE???
Electric cars don't have to be small. Or ugly. Most new designs are for either mid size, pleasantly looking cars or high end sports cars.
The reason most electric cars already in the market are small are because they were using NiMh batteries which had low capacity, and because the same people that would prioritize the environment enough to pay more for an electric car are those that see larger cars as a waste of space and energy. But as the cars become mainstream that will no longer be the case.
See it this way: if someone offers you a car that uses no gas, costs about 20% to run as your current car, has better performance, better driveability, similar range, better reliability and generates zero pollution, all at the same price as an equivalent gas powered car, why would you chose the later? And the point here is that what I say is going to happen in the next ten years. The "foothold" strategy is just a tool to accelerate adoption, but it is not required for availability.
Like this by J5Chicago November 16, 2009 11:12 AM PST
I wonder if car companies are thinking in terms of Moore's Law when they are designing the future of electric vehicles? I guess what I'm saying is, base the car of tomorrow on the technology of tomorrow, not the technology of today. Batteries get smaller, lighter, less expensive... just look at laptops from the past 10 years or cell phones. Smaller batteries. Better batteries.
Like this Reply to this comment by Renegade Knight November 16, 2009 11:14 AM PST
The tried and true strategy is to sell cars that people want. The Prius sells well. You can also turn it into a plug in hybrid with an aftermarket kit.

Automakers have the ability to make these a lot more affordable but I've not seen one propose even once the simple solution that would do it. Sell the batteries that folks need as an optional upgrade. Got a 2 block commute? You don't need much battery and can get the "small" battery upgrade. Got 20 mile commute, you may want the high capacity upgrade.

They do this for laptops, they could do this for cars.

Like this Reply to this comment by tjrieves November 16, 2009 4:18 PM PST
Anyone remember back in the 90's when GM introduced the electric car in California, and then the oil companies sued GM for some asinine reason pertaining to the fact that the car didn't need gas? Then in court the oil companies got an unlimited amount of time to speak, but GM (I think, please correct me if I'm wrong) was only given about 4 minutes to speak. Maybe it was the people protesting the destruction of the cars.

Like this Reply to this comment by cjburl November 16, 2009 6:42 PM PST
GM was on the side of the oil companies. Somehow their electric car program got away from them and produced a viable product even though they thought it would fail. Once things got close to being successful they scuttled it with help form the oil lobby. It was the environmentalists that got the short end at the hearing in California. In the end we had a viable electric car model moving forward a decade ago before legislation requiring increased fuel economy standards was dropped in favor of hydrogen. In the next few years Tesla will have a sedan to match its roadster which will be more accessible to the masses. I say that GM and the lot has brought this onto themselves and no more taxpayer money needs to be spent to seed for profit businesses who continue to spend millions on developing new combustion engine models. Get with the program big 6 or someone will provide a solution and obsolete all of you. One more thing to note, the government provided funds to the US automakers to produce hybrids in lieu of raising emissions standards and they did squat with it. It did however scare Honda and Toyota enough that we now have the Prius, Civic and Insight Hybrids while they have nothing to compete.
Like this Reply to this comment by flathead50 November 16, 2009 7:43 PM PST
The cost of ownership will need to be comparable to the cost of current gasoline vehicles. There are many other expenses of maintaining your gashog: regular oil changes, transmission service/fluids, antifreeze/coolant, sparkplugs, etc., that will be unnecessary for an all-electric drivetrain. Plus, add the cost of the gas at the pump. Battery expense will need to be somewhere in the ballpark of these additional expenses. I believe that will be doable if they price the batteries correctly. As to needing "charging stations" around the area you drive: consider that the only infrastructure needed is an electrical outlet capable of accepting a charge cable. It would most likely resemble a RV hookup. Owners could have a plug installed near their home parking spot. Remote stations could easily have coin or credit card operated outlets scattered in parking lots/garages. I believe Walmart already has hookups fro RVs in their parking lots. Malls, employers, roadhouses, Burger King, Borders Books, etc. could have special parking spots next to the handicapped stalls. It CAN happen. It is not rocket science!