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How the Stimulus Revived the Electric Car

The Obama administration helped build an American electric car and battery industry. The question is: Will it last? From ProPublica reporter Michael Grabell’s new book on the stimulus, Money Well Spent?

Rodney Smith cleans on a new Think electric car at the Magnum Drive plant in Elkhart, Ind., on Dec. 20, 2010. (J. Tyler Klassen/The Elkhart Truth/AP Photo)

This story was adapted from "Money Well Spent?: The Truth Behind the Trillion-Dollar Stimulus, the Biggest Economic Recovery Plan in History," which will be published Tuesday by PublicAffairs.

 

A common criticism of President Obama's $800 billion stimulus package has been that it failed to produce anything – that while the New Deal built bridges and dams, all the stimulus did was fill some potholes and create temporary jobs.

Don't tell that to Annette Herrera. She was 50 when the auto supplier she worked for in Westland, Mich., closed its factory and moved the work to Mexico. Then, after being unemployed for 2½ years, she got a job in October 2010 with A123 Systems, which had received $250 million in stimulus money to help open a new lithium-ion battery plant in nearby Romulus, Mich.

"The first thing I did was call my husband and tell him, 'You're never going to guess! I got a job!'" Herrera recalled. "And then it was like celebration time."

One success the Obama administration can duly claim is the rebirth of the electric-car industry in the United States. Automakers have unveiled a number of mass-market electric cars, which have seen small but rising sales. Battery and parts manufacturers are building 30 factories, creating thousands of new jobs. A123 has hired 700 workers at Herrera's plant and a second one in nearby Livonia, and plans to hire a couple thousand more people over the next few years.

If it wasn't for the stimulus, the companies say, they would have built these plants overseas.

It was all part of an effort to promote "green" manufacturing and put a million electric cars on the road by 2015.

The question is: Will it last?

Elkhart, Ind., once believed it would. It saw electric vehicles as its salvation after watching its unemployment rate hit 20 percent. Eager to seed a new industry, the county witnessed electric-vehicle ventures sprout out of nowhere as the stimulus took off in 2009.

But by late summer 2011, what had sprouted were weeds. The parking lot of the Think electric-car plant was full of them, some more than a foot high growing from the cracks. Out front were two pickups and a motorcycle.

Hundreds of laid-off factory workers were supposed to have found jobs churning out the Norwegian company's bug-like, plastic-bodied cars, which ran solely on electricity.

Today the Elkhart factory employs two. Its parent company filed for bankruptcy in June. Its largest shareholder and battery maker, Ener1, which received $118 million in stimulus money, did the same last week.

A second life

Electric cars began appearing on California roads in the mid-1990s after state regulators mandated that a certain percentage of automakers' fleets include zero-emissions vehicles.

But within a few years, they were deemed a failure by car companies, which stopped making them and took back those they had leased.

Much had changed in the eight years leading up the stimulus package. The lead-acid and nickel-metal hydride batteries that weighed as much as 1,200 pounds were replaced with lithium-ion batteries that weighed as little as 400 pounds.

In the early 2000s, gas hadn't even passed $2 a gallon. Less than a decade later, it was twice that. Toyota had proven the demand with its long waiting list for the Prius hybrid.

Government policy had changed, too, with a 2007 energy bill that increased fuel-efficiency standards and provided $25 billion in loans for automakers to upgrade their plants.

But until the economic stimulus package was passed in 2009, the manufacture of electric cars and their batteries in the United States was nearly nonexistent.

The United States had only two factories manufacturing less than 2 percent of the world's advanced batteries. Most were made in Korea and Japan. In America, only Tesla manufactured an electric car — which sold for a cool $100,000. Across the entire country, there were a mere 500 electric charging stations.

But as the stimulus kicked in, there was suddenly no better environment for the electric car to thrive.

With more than $2 billion in federal grants, matched by another $2 billion in private investment, the Obama administration was supporting electric cars from the mine to the garage.

Chemetall Foote Corp., which operates the only U.S. lithium mine, received $28 million to boost production at its plants in Nevada and North Carolina. Honeywell received $27 million to become the first domestic supplier of a conductive salt for lithium batteries. More than $1 billion was spent to open and expand battery factories, many of them in hard-luck towns across Michigan. Through a separate federal program, automakers received loans to retool their assembly lines.

Customers could receive a $7,500 tax credit for buying an electric car. The stimulus provided funding for 20,000 electric charging stations by 2013. In many cities, drivers could get a home charger for free.

Although electric cars would not make up for the generation-long loss of manufacturing jobs, at least not yet, it was novel to see companies creating jobs in the Rust Belt instead of outsourcing them.

In July, Johnson Controls opened the first U.S. factory to produce complete lithium-ion battery cells for electric vehicles. Compact Power is building a $300 million factory in Holland, Mich., to produce batteries for the Chevy Volt and the electric Ford Focus. A123 now supplies the luxury electric carmaker Fisker Automotive and the manufacturers of electric delivery trucks used by FedEx and Frito-Lay. "Quite simply, if we didn't get that grant, we wouldn't have built [the factory] in the U.S.," A123 spokesman Dan Borgasano said.

The battery grants have created and saved more than 1,800 jobs for assembly workers, toolmakers and engineers, according to a ProPublica analysis of stimulus project reports filed by the companies. That number doesn't include the workers who constructed the plants or those hired by the matching private investment the companies had to make to get the grants.

Killed again?

The problem: Consumers have been slow to embrace the electric car.

The price of the battery is still too high, and the price of gas is still too low, the Government Accountability Office warned in June 2009 before the grants were awarded. The starting price for the all-electric Nissan Leaf is $33,000, while the hybrid Volt sells for about $40,000 before tax credits — far more than many middle-class families can afford.

About 40 percent of drivers didn't have access to an outlet where they park their vehicles, the GAO noted.

"Although a mile driven on electricity is cheaper than one driven on gasoline," the National Research Council reported, "it will likely take several decades before the upfront costs decline enough to be offset by lifetime fuel savings."

Perhaps the biggest obstacle, though, was what the automobile represents in the American psyche: the freedom of the open road. While most people drive less than 40 miles per day, consumers want cars that they can also take on summer vacations — and they don't want to have to constantly worry about looking for a charging station.

The Leaf's range is just 73 miles, according to the official government rating, well below the much-advertised 100 miles.

By the end of 2011, fewer than 18,000 Leafs and Volts had been sold in the United States.

A report by congressional researchers last year concluded that the cost of batteries, anxiety over mileage range and more efficient internal combustion engines could make it difficult to achieve Obama's goal of a million electric vehicles by 2015. Even many in the industry say the target is unreachable.

While the $2.4 billion in stimulus money has increased battery manufacturing, the congressional report noted that United States might not be able to keep up in the long run. South Korea and China have announced plans to invest more than five times that amount over the next decade. Even A123 had to lay off 125 workers in November — though Borgasano says the company plans to rehire them all by June — because Fisker reduced orders.

Dick Moore, the mayor of Elkhart, had hoped the area known for its recreational-vehicle factories would one day be not just the "RV Capital of the World" but the "EV Capital of the World" as well.

Navistar International had received $39 million in stimulus money to build 400 electric delivery trucks in the first year. But by early 2011, it had hired about 40 employees and assembled only 78 vehicles.

Think had rallied into 2011 with plans to start production in Elkhart earlier than expected. But in April, assembly work suddenly stopped as the plant awaited parts from Europe.

In June, Think's parent company filed for bankruptcy. The decision left the Elkhart plant slouching toward extinction until the American subsidiary was purchased by a Russian entrepreneur who promised to restart production in early 2012.

But on Thursday, its battery maker, Ener1, also filed for Chapter 11 bankruptcy, reporting that the demand for electric vehicles "did not develop as quickly as anticipated."

Elkhart's dream of becoming the EV capital?

Moore put it this way: "The fact that this hasn't moved very quickly, that doesn't bode well for that idea."

The future

The fate of the electric car depends greatly on whether sales take off soon.

There are other factors, such as the price of gas and whether Congress approves proposed standards requiring automakers to raise the average fuel economy of their vehicles to 55 miles per gallon by 2025.

The electric car has always struggled with a chicken-and-egg dilemma: Automakers have been reluctant to build electric cars without consumer demand. But consumers won't buy them until automakers develop cheaper, longer-range batteries.

One of the goals of the ongoing stimulus spending is to solve this problem. By 2015, the 30 battery and component factories will be able to produce 40 percent of the world's batteries, according to the administration.

The investments would help manufacturers increase the batteries' life from four years to 14 and cut their cost from $33,000 to $10,000, the administration said in a report on innovation. That would make the electric car more competitive.

Herrera noted that many people at the A123 factory believe they will never be able to afford the cars powered by the batteries they make. But, she says, "you never know."

"When the flat-screen TVs first came out, they were way expensive, and now they're reasonably priced," she said. "I think that's going to be the same thing with electric automobiles. This is a new product. It's going to take time."

That third-to-last paragraph is the key, here.  Right now, the car companies seem to be playing a zero sum game:  We won’t be spending money on gas, so they want that money.  It amounts to a premium for people who care more about their environmental impact (neglecting how electricity is made) than their budget.

Which is great for them, but impossible for me.

Figure the difference in price is fifteen to twenty thousand dollars, roughly double the price of an internal combustion automobile, even though there are fewer moving parts.  Picking the lower price and assuming four dollars per gallon of gas, the electric car doesn’t pay for itself until you’ve bought four thousand gallons.

For my car (a fifteen-year-old Volkswagen), that’s a fifteen gallon tank and I go about three weeks if I let the tank empty out completely, translating to about seventeen complete fill-ups in a year.  That means that an electric car saves me nothing for more than fifteen years, assuming it lasts that long, electricity is magically free, and I’m not charged any interest on the purchase for not having 30K cash on hand.

The math is going to be different depending on your commute, but especially considering that we subsidized this (meaning it should be partly paid for already), it’s an insane price no matter how you slice it.

At ten thousand, though, the fuel savings pay for the car in about ten years.  By contrast, that’s a good deal (nearly free), as long as the car can last about that long.

“This is a new product. It’s going to take time.”

Uh,no. Electric cars have been around since the 1890’s. Thomas Edison was building electric cars. There has been plenty of time to make them work.

Where does the electricity come from to recharge the batteries? Does its production and transmission cost less (monetarily and environmentally) than the gasoline not otherwise used? Has this been publicly discussed?
pavellas.com

Here is the key statement in the article. “While the $2.4 billion in stimulus money has increased battery manufacturing, the congressional report noted that United States might not be able to keep up in the long run. South Korea and China have announced plans to invest more than five times that amount over the next decade.”
That’s how China killed off Solyndra the company with better technology than that being produced in China. It’s the WalMart strategy.

I can name a number of area’s where the ‘stimulus’ money helped the economy for short and long term, saving in the long term money especially in government, like the Veterans Administration, but you can take a look at that and plenty more at Recovery.gov unless you pray at the alter of FOX not news, can’t help ya there you’re already to far gone as witnessed in speak and replies online.

Add to my previous, if the 1% grossly wealthy had been following the con o0f ronnynomic capitalism, extremely small ‘c’ on that, there wouldn’t have needed be a stimulus let alone in alternatives, which they helped kill along with the special interests some forty years back when we started down that road, I was installing or on jobs where it was then, leaving it till now and the loss of the trades to the China’s of the other world, who once envied what we were building, who now lead and we’re not even racing to catch up thanks to the so called free market mentality of the repubs and their obstruction after they collapsed what was forecast long back that same economic fallacy of growth for everyone!!

Todays failures lead to tomorrows success. this is a real area of need and americans have to instantly reject the Idea of overnight wa-la it’s here!
The question is, what are we willing to give up now for a future free of our dependance on foriegn countries. that would include all countries including our canadian friends.
thanks for reading

The easiest way to ensure the survival of the electric car is to extend Big Oil’s monopoly to include all forms of power generation.

Of course, the additional access to the American consumers’ - to include industry’s - pocketbook and consequential massive increase in the nation’s cost structure on top of rigged currency exchange rates offshore would be the end of America once and for all.

Not that that probable outcome would deter Big Carbon and the Republicans who represent them; it certainly hasn’t to date.

lawrence Marcus

Jan. 31, 2012, 12:50 p.m.

Yes but edisons battery technology was really poor and we didnt even have a highway system then, it has just become feasible now. The Chinese and Japanese governments subsidize their electric car industry because they arent as short sighted as those people in washington.

This was similar to the situation the US was in in the 90s under Clinton when the US realized it had to make its own chips rather than rely on Japan…......then Intel got some bucks and the rest is history. You have to have government support for emerging industries or they will fall flat or sometimes in this case industries which are vital but need support.

Republicans dont understand any of this and they only understand short term gains LOL


Dont worry about the load on the power networks, there is a govt subside for this as well…....its lawrence livermore LLNL and the LIFE project which has been funded for 50 years and now because of this we can replace coal and nuclear with fusion plants, yes not science fiction but Science and making the parts here has already created thousands of jobs….. however darpa too got several million dollars to create high power batteries that are compact and because of that investment lithium will be replaced in a few years with better alternatives…..........

The list goes on but you have to understand that cooperation between govt and industry and universities has yielded our greatest successes

Take for example the proximity fuse (check that out on Wikipedia)

RIght now we could have the economy recover faster if a few republicans would let Obama spend another trillion. sounds dangerous but really most people dont understand that govt spending pulls you out of a recession fast We can cut later, how about the defense budget?

On the other hand Obama cut Nasa which you really need to work with industry to get the ion engines we need for exploration. Next year the Vasimir Ion engine will be tested on the space station and will allow a fast trip to mars and back, all it takes is getting out priorities straight. Boeing has a xenon based ion engine being used already in satellites and the Air Force has a smaller better shuttle but wont let us civilians use it, so sometimes you have to give the military money so the technology will reach us. Complicated picture but we just need someone at the top who gets technology which will pretty much rule out any of the candidates….............


Guess people here and in congress still dont get it….......well its okay they all failed science in school anyway which is what you get when you put lawyers instead of engineers in charge.

Nothing more than a wealth transfer exercise:

Take a hundred million dollars from taxpayers and give it to the government. The government will spend it, and in the process, sustain and create jobs. How many? Let’s say, [A].

Allow taxpayers to retain the one hundred million dollars. They will invest and spend it, and in the process, sustain and create jobs. How many? Let’s say, [B].

If [A]>[B], then we should give government virtually all of our hard earned wages. The Soviet Union was run on the basis that [A]>[B]. Case closed.

As [B]>[A], as is always the case, we must only give so much of our hard-earned wages to government as are needed to support essential services, both at Federal and State level. (Shrinking the size of government at Federal level, only to expand it at State level accomplishes nothing.)

Side note: When the government borrows money, it might create jobs, but the impact is temporary and illusionary, because future tax revenues applied to interest payments and debt redemption will hamper job growth. Deficit spending, especially on a sustained basis, is highly immoral, but by the time our children and grandchildren come to recognize the immorality of the debt burden that they have inherited, it will be too late. The culprits will be dead and buried. Their only legacy: mountains of debt.

Now for an example, to illustrate the point, but I am not going to mention the name of this country. In the past, when I have mentioned the name, people without any proper rebuttals, always drag up some irrelevant fact about the country’s social policies or whatnot.

This country became independent about 45 years ago, at which time it had per capita income of $600, below that of Guatemala. The country’s economy grew on average at 9% p.a. since then. Today, it is the 4th wealthiest country in the world on a per capita basis, with GDP per capita of approximately $50,000 – no need to debate welfare or entitlement programs in such an economic environment. The country has no natural resources. Government spending is equal to about 12.5% of GDP. The highest individual tax rate is 20% and the corporate tax rate is 18%, but many US corporations have relocated their manufacturing facilities to this country and, consequently, enjoy a tax holiday. The unemployment rate is below 4%. The government runs a budget surplus. Its leaders are the highest paid politicians in the world – now that’s an incentive for the likes of Gingrich and Santorum.

Job Creation 101: Limited government and low taxes.

I want to point out something that wasn’t mentioned in the article: the new Mitsubishi electric car that costs between $21-22,000, and the braking system of the car recharges the battery. They’re being made in the U.S., too, so they’re putting American workers to work. I think that’s less than $400 per month over five years, depending on the interest rate. I plan on buying one.

also..One of the reasons so many companies go belly up is the management..A good Idea created..A flow of money, a new “new super building”..A union with all the bells and whistles.
Hate or love Bill gates of Microsoft.( or Microsoft). created a stock option plan for himself, with actually no salary. Many persons got very rich and still do under his plans. went into a small town, bought land for next to nothing and built a campus based on sales, not projected future growth.
this is one of the problems with these start up companies in new technology..A huge new building when so many sit empty..Salaries that would blow your mind away…overpaying employees who will gladly take what is given but would rather just have a job with reasonable pay and options. It actually isn’t china, if the pressure is kept on with-in ten years no will be buying their products unless of better quality; we can change that.
We actually need the goverment(use) to keep an eye on our investments…any common since business person would?..what we have forgotten is the goverment is us. the People!
the stimulas relief package has been made a bad taste by all. A lot of companies have sprung up, people and dying companies saved. not enough but some.

that car company with weeds 2 ft high could be revived. but look at the body on the car..they might have had the greatest projection of a battery system for a vehicle but what person would really want to purchase such a poor family designed mover.
Every curve needs to be covered, if your plans don’t fit the needs do research and find another use for your product.
I’m a believer in Atomic energy..It would seem so are many republicans and democrats, and americans? But if you were the president would you push for if the states say, love the thought but you can’t even cross my state with spent materials much less bury it here?
I have always wondered about atomic powered cars and heavy duty equipment?..Perhaps not the best time but that is what I’m saying, one step, For sure not an overnighter.
thanks again for reading

Bill wrote: “We actually need the goverment(use) to keep an eye on our investments…any common since business person would?..what we have forgotten is the government is us. the People!”

We already have a billion dollars a year government agency, the SEC, regulating the financial markets and it is a total failure. The SEC protects stock option plans (Bill Gates, an honest soul, never accepted options), a scheme that entails a massive transfer of wealth from the retirement funds of middle-class Americans to the corporate elite. All the financial institutions (mutual funds etc), investment bankers, investment advisers, all the folk regulated by the SEC participate and benefit from this scam.

Government regulations jury proof these hucksters. Since the Lehman collapse nobody has gone to jail, other than Madoff, but the SEC knew about him back in 2001 and did nothing.

Put this idea that the government is looking out for us, out of your mind. The regulations are written by industry insiders and enforced by regulators who live for the day when the corporations they regulate, hire them as a payback for protecting them.

All we need are billboards on on highways: What is there about Wall Street and fraud you don’t understand? If you don’t know how to play their game, keep well away. You are on your own. Government cannot protect you. That will save taxpayers one billion dollars a year, and remove the illusion that the government protects your investments through SEC oversight.

One Volt costs the taxpayer $255,000 dollars (considering stimulus and R&D).  This article fails to mention the crony capitalism and the massive waste of stimulus money.  Money the taxpayer will never see repaid.

Besides, if these car aren’t burning gas how are they fueled?  Coal, nuclear power, or hydro-electric power.  The problem gets far worse.  In other words we haven’t solved the problem, we’ve shifted it to another industry.

Oops, SYSMGR, you let the cat out the bag. Silly you. Crony capitalism keeps the incumbents in Washington in power.

There is never any justification for taking hard-earned wages out of my paycheck for redistribution to political campaign backers or other dubious recipients. To borrow the money is a fraud on future generations.

Nothing will change until the Fourth Estate is restored to its initial purpose, that is, to accept the fact that all governments lie all the time and it is their duty to expose these lies, and all the graft and the greed associated with power.

There isn’t a “chicken-and-egg dilemma” as the author suggested.  It’s clear that the automakers can’t build a cheap long range electric cars.  They can build expensive short range electric cars.  Is there any question to anyone why there is such low demand? 

The unsustainable stimulus injection is colossal waste of taxpayer money.  The government is making several mistakes giving stimulus money to manufacturers.  They should concentrate on making an environment fit for electric cars instead. 

Mistake 1.  The government assumes the demand for electric cars is there.  The sales for these cars have been slow because they just don’t much economic sense as long as gas prices remain low.  If all the federal incentives isn’t enough to move these cars, good luck in the future when the incentives run out.

Mistake 2.  The government doled out stimulus money based on electric car sales projection.  When has any of these projections come true?  It’s a big gamble that generate a lot of waste when the sales projections fall short and the companies collapse.  Sure you can claim job growth in the short term, but if the end, you may have just blown a ton of money with nothing to show for.  I would’ve spent the money on research for cheaper batteries. 

Mistake 3.  The government chooses not to raise gas taxes.  If the government really wants to change driving behavior, try making gasoline $10 per gallon.  The price of gasoline will affect every driver equally and the gov’t can do away with CAFE regulation.  Consumers will have much better economic incentives to buy electric or hybrid.  The tax collected can be used to upgrade infrastructure for electric or hydrogen cars, and invest in research for better technology.

Y’know, Mark brings up an excellent point.  Show of hands, does anybody remember WHY American automakers were on the brink of failure for so many years?

It was because, while Americans were looking to buy fuel-efficient cars, Detroit denied the opportunity at every turn.  Rather than create a subcompact, they moved into SUVs and threw money into those programs as if our preferences didn’t matter and there was no competition.  But most of us didn’t buy because it wasn’t what we wanted.

Again, we’re being told that the problem is with us.  They’re trying to sell us cars, but we mean old consumers have standards that are undermining their business models.

I disagree about most of the rest of what Mark says, though, since it kind of boils down to the government giving stimulus money to EV manufacturers and then forcing us to buy the half-assed products on their terms.

Seriously, buy a new car or the government will make sure I go bankrupt?  Yeah, that’s the world I want to live in.  Maybe next week, they can offer to break my legs if my employer doesn’t keep up my insurance premiums.

@SYSMGR:  Just wondering, where did you get the cost of $255,000 figure per Volt from taxpayers? 

I agree with you on shifting the problem with electric cars.  They seem to be so much cleaner, but they are not necessarily so.  In addition, the EPA’s MPGe rating just completely misleads buyers with numbers of >90MPGe.  These tank to wheel numbers should be divided by 3 for realistic well to wheel numbers.

Cost of the Volt

Chevy Volt Costing Taxpayers Up to $250K Per Vehicle
Analyst: ‘This might be the most government-supported car since the Trabant’
By Tom Gantert |

(Editor’s note: This article has been updated with a reaction from a General Motor’s official.)

Each Chevy Volt sold thus far may have as much as $250,000 in state and federal dollars in incentives behind it – a total of $3 billion altogether, according to an analysis by James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

Hohman looked at total state and federal assistance offered for the development and production of the Chevy Volt, General Motors’ plug-in hybrid electric vehicle. His analysis included 18 government deals that included loans, rebates, grants and tax credits. The amount of government assistance does not include the fact that General Motors is currently 26 percent owned by the federal government.

The Volt subsidies flow through multiple companies involved in production. The analysis includes adding up the amount of government subsidies via tax credits and direct funding for not only General Motors, but other companies supplying parts for the vehicle. For example, the Department of Energy awarded a $105.9 million grant to the GM Brownstown plant that assembles the batteries. The company was also awarded approximately $106 million for its Hamtramck assembly plant in state credits to retain jobs. The company that supplies the Volt’s batteries, Compact Power, was awarded up to $100 million in refundable battery credits (combination tax breaks and cash subsidies). These are among many of the subsidies and tax credits for the vehicle.

It’s unlikely that all the companies involved in Volt production will ever receive all the $3 billion in incentives, Hohman said, because many of them are linked to meeting various employment and other milestones. But the analysis looks at the total value that has been offered to the Volt in different aspects of production – from the assembly line to the dealerships to the battery manufacturers. Some tax credits and subsidies are offered for periods up to 20 years, though most have a much shorter time frame.

GM has estimated they’ve sold 6,000 Volts so far. That would mean each of the 6,000 Volts sold would be subsidized between $50,000 and $250,000, depending on how many government subsidy milestones are realized.

If those manufacturers awarded incentives to produce batteries the Volt may use are included in the analysis, the potential government subsidy per Volt increases to $256,824. For example, A123 Systems has received extensive state and federal support, and bid to be a supplier to the Volt, but the deal instead went to Compact Power. The $256,824 figure includes adding up the subsidies to both companies.

The $3 billion total subsidy figure includes $690.4 million offered by the state of Michigan and $2.3 billion in federal money. That’s enough to purchase 75,222 Volts with a sticker price of $39,828.

Additional state and local support provided to Volt suppliers was not included in the analysis, Hohman said, and could increase the level of government aid. For instance, the Volt is being assembled at the Poletown plant in Detroit/Hamtramck, which was built on land acquired by General Motors through eminent domain.

“It just goes to show there are certain folks that will spend anything to get their vision of what people should do,” said State Representative Tom McMillin, R-Rochester Hills. “It’s a glaring example of the failure of central planning trying to force citizens to purchase something they may not want. … They should let the free market make those decisions.”

“This might be the most government-supported car since the Trabant,” said Hohman, referring to the car produced by the former Communist state of East Germany .

According to GM CEO Dan Akerson, the average Volt owner makes $170,000 per year.

~~~~~

@John:  It’s true that some Americans were looking to buy subcompacts when fuel prices are cheap, but you can’t really blame automakers to chase after profitable trucks and SUVs.  To this day, domestic automakers still have the best selling trucks and SUVs.  For many years, domestic automakers have been making crappy cars, but you can’t deny the fact that they also made the best trucks.  Not only do they make the best selling trucks, they also make the most fuel efficient ones. 

http://www.fueleconomy.gov/feg/best/bestworstEPAtrucksNF.shtml

The argument I wanted to make is that US fuel prices are one of the lowest in the world, and it is affecting American driving habits and US automakers ability to compete in certain market segments.  Europeans and Japanese regularly pays $2 to $3 more than we do per gallon.  Higher fuel prices will definitely drive Americans to buying higher MPG cars, thus the demand for hybrid and electric cars will increase.  Some may also seek alternative transportation options, such as public mass transit.  We saw when the fuel prices jumped from $2 to $4 per gallon, truck sales plummeted and compacts soared.  And GM, who was betting the farm on trucks and SUVs went bankrupt with the help of GMAC’s mortgage meltdown.

I have been an electric vehicle enthusiast since 1994 when I went to a presentation by a college instructor from a local community college which had an electric vehicle program. I was amazed at the potential of electric vehicles at the time. The main draw-back at that time was battery weight and battery efficiency… Fast forward to today and several things have taken place but several things have also NOT taken place. Virtually all of the electric vehicle component technology has moved forward in leaps-and-bounds—power management systems, motor efficiency, motor performance, regenerative braking, non-battery component weight…. but everything falls almost flat on battery efficiency, battery weight and battery charging. Where every other electric vehicle component has shown a steep development curve, batteries in comparison, are only mildly better than they were in 1994. Money is not always the answer… there should have been more mandates regarding fleets both in government and in the private sector—more rewards and incentives for adopting electric vehicles would have created demand for improvement. Instead throwing money at the industry to just make the same product as everyone else had the opposite effect and reward mediocrity and the maintenance of the status-quo. He should have acquired electric vehicles for staff and even a new electric presidential limousine. I know “shoulda, coulda, woulda…” but it would have made a difference.

Though on one hand the vehicles seem more like cars and less like science experiments, the bottom line is that battery technology is still poor. As an Obama supporter I looked forward to this man being a truly great president. I so hoped that he would someday become known as the “president who weened the USA from foreign oil” and I believed that he could have accomplished that goal. It would have been a bi-partisan effort and virtually all of the traditional impediments to the left and right working together could have been mitigated, creating one unified common effort in the best interests of the country…  I know that sounds naive and grandiose but I believe that thus far it has all been for naught. The president spent so much of his political capital on his almost completely ill-fated health-care plan; he missed out on the opportunity that could have really made him deserving of the Nobel Prize that he already received. I am going to make a statement that will leave many people upset, but I believe that had he put more of his first-term time and effort into this one area the USA would be a completely different place today—not “kumbayah”—but it certainly would have made it much more difficult for his other initiatives to be viewed so negatively by his opponents. He can still do it but it will be a difficult sell now.

At the same time that the government is spending our money on electric cars so that no one had any money to buy anything, it is spending our money on emission controls and clean air days to help us buy more oil and even have less money. The government really needs to stay out of this like it’s supposed to .

Mr Obama and his stimulus package and the EPA should do some thinking about where their coming from and where they should go.

I got to this late so I don’t know if you mentioned “Who Killed the Electric Car.” 

It’s probably available at your local library for free!  Enjoy.

This article offers another part of the equation. It doesn’t solve the wage gap, even for the skilled worker profiled: http://www.theatlantic.com/magazine/archive/2012/01/making-it-in-america/8844/3/?single_page=true. The WalMart model & the IPhone revelations spell out that someone - many someones - are paying dearly so that others can have cheap things. Meanwhile, on the subject of transportation, what are we doing to dramatically improve the mass ground-based versions?

Mark Wu writes:

“The argument I wanted to make is that US fuel prices are one of the lowest in the world, and it is affecting American driving habits and US automakers ability to compete in certain market segments.  Europeans and Japanese regularly pays $2 to $3 more than we do per gallon”

You couldn’t be more wrong. We pay for the defense of Europe and Japan. We pay to keep the sea lines open. We spend 6% of GDP on defense . The countries we protect spend 1% to 2% of GDP (For example, we spent $920 billion on defense in 2011 fiscal year. Canada spent a mere $23 billion, Japan $53 billion or 1% of GDP). We fight trillion dollar oil wars. Add these costs to oil procurement and we spend $9 a gallon. We are being duped by our politicians, the war profiteers and the media.

Mark, just to clarify, I didn’t mean to suggest anything about the quality of American cars.  My point was only that the American automakers strongly resisted the trend towards smaller cars while it was happening because (as you mention) the profit margins were smaller.

They held out for “better customers,” basically, rather than serving the market, and they paid the price in crashing revenues.

History is repeating itself, here.  Rather than produce long-distance EVs, they insist that we rarely drive long distances.  Rather than lower the price, they imply that we owe them years of our future fuel savings.  Every deficiency in the product is a flaw in our demands, not their planning, as far as they’re concerned.  Then they scratch their heads again wondering why we haven’t all rushed out to go into debt buying one.

I drive a Leaf. 
Our house is full solar- we did not convert from partial to full solar until we calculated adding in the cost of an electric car.

Not only do we not have an electric bill, we no longer pay $250 a month for gas.  The solar installation will now pay for itself in 4.5 years with the amount of money saved per month.

We waited months for the car as they have been so popular in our part of the country.  Our range is about 85 miles as it extends the life of the battery to not do a full charge on a regular basis.  It handles well and accelerates quite quickly. The battery warranty is good for 8 years. 

What about long trips? We have a second vehicle for those.  The Leaf is the around-town car, used for 1000 miles per month. 

Do they replace all gas powered vehicles? Of course not.  But powered by solar, using more of them could significantly reduce our country’s dependence on foreign oil.

The ‘fuel savings’ on an electric car don’t have to pay for the whole car for you to break even - just the difference in purchase price between the electric car and the equivalent size gas car.  So if that difference is $13k to $20k and the gas car gets 30 to 40 mpg of $4 gas, you break even at somewhere around 13000 - 15000 miles.  That’s like ONE YEAR of use.

Nina, I applaud you!

I bought one of the first Honda Civic hybrids imported into the USA. My son drives a 2000 Insight.  A really smart young Republican financial planner quoted me the same $$ reasons(quoted above) why I was a fool to spend the extra $6,000 rather than buy a regular Civic in 2003; it would take blah, blah, blah number of years to break even. Until gasoline went up to almost $6.00/gallon in the Chicago area! He was unmoved when I pointed out that my car did not spew crap into the air when it was merely sitting in traffic; he didn’t yet have children to breath in that very crap that his large SUV emitted. Those Honda products run mostly on gasoline using the self-generated electricity that charge the batteries to run the electric assist motors for power boosts. The operative word being electric and it’s derivative. I believe that electric hybrids are the next best idea until all electrics come up to par. I too, would like to see a reduction in cost per unit, so demand will rise naturally! Battery technology does need to catch up, but here is the issue to me; American banks and corporations have had the benefit of almost all the money in the world, and they don’t seem to have been able to do anything different than the dog whose ass-smell they are following has done already. If the free-market is so darned innovative, where were the privately-financed battery improvements? If Japan & Korean subsidize their auto industry’s research, what is so awful about a US stimulus plan that does the same? Remember, they laughed at Edison before he built the electric car because horse ranchers and railroads were worried that no one would buy their products if the automobile gathered a following. Big Oil stockholders- including those in Congress - are feeling the same way now. You can blather all you want about the cost of research to the American taxpayer. If private industry refuses to move forward because of their own self interest, then, yes, a forward thinking president has to light a match under them.  Boom!!!

I’ve read thru all comments—veryinteresting!  HERE"S REALITY!!!

We’ve just LEASED a NISSAN LEAF as sales/estimating vehicle. 39 months at $500 a month.  Car makes PERFECT sense this way as it will be “wrapped” billboard for our company and can be returned as technology leapfrogs battery/range. Lease can be set up no down payment so cost is confined to install of charging station.  If you’re lucky early adapter charging station is free.  No gas, oil, plug wires etc and it is a KICK to drive.  High torque in DRIVE mode, High regenerative braking in ECO mode-driver chooses on the fly. Hand wringing about big gov’t,big oil,big China is mental mistake—MY OPINION.  ONLY positive action at micro level leads to changed world.
Look for us at an Energy Remediation jobsite near YOU!

Bruce Fernandes

Feb. 2, 2012, 8:22 a.m.

This is an example why government interventionism has been an abject failure.

OK, save GM but do not impose upon it to build one of these European “coffin cars” no one wants to own.

If everyone had an electric car electric rates would go thru the roof.  The public utlities do not have the capacity to have over 8% of US cars become electric.  Costs assume recharging at lowest late night rates but several utility CEOs have said they do not have the capacity beyond that 8%.

Unintended consequences would be to impose higher utility bills on everyone for the cost of major buildouts of electricity infrastructure not being used by anyone but electric car buyers.  Perhaps if electric car buyers paid for the marginal additions to utility infrastructure they would realize that enormous cost directly tied to the user group requiring more inftrastructure would never own an electric car.

So once again a socialist solution (impostion of higher electric rates on everyone for an infrastructure buildout benefiting less than 10%) becomes the solution.

This is why government should get out of the business of telling the American people they should buy European style coffin cars and live their lives lilke Europeans.

@TS Douglas:
Thanks for posting the article.  I was intrigued by the $250K subsidy to Volt figure until I read the article, which I found to have very dubious accounting.  In the Compact Power example, the $100million figure went to the plant, not to GM.  GM still has to buy the batteries from Compact Power.  Compact Power is a LG Chemical subsidiary, the incentives were given to open up their plant here.  By the author’s logic, one can argue that Korea subsidized the Volt as well, which is not a valid claim.  Furthermore, I don’t understand why the author even tried to attribute A123 subsidies to the Volt when it doesn’t even supply them with their batteries.

@Albert Meyer:
Yes, it’s true that we pay for defense to secure sea lanes, but that does not benefit only the oil companies, it benefits our entire economy.  That cost is paid in our federal taxes, which I don’t think factor into many consumers’ minds when choosing a car based on MPGs.  When most people choose cars, I bet they are thinking about prices at the pump, not what they are paying in the macro economic sense.  If you want to factor in federal taxes into vehicle operational costs, let’s not forget that Europeans routinely pay more taxes, income and sales.  Bottom line is, higher MPG cars’ operational costs are lower, therefore when gas prices go up, higher MPG cars’ sales go up.

@Jan:
I agree with you, stimulus money should be spent on research.  But I’m afraid that is not where the money went.  The money went to opening up manufacturing plants that may not even be competitive in the marketplace, notice how many failing and failed enterprises were mentioned in the article above.  The benefit is a short term economic injection.  However, I believe money should be spent on research, where the resulting innovation can have a much longer lasting effect.

Charles Pickering

Feb. 2, 2012, 4:04 p.m.

The stimulous revived the electric car by taking money out of my grandchildren’s pocket and giving it to my neighbor by way of subsidies. When the handouts dry up, neighbor will be left with an aging battery, fire hazards and a mouthful of rhetoric about how he saved the environment.

Electric cars serve primarily to gain traction among so-called progressive voters for otherwise neo-liberal politicians.

When was there ever 700 people at that plant? There were never half that many and since the layoff last November there are probably less than 100 left!

@ Marc Wu

I wish we were paying to protect the sea lanes as, indeed, it’s a service that benefits the entire world.  Sadly, the US gov’t does not raise enough through taxes to pay its bills or the interest its debts.  It’s all being financed through phony accounting, over-issuance of bond, increasing the money supply (inflation… or devaluation) and “off balance sheet” accounting for wars abroad.  : (

@ lawrence - I’m not a big fan of nuclear but there are some very smart minds at the VERY pro-nuke site, BraveNewClimate.  Fusion is 50-60 years away though there are some interesting developments from the Russians (BR sodium-cooled reactors which burn actinides), Toshiba (PRISM Reactor), Hitachi and so on that will be safeR, cleanER than the Gen I / Gen II reactors which, as we saw in Fukushima (Gen II) can just be devastating.

We need more BASELOAD power, more conservation, more nuke, more solar with battery backup… but we need better batteries/storage of energy.  The Spanish have a good idea with their Torresol Gemasolar 19.9 GW/h / year plant.  And right now it seems like a pipe dream, but maybe Andrea Rossi is on to something useful for the entire world with his e-cat device.  We will know in the next few months.

The issue everyone overlooks is that Govenment “borrows” money to create jobs, but never pays back their borrowings - and when times are good they use the windfall of tax revenue to build, spend, and give away.

Politiicians want you to believe they are “visionaries”, and that their costly projects (i.e. electric vehicles) will secure our future. The sad truth is they are spending to secure their own future.

I live in Elkhart, Indiana and now that free money is spent, things are beginning to slow. RV’s are what RV’s always have been and never received a penny from Uncle Sam. Only a politican will claim that Obama stimus is the “indirect” cause of the RV comeback. It always comes back.

There it nothing wrong with building and promoting electric vehicles - what’s wrong is this self-serving “all-in” approach taken by politicians at taxpayers’ expense. And when failure becomes obvious, new regulations are imposed until traditional methods are no longer affordable. 

This is a backdoor approach to force the US into socialism.

Is this a positive story or a nightmare scenario. With the billion of government money does anyone think these schemes will survive? Fisker is about to go bankrupt, Solyndra gone…as pretty much every company mentioned here with a couple of years. Electric cars are a failure. Natural Gas cars are greener and can go more than 100 miles and you can refill them in minutes.!

I disagree with the chicken and egg thesis…Electric cars struggle against physic!

This is not a success when it’s being so heavily subsidized by taxpayers.  The country is bankrupt and we are wasting billions trying to force something “green” to happen.  If electric cars are so great, they don’t need huge subsidies and tax breaks, people will buy them anyway.  First, the country needs to get on solid financial ground, then we can investigate new technologies.  We we have a complete financial collapse, electric cars and green energy will me nothing.

Electric cars are DOA!!!

What is coming in the near term will be nat gas heavy duty trucks.  Simple economics according to T Boone Pickens.  Typical big rig uses 30,000 gallons of diesel every year.  Savings nat gas over diesel well over $1.00/gallon.  The nat gas engines pay for themselves WITHOUT GOVERNMENT SUBSIDIES…. I’m sure government will put forward subsidies simply to claim credit for some fantasy that only government can stimulate innovation.  It is all happening as we speak and more and more nat gas refueling stations are being built along major highways in USA by the private sector.  Cummins engine is working on nat gas engines.

This will be big and once the technology is proven the major auto makers will move to nat gas and electric should go on the ash heap of history.  Electric is a joke because the derivitive of electricity is coal powered utility plants UNTIL NAT GAT takes over as the primary source of utility power.  Unfortunately, the congressional delegations in PA, W VA, and other coal states will have something to say about that…. coal production/shipments are way down as a result of EPA rules forcing utilities to convert to nat gas.  Railroad stocks and coal stocks have cratered in the last six months.

Nat Gas was always going to be THE transition fuel before you could ever justify green technologies since nat gas is readily available here and now and green is nothing more than liberal’s wet dream fantasies and only worked when they could cap, trade, and tax the crap out of our utilitiy bills in order to fund boondoggles like Solyndra, First Solar.

Germany and Spain are now effectively out of the solar/wind subsidy business and their phony green sectors are coming apart as we speak.  The British people are angry as heck about their recently enacted cap and trade system.

Fundamental economics of supply, demand, and cost can be temporarily blunted by government intervention but in the end government has never been able to inexerably alter the fundamental concepts of economics.

Those that have invested in nat gas infrastructure (not the nat gas producers) are making fortunes.  Those with the vision of nat gas as THE transition fossil fuel will benefit for years to come as solar and wind perhaps find a place in the formula as long as government largess does not force solar and wind down our throats at the expense of our monthly utility bills going higher and higher.  I live in NV where we have all the sun we can ever need and yet our utility bills are painfully higher as part of the process of building out solar which supposedly should lead to lower bills.  Only government can find a way to make that which they say will cost us less in the future actually cost all of us a whole heck of a lot more.

This article is part of an ongoing investigation:
Eye on the Stimulus

Eye on the Stimulus

Officials have struggled to spend the nearly $800 billion stimulus package quickly and effectively.

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