Is the Government Screwing Up the Electric Car?

The Fisker Karma - very cool but bankrupt

There is nothing stranger and sadder than thinking you can manufacture demand. Sure you can spend millions marketing the “Leaf” with every conceivable cultural bribe you have in your bag, environment, style, design, and sex (electric sex is certainly better than gasoline sex, don’t you think?). You can offer federal grants, tax rebates, and even push for higher gas taxes. All to push the consumer into something they still fear – and I mean fear. I’ve written at least five blogs on the problems and blessings of the electric vehicle:

The Urban Umbilical Cord – Part 1 – August 26, 2010 

The Urban Umbilical Cord – Part 2 – September 3, 2010      

The Electric Dream Car – March, 2011         

and others that looked at batteries and bribes.

My favorite economist Ludwig von Mises famously said in his great book on economic systems Human Action, A Treatise on Economics, “The market is supreme.” And right now the market is saying an emphatic, “NO!” There is too much confusion, an accumulation of never ending poor news, and the overriding sense of an industry that is failing. Battery makers (with government guarantees) going out of business, car companies failing (the Fisker Karma bankruptcy is the most dramatic due in great part to poor construction, software, and price – against its very cool design), and the confusion about hybrids and electrics in general.

This is not an argument against the product, it will be the primary type of urban vehicle at some point in the future but it has to get past this welfare image that tells a buyer that the only way they can come to market is through some sort of government gift or outright grant. They will tell you in marketing perception is everything and right now the electric car is very, very questionable. Visions of an out of work Depression worker with his hand out comes to mind when I think of the industry.

Will I run out of power before I can get home? Will it be safe? Will it explode if the battery overheats? What happens if the battery goes to zero – can it be recharged or will I have to pay $30,000 to fix it? Is this only a product for the rich and ostentatious? Is Tesla really telling us the truth about its mileage or do I have to buy one to find out?

Like everything there is a classic bell curve of acceptance, a long slow climb then acceleration to the level of almost a fad – it happened with everything including the radio, television, computer, even the mobile phone. The time frames were long or compressed but the curve is still there. The electric automobile still has a way to go. And the competition is increasing; look for more cars powered by natural gas (which we have a lot of now and it’s cheaper) and the technology for those vehicles is a lot closer to the gasoline and diesel powered machines.

I have maintained that a vehicle with a replaceable (think refuelable) battery is the future – the extension cord at work and home is all so very DIY, but the electric vehicle’s use as a replacement for the gas-guzzler must meet a different standard. They are two different technologies – car building versus battery making, ask Boeing about that. Build the car with a slot that accepts a battery with a range of options: range (storage amount), price (to essentially rent the unit), and source (nuclear, wind, solar, natural gas). The last is for the touchy-feelies out there.

The government (feds and state) keep trying to pick a winner by throwing cash around like drunks at a strip club. For what was wasted at Solyndra ($535M loan) and Fisker ($529M loan) we could keep the airport towers operating for two years (FAA cut due to sequestration is $600M). That is why the electric car is in trouble – government diddling.

Stay Tuned . . . . . . . . . .

The Electric Dream Car

I have, over the last nine months, challenged the fundamentals of the electric car on one specific issue, its viability in a world of inexpensive gasoline. And now there is one more issue to deal with, the unquestionable silliness of Washington to force feed the car (esp. the American version) down the throats of the American consumer. Patrick Michaels points out, in a Forbes article about the Chevy Volt, its debut is nothing more than a sham and if you and I were to proceed the way GM has, I suggest that we would be sharing a hall with Bernie Madoff.

And yes, gasoline is still inexpensive. Germans pay about $5.60 for a gallon (last month), but a good chunk of it above $4.00 is taxes. They seem to survive.

I have no sympathy for a product that does not meet the needs and expectations of the marketplace. Every year thousands of products, inventions, toys and all sorts of things are designed, manufactured, marketed and then offered to the public. Most fail.

The alleys of the marketing world are littered with great ideas, the Edsel, New Coke, Microsoft’s Zune, Microsoft WebTV, Apple’s Newton, the DeLoren, Sony Betamax, the USFL, Charlie Sheen, and the list goes on.

The Volt, and other such pretentious products, will have to meet the measure of the consumer, and no matter how it’s presented. If it doesn’t, it will and deserves to, fail. Pumping the marketplace with subsidies, tax credits, tax refunds, and free chargers will not prop up a disaster. Sure its price is high, $41,000 sticker (just try and find one at that price), which is $17,500 over the price of a Ford Focus-SFE(40 mpg), that will get you essentially 175,000 free miles for the difference, even with $4.00 gas. And the Volt STILL uses gasoline to push you down the highway. Maybe it should be renamed the Chevy Gas.

My problem is with the use of public funds to support, what is essentially, a United States government owned company (U.S., not the non-capitalized us). There are so many other uses to waste money on, why the rabid focus on just this?

I firmly believe there is an all-electric American car in the urban future, but it has to compete with all the other competitive transportation products, both electric and hybrid, out there and soon coming down your street. The Tesla looks interesting, the Fisker Karma is dramatic, the Nissan Leaf is tailpipeless, and soon there will be others. But even these will get the tax savings – at least for a while. Remember the hybrid’s use of HOV lanes in California, what gov gives – gov takes.

But the future is a little dusty right now. Will there be the power generation needed to help fill the batteries of these little beasties? What is the future of nuclear power? How will these personal transportation devices compete for juice with the giant sucking sound of high-speed rail in the future? I don’t know, and neither does anyone else. I’m just getting a little tired of paying for someone else’s toys.

The Urban Umbilical Cord, Part 3

Once more into the never ending wonder that is the electric car. I posted, about six weeks ago, two blogs about my take on the vehicle and how the public may receive it. I did not and will not deal with the mechanics or even the whole issue of batteries and recharging and what their real impact is, I leave this to the experts. Remember, it is nothing more than a car with a different and yet quite conventional power source; one that has been around longer than the internal combustion engine – the electric motor. (Oh by the way honey, did you plug-in the car last night?).

What I do object to is how federal and state governments are now the financiers and marketers for this form of transportation. Besides being involved with the ownership of GM, governmental agencies dangle freebies to the market in an unabashed effort to prevent their failure.

In an article in the NY Times on Thursday it was laid out simply for all to understand. These incentives include for the Nissan Leaf (due in December): a $7,500 federal tax credit, a $2,500 cash rebate from the state of Tennessee if you live there (in California you will receive a $5,000 tax credit). Also, in many states, they will install, at no cost, a home-charging unit provided by the Energy Department (some provide tax credits for this). By the way you cannot just plug this baby into your toaster outlet – it feeds on 240 volts and it will require you to rewire your garage.

These cars are not cheap, the Leaf starts at $32,780, the Chevy Volt $41,000, and for the racy Tesla Roadster – north of $100,000. These prices are well inline with the gasoline market and I am sure they will be physically worth the price. They will have leather options, cool cup holders, a jack for you iPod, and maybe even a back seat (except for the Tesla). And don’t worry about the noise issue, gas cars are so quiet now they can sneak up and bite you even with their conventional motor.

But why are our governments in the car business? The rationales include saving us from the oil companies, cleaner air, the environment, and jobs. All well and good; I certainly would rather leave the hundreds of billions in dollars we spend for fuel here at home than send it to folks who really do not like us.

The urban environment would benefit. There will still be millions of cars on city streets but they will reduce particulates and carbon dioxide by significant amounts. We will all be happier as we go to jobs in our electric mix-masters while we save the environment.

But what about apartment complexes and condominiums, how in the world will these electrical systems be integrated into this market - an important customer base? Imagine trying to rewire and accommodate these facilities. I can just see the association meetings, who is to be first and who is last. It will not be pretty and it certainly will not be cheap. I guess the gov’ment will just have to help. And what about the work place, who will cover that? (I am beginning to sound like Andy Rooney, one moment while I slap myself.)

For a product to be successful the market has to embrace it. The product must meet demand (real or perceived), be affordable to enough buyers, tease others to follow, and be profitable. The last is the most important. With all this government meddling how can the manufacturer even understand the real market and the profitability of its product? A recent affect of this governmental diddling can be seen in the credits offered to first time homebuyers. The sales dropped through the floor after these “rebates/discounts” were dropped. Homebuilding is one thing – billions in manufacturing plants and jobs is another.

The electric car is a palliative. It is a trophy to be driven, proving the driver’s worth and social concern. It is also a provocateur; it will roil the social and economic structure of the country. Is it for better or worse? This remains to be seen. But to be successful it must be profitable and that is still hidden in the fog.

Stay tuned . . . .