The Excruciating Economics of Electric Cars
With oil prices reaching record levels for the year—and potentially heading higher—the prospects for electricity-powered cars is also on the rise. Barclays Capital said, “The groundwork for a sustainable move into higher price ranges has been laid.” Deutsche Bank said prices could surge to $100 a barrel in the next two quarters if the US dollar continues to weaken—with relatively little effect on a global economic recovery. Rising oil prices alone are not enough to ensure the future of electric cars—but there are clear signs of a massive transition to plug-in hybrids and electric cars.
“Electric transportation is still expensive. We cannot overpromise and underdeliver and hype this.”
The industry to produce lithium ion batteries—they key component of electric and plug-in hybrid cars—is ready to boom. In a report released on Wednesday, Pike Research projects that lithium ion batteries will make up more than 20 percent of the global $4.1 billion energy storage sector within the next decade. The Mercedes S400 hybrid will be the first mainstream production vehicle to use a lithium battery, when it’s introduced later this year. The next generation of plug-in hybrids and electric cars will all utilize lithium ion batteries, which can provide more power and energy storage in a smaller lighter weight package. “While lithium ion was once limited to consumer electronics devices, it is quickly becoming the battery of choice for electric vehicle manufacturers,” said Pike Research analyst David Link.
Sanyo, the Japanese electronics company, announced Wednesday a major push to mass-produce lithium ion cells for plug-in hybrid vehicles starting in 2011. According to the Wall Street Journal, Sanyo plans to produce 300,000 to 400,000 batteries per month for use in vehicles that can be recharged at home. The company will also produce battery systems, including chargers, in the US, Europe and China after 2012. Sanyo is the subject of a takeover bid by electronics giant Panasonic, which jointly produces batteries with Toyota, the dominant player in today’s hybrid market. By 2015, Sanyo’s plan is to produce 10 million lithium ion batteries per month for hybrids and plug-in hybrids.
Battery production for plug-in cars currently is almost exclusively based in Asia—but US firms are trying to break that stranglehold. Mass.-based battery maker A123 Systems—which raised $380 million in an initial public offering in Sept. and received a $249.1 million grant from the Department of Energy in August—said yesterday that it’s negotiating an additional $235 million loan from the energy department to expand US operations. “It’s not done, but it’s in discussion,’’ said A123 CEO David Vieau.
Electric Transportation for the Masses
These levels of investment are predicated on rapid adoption of plug-in cars, but obstacles remain—primarily cost. Nancy Gioia, Ford’s newly appointed director of electrification, said yesterday that Ford wants its hybrids, plug-in hybrids, and electric cars to be more than a niche. “It’s about affordable transportation for the masses,” she said at a presentation of the Ford Focus EV and Ford Escape Plug-in Hybrid to media and government officials. HybridCars.com had a chance to drive the vehicles. We were impressed by the advanced level of development of the prototypes which are two years away from production. The viability of the technology is no longer in question, but cost is another matter. “Electric transportation is still expensive,” Gioia said. “We cannot overpromise and underdeliver and hype this. Because what could happen is you damage the reputation of the technology.”
“This is the biggest shift in the car industry probably since we went from the horse to the gasoline engine.”
Then there’s the expense of adding recharging infrastructure. Bloomberg reported today that California’s push to lead US sales of electric cars might result in higher power rates for consumers. California’s Public Utilities Commission is reviewing the effect of electric cars this month. Power companies have to install new transformers and meters to handle greater demand and prevent blackouts when plug-in cars are charged at outlets. That will cost billions of dollars and utility rates will rise to cover the costs, according to analysts. Southern California Edison estimates that by 2020, as many as 1.6 million cars recharged by the grid may be in use in its 50,000-square-mile coverage area, about the size of Alabama.
The excruciating economics of plug-in cars is unlikely to stop the technology’s momentum. Industry and political leaders believe the transition from gas-powered vehicles to cars that charge up at home is a means to create new clean tech jobs, rejuvenate the auto industry, and address environmental and energy security issues. “We stand on the threshold of a real revolution in the propulsion of our vehicles,” Ford Executive Chairman Bill Ford Jr. said during a speech at The Business of Plugging In, a conference held in Detroit this week. Henrik Fisker, CEO of Fisker Automotive, which makes the Fisker Karma plug-in hybrid, said, “This is the biggest shift in the car industry probably since we went from the horse to the gasoline engine.”