Will electric cars take off? The view was somewhat clouded at Accenture's global and televised Sustainability 24 event last week. I chaired the electric car panel, and came away with the view that the early years are likely to be a bit slow, but government subsidies — including the large Department of Energy Advanced Technology Vehicle Manufacturing (ATVM) loan program that has paid out $8 billion so far (and has $16 billion left) — are important to kick things off.
Accenture's recent survey of consumers in 13 countries found opposition based not only on cost, but also convenience, range and making the transition from one fuel to another. According to Curt Volkmann, a senior executive at Accenture, car buyers also showed a strong preference for plug-in hybrids over battery EVs. "Is the market ready?" he asked. "Not yet."
It's difficult to gauge the early market, and that's what makes it a challenge for automakers exploring electrics. The loan program helped ensure not only that EVs are built, but that they are built in the U.S. The DOE received 140 applications and has funded five companies, including Ford, Nissan, Tesla and Fisker. "We're lending where commercial banks can't accept the manufacturing and market risk," said Nick Whitcombe, director of the ATVM program. "Our aim is to bring new vehicle technologies to retail and commercial fleets, and manufacturing at scale to bring down costs to operating parity with fossil-fuel vehicles."
The funding of Tesla Motors, which got $465 million, is likely to pay off. Tesla is introducing its Model S in June, and has already sold out the 2012 production run. The Model X comes later, and that is likely to sell well, too. CEO Elon Musk is on a roll lately — his other company, Space X, successfully launched its rocket to the space station last week.
The investment in Nissan ($1.4 billion) is fairly safe, too. As Scott Becker, a senior vice president for administration and finance, pointed out on my panel, the DOE money was instrumental in persuading the company to build the Leaf and a related battery plant in Tennessee, rather than abroad. "The ATVM loan program was an inducement for Nissan to localize production," he said.
Nissan will have the capacity to build 200,000 battery packs and 150,000 Leafs annually. The new plants will add 1,300 direct jobs that could easily have gone to Europe or Asia (where most battery production is located). The battery plant opens in September, and car production in December.
Much of the early EV deployment is going to be in California. Larry Rillera of the California Energy Commission points to the state's $100 million in annual appropriations to help jump-start manufacturing, as well as installation of charging stations and consumer subsidies — buy an EV and get $2,500 back. But California also has the best climate for the cars, slews of early adopters, and strong green sentiments.
It's not hard to be pessimistic, given relatively low early numbers, but I think it's too early to judge. Asking people to go from gas to electricity is a tall order. How long did it take to replace horses with cars? How about radio to TV? Corded phones to wireless? Right, it took many years. I remain convinced that electric cars will replace fossil fuel. But I wouldn't make book on the timetable.
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