A New World of Opportunity

Anyone out there read Inc. magazine? I don't either.

But I picked up the November 2009 issue at the October CAR "Business of Plugging In" event because it contained a very interesting feature called "The Connected Car" by Bernard Avishai, a business professor and writer at the Hebrew University of Jerusalem. "Want to get into the car business?" the subhead asks over a two-page photo of a Volt rolling chassis. "The imminent introduction of electric vehicles will make possible – in fact, will require – the creation of a vast ecosystem of entrepreneurial businesses."

"At ground level," the article begins, "electric cars like GM's Chevrolet Volt – due to be launched in November 2010 – are pretty much everything the U.S. economy is banking on. The cars promise innovative engineering and a resurgence of the American auto industry. They mean an America that is manufacturing things rather than just bundling financial instruments. Cosmetically, electric cars mean green technologies that will migrate to China, India and Brazil, where they will allow for Western styles of personal freedom...."

To be fair, the U.S. economy and manufacturing base need a lot more than EVs, beginning with tax breaks and incentives for all businesses, small and large, to begin hiring again. Once that begins and regular folks have money and confidence enough to invest in new vehicles, we know that a growing percentage of them will be EVs, many manufactured here. (more after the jump).

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EV business may be booming soon

I dropped by the Center for Automotive Research's (CAR) "The Business of Plugging In" conference in Detroit recently and came away with a collection of quotes and useful information from movers and shakers working to make vehicle electrification happen.

Most reasonable observers understand that electric vehicles will not replace liquid-fueled vehicles in large numbers any time soon due to their three key disadvantages of high battery cost, limited driving range and long recharge times. But everyone sees that they will become an increasingly viable alternative as automakers respond to growing consumer demand and ever-toughening fuel economy standards.

Respected research firm J.D. Power and Associates forecasts that, while 90 percent of U.S. light vehicles sales today are gasoline-powered (most of the other 10 percent are flex-fuels and diesels), the gas-only share will decline to about 80 percent in 2012 and less than 75 percent by 2016. Part of the alternative-energy 25 percent will be 1.5 million gas-electric hybrids (about nine percent of projected total sales), including plug-ins.

Power's good-news predictions: the number of hybrid models available in the U.S. will increase from 22 today to more than 100 by 2015, and the number of "pure" (battery only) EV models will swell from one (the Tesla roadster) to at least 13 by 2012. Bad news for pure EV fans: Power says just 0.5 percent of sales (fewer than 100K units) will be pure EVs by 2015. There's more after the jump.

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I reported last month on Nissan's LEAF EV plans, as presented by Nissan Product Planning VP Larry Dominique at the August Center for Automotive Research Management Briefing Seminars (CAR MBS) in Traverse City, MI. Dominique's presentation was one highlight. Others included three speakers from Toyota and two each from Ford and GM that I wanted to share with AutoblogGreen readers. Can't cover everything, but here are interesting excerpts:

New Toyota President Akio Toyoda (oldest son of 1982-1992 president Shoichiro Toyoda and grandson of company founder Kiichiro Toyoda) didn't say much about advanced vehicles or powertrains but did position himself as a car enthusiast and race driver who intends to inject more excitement into his company's future products. He said Toyota would introduce a "fun and affordable sports car" and a (~$200K) Lexus supercar in the next several years.

Toyota Public Policy and Government/Industry Affairs Group VP Josephine "Jo" Cooper said, "It is more important than ever before that Washington and the auto industry work together and be serious about resolving our differences, which can lead to more sensible and effective policies." She added that Toyota "sees a clear path toward commercial introduction of a fuel cell vehicle by 2015" and will introduce a short-range urban commuter EV in 2012.

"In the 1990s," she reminded us, "we launched a retail version of our RAV4 EV to comply with a demonstration program required under California's Zero Emissions Vehicle mandate.... Our experience confirmed that three conditions must be satisfied before a new technology will be accepted by consumers: all technical problems MUST be resolved; the consumer and the market MUST be prepared; and regulatory policy MUST ALIGN with both these conditions.

There's more after the jump.

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It was probably mid-1980, soon after the federal government agreed to guarantee massive loans to financially struggling Chrysler Corp., when then-Chrysler Chairman Lee Iacocca invited groups of auto media and analysts to its styling center for an off-the-record preview of what was coming two, three, even four years down the road. Most were impressed.

We couldn't write about what we saw that day, but we could report in general terms that, much to our surprise, it looked pretty damn good. That was a very crafty move that probably altered outside perceptions – mostly by word of mouth – enough to help the company survive to launch those appealing new products and pay off those loans seven years early.

A couple years later, Ford was on the ropes thanks to woefully bad product quality and styling. Then-new Ford Chairman Don Petersen sat down next to me at a table full of auto writers wolfing down box lunches during the company's summer Dearborn Proving Ground "long-lead" press preview. Between bites of his sandwich, he opened his brief case, pulled out a handful of photos and surreptitiously showed them to me. They were styling models of the next-generation Thunderbird (which looked terrific) and Mercury Cougar (less so, but distinctive) and a pair of smooth, nicely proportioned compacts that would launch two years later as the Ford Tempo and Mercury Topaz.

The following summer, Ford Design PR leaders pulled some of us aside, one by one, took us into a design studio and showed us models of what would become the first-generation Taurus and Sable sedans and wagons that would save the company's bacon more than two years later. Again, we were on our honor not to report what we had seen. Again, the object was to subtly improve outside perceptions and expectations.

Fast-forward to Aug. 11, 2009, one month and a day after the "new General Motors" emerged from Chap. 11 bankruptcy. As you've heard, GM invited a substantial number of auto media and analysts to its Warren, Mich. Tech Center to open its kimono and show off pretty much everything it has coming in the next few years. Find out what was revealed after the jump.

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Had lunch the other day with Nissan North America Product Planning Vice President Larry Dominique. He is the point man for communicating Nissan's green-vehicle vision, beginning with its soon-to-come LEAF battery electric car. A few minutes earlier, he had presented exactly that to a large roomful of automaker and supplier representatives, industry analysts, consultants and media.

The occasion was the Center for Automotive Research (CAR) Management Briefing Seminars, an important industry conference that has been a 44-year annual tradition. He and Nissan Midwest PR manager Brian Brockman had invited a small group of journalists to join them for lunch so we could ask burning questions about the car and the plan. Which we did. Find out what the answers were after the jump.

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With so much information (and disinformation) available on the Web, does anyone read magazines any more? Most are struggling to retain both readers and advertisers, and many are going upside down.

In the specialized area of auto magazines, there are still plenty of good examples in many flavors, led by the quartet of major monthlies I've been reading most of my life: Motor Trend, Car and Driver, Road & Track and (relative newcomer) Automobile. While there is no shortage of excellent journalism – and, unfortunately, some not so good example – on today's better car blogs and websites, I believe that the editors, staffers and contributors to these informative and entertaining books (many of whom I count among my friends) are, as a group, the most talented and knowledgeable auto writers in the business.

I have written for all four in the past and still enjoy reading them, mostly on airplanes. One excellent reason is the depth and breadth of coverage they offer of the automotive universe and its most interesting people and products, including electrically-powered ones. After the jump, we take a look at what the paper mags are saying about our eco-friendly favorites.

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I really stepped in it last time by stating that GM never owned patent rights to Ovonic's NiMH batteries and never sold them to an oil company, and that no one sued Toyota. I believed those statements to be true at the time, but several of you straightened me out.

However, since that complex issue has little to do with range anxiety, I'll come back to it at the end. Meanwhile, I wanted to address more of your comments and responses before moving on to new topics in future essays. Here goes:

EV1 was a low-volume vehicle made of a bunch of low-volume parts with little shared with GM's other products and released on a limited-availability basis. I have no problem with GM portraying it as a testbed, an excellent testbed at that, but to use the defense that GM was trying to make it succeed in the marketplace is just plain silly. – meme

To make the assumption that GM's BEV program was about only EV1 is silly. It was the pioneer vehicle on which the technology was developed. We hoped it would have more takers but never kidded ourselves that an expensive two-seater with very limited range would sell in big numbers or ultimately turn a profit. What should have been profitable long term, if only the enabling (lithium-polymer) battery had arrived as planned, were more practical and affordable follow-on BEVs, plus selling the technology to other automakers.

(more after the jump)

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There was a lot of feedback (50 comments at last count) to my column on EV range anxiety, some thoughtful and intelligent, some not. The few who accuse me of being anti-electric vehicles, which I definitely am not, were not. Neither were the two (same guys each time) touting the idiotic conspiracy theory that GM sold its Nickel Metal Hydride (NiMH) battery patents to an oil company (Chevron? Exxon?), and then that evil oil company sued Toyota to prevent it from using NiMH batteries to keep them off the market because they might "threaten their oil business." Jeeesh!

On the first count, I LOVE the smooth, silent, seamless, torquey, petroleum-free performance of a good EV. Yet I'm not ready to own one because the vehicles available are still too expensive, too primitive and/or too range-limited to offer a practical, affordable ICE alternative. I devoted nine years of my working life to testing and developing what became GM's EV1 (and other advanced vehicles) in hopes of helping to move that technology to where it could for most people. Hasn't happened yet, but I know a host of folks are working hard on it today.

On the second charge...who makes up such BS? The battery technology that GM offered as an extra-cost option in '99-model EV1s was one of many significant breakthroughs of genius inventor Stan Ovshinsky, who pioneered Ovonic amorphous solar cells in the 1970s and founded Ovonic Battery Company in 1982 to pursue commercial uses for NiHM batteries, most notably to power longer-range (vs. lead-acid) electric vehicles. Ovonic was a supplier to GM. GM never owned patent rights to its batteries. No one ever sold them to an oil company. And no one sued Toyota. (Column continues after the jump).

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I left the dinner meeting around 9:00, with home roughly 60 miles away...no challenge for an engine-powered vehicle, even relatively low on fuel. You can always find an open station.

Not so on this 1997 night. I was driving an EV1 development vehicle freshly equipped with an experimental nickel-metal-hydride (NiMH) battery pack. We were developing NiMH - which was promising double the usable energy of our '97 advanced lead-acid (PbA) packs in about the same (nearly 1200-lb.) package - for the '99 model year.

As GM Advanced Technology Vehicles' test and development manager at the time, I routinely drove PbA EV1s home and back, re-charging overnight, during the summer. My 60-mile mid-Michigan commute was easily doable in warm, but not cold, temperatures.

When the mercury sank, so did range, due partly to reduced PbA performance but mostly to lost vehicle efficiency. Our 50-psi Michelin low-rolling-resistance tires became just average at low ambient temperatures. Cool seals, bearings and lubricants have more friction. The air flowing over and around our 0.19-Cd electric bullet got thicker and more viscous as temperatures fell. Then there are accessory loads: lights, heater and (in wet weather) wipers.

But this was a hot, dry summer night, my NiMH pack should have been good for 120 miles, and my after-work meeting was only 30 miles from work. Should have been a piece of cake to get home afterward, even with lights on at 70-80-mph freeway speeds. But it wasn't. (post continues after the jump)

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In my first column reality checking the Detroit Auto Show, some of you questioned my assertion that even Toyota's relatively high-volume hybrids are probably not profitable. Of course, Toyota has lowered the costs of its Hybrid Synergy Drive components over many years and hundreds of thousands of units. But I believe they're still too high for any Toyota Hybrid - even the Prius or the soon-to-come higher-priced Lexus HS 250h - to turn a profit.

I can't prove it - Toyota is not about to share its cost numbers with me or anyone else - but that's my opinion, and these are "opinion" columns. Yours may differ, and yours may be right. But I'll bet no one outside of Toyota knows for sure.

What most folks outside the industry don't see or comprehend are the enormous costs of designing, testing, developing and validating every one of the thousands of parts and pieces that go into every modern vehicle. Beyond the mostly expensive and relatively low-volume hybrid system components themselves are all the Prius' specific body, chassis, electrical and comfort and convenience parts and pieces, few of which are shared with other vehicles. The addition of the new Lexus HS 250h on the same architecture will help by raising the volumes of parts that are shared, but I doubt whether even that will turn a profit at its higher prices but much lower volumes.

Am I suggesting that Toyota is fibbing by claiming that Prius is profitable? It depends on how they calculate their costs. If they add up the costs of all those parts and pieces - including the still very expensive battery, EVT transmission, motors, wiring, control systems and more - and toss in the relatively minor cost of assembly, the total may indeed be less than the Prius' average selling price. But they would have to discount all those years and huge costs of design, testing, development and validation, which must be spread out ("amortized") over hundreds of thousands, even millions, of units. Their business plan has depended on long-term profitability from growing sales of higher-priced luxury hybrids and sales of the Synergy drive system to other OEMs, neither of which has fared as well as hoped.

What I don't understand is why Prius' profitability seems so important to some ABG readers. If each unit sold does make a buck, bully for them. If not, so what? Toyota's whole hybrid program is still a hugely profitable investment as one of the best-ever image-building efforts any automaker has ever carried out. Whatever they have spent on it through the years is worth far more than any amount of paid advertising they could have bought for similar money. What should be important to potential owners is whether any EV's or HEV's selling price is worth the long-term gas savings it offers, whatever its cost to its manufacturer.

That said, let's reality check some other electrically-powered vehicles showcased at this year's Detroit North American International Auto Show. Follow us after the jump.

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