The Volt: What Happens When Ideology Gets Ahead of Reality
Mr. President, you are building the wrong car.
In a May 2007 speech before the Detroit Economic Club, Candidate Obama chastised American automakers for building the wrong cars-while they were building “bigger, faster cars,” “foreign competitors were investing in more fuel-efficient technology.” He stated that “it’s not enough to only build cars that use less oil-we also have to move away from that dirty dwindling fuel altogether.” He noted that “the transformation of the cars we drive and the fuels we use would be the most ambitious energy project in decades.” He promised “generous tax incentives” and “more tax credits” to make this happen. He believed that the additional costs are “the price we pay as citizens committed to a cause bigger than ourselves.” He claimed to be a leader who could make this happen as he intoned, “Believe me, we can do it if we really try.”
While that speech did not mention the Chevy Volt, or even electric cars, it surely laid out his ideology. For the most part, these are campaign promises he has kept. He has driven Detroit to “move away from that dirty fuel altogether.” He has offered “generous tax incentives” and “more tax credits.” To see “the most ambitious energy project in decades” become a reality his administration has handed out loans to virtually every strata in the electric car’s foundation.
He’s bailed out GM-which allowed government manipulation of the market to produce the Volt in the first place.
He’s given billions of taxpayer dollars to “green” energy companies who promised to deliver the electricity-Solyndra is just the one of the myriad of failures in his “ambitious energy project.”
Beacon Power Company received $39 million of its government-guaranteed loan before it filed for bankruptcy. Beacon Power developed new technology that supposedly provides energy storage designed to help the intermittent solar and wind power be used by power grids, which need stable power to remain reliable.
Just this week, another Obama backed company filed for bankruptcy. EnerDel made lithium-ion batteries for electric cars. It received more than $100 million in government funding from the Obama administration, as part of the economic stimulus package and green energy push. One year before EnerDel filed for bankruptcy, Vice President Biden visited the plant and crowed: “A year and a half ago, this administration made a judgment. We decided it’s not sufficient to create new jobs-we have to create whole new industries.” The reason for EnerDel’s demise? “The company suffered when demand for the batteries dropped as fewer Americans than expected opted for electric cars.”
Yes, the Obama administration has worked hard to line up the dominos to insure a “transformation of the cars we drive and the fuels we use.” They have provided “generous tax incentives” and “more tax credits.” But to what end?
The dominos have fallen, one right after the other-all the way up to the Chevy Volt and beyond.
Last week GM launched “national and television print ads” to try to bolster the slumping sales for the Volt. (Every time you see an ad for an electric car, think of President Obama and your tax dollars.) Dealer orders are down. They report: “We just haven’t been seeing the interest. The cost definitely has something to do with it.” GM is considering slowing production due to the less-than-expected demand and has temporarily laid-off 1,200 workers.
In 2011, instead of the forecasted 10,000, 7,671 Volts were sold-which comes out to three-hundredths of 1 percent of US carmakers unit sales. Analysts say there has been a “slow initial uptake of the first models to come on the market.” Many of the Volts that were sold were to government. New York City bought 50. The city of DeLand, FL used part of a $1.2 million federal grant to buy five. Perhaps in effort to save his “ambitious energy project,” President Obama has committed the fed to buying 100+. He’s even pushed his Jobs Council leader, Jeffery Immelt, to buy them. GE will purchase 3000 through the year 2015.
Of course GE is one of the leading suppliers of the charging stations needed to power the Volt-much like those removed by Costco, due to lack of use. After investing a lot of time and money on recharging stations, GE has to do what they can to not let the market slip further away.
But, remember, “we can do it if we really try.” From the first domino to the last, the administration has really tried. The Volt, says the Financial Times, was “fast-tracked through development in a process it likened to a ‘moonshot.'” Adam Jones, an analyst with Morgan Stanley, believes that they are “not yet ready for prime time.” Addressing the removal of charging stations at Costco, general manager for northern California, Dennis Hoover said: “Why should we have anybody spend money on a program nobody’s thought through?” Calum MacRae of PWC’s Autofacts states that electric vehicles “are flawed in terms of convenience.”
Citing statistics for the Nissin Leaf, Forbes Magazine counts the cost of an electric vehicle (EV): “At $0.11/KWH for electricity and $4.00/gallon for gasoline, you would have to drive the Leaf 164,000 miles to recover its additional purchase cost. Counting interest, the miles to payback is 197,000 miles. Because it is almost impossible to drive a Leaf more than 60 miles a day, the payback with interest would take more than nine years.” But, they state: “The cost is not the biggest problem.” “The biggest drawback is not, range, but refueling time. A few minutes spent at a gas station will give a conventional car 300 to 400 miles of range. In contrast, it takes 20 hours to completely recharge a Nissan Leaf from 110V house current. An extra-cost 240V charger shortens this time to 8 hours. There are expensive 480V chargers that can cut this time to 4 hours, but Nissan cautions that using them very often will shorten the life of the car’s batteries.”
Plus, the cost of electricity keeps going up. According to the Energy Information Administration, residential electricity rates have risen from 11.26 cents per kWh in 2008, to 11.51 cents in 2009, to 11.54 cents in 2010. With the increasing regulation on cost-effective coal-fueled generation, and the proposed plant closures, that trend is likely to get even more dramatic.
No wonder initial “uptake” has been slow. Meanwhile, impressive advances in the technology for the traditional internal combustion engine are being made-with some outperforming hybrids. A gasoline powered Ford Focus costs about half of its electric version sibling. Remove the $7,500 US government tax credit and the EV is even less desirable.
Despite Obama telling Detroit that they are building the wrong cars, Americans don’t want what Obama is selling. Washington has poured billions of dollars in making cars that people have to be paid to buy. Meanwhile, Chrysler is enjoying a resurgence thanks to Jeeps. Chrysler is adding more than a thousand jobs to build gas-guzzling vehicles like the Dodge Durango and Jeep Cherokee.
Mr. President, you are building the wrong car.
But this was before his now-public, election-year conversion experience, as expressed in the State of the Union Address. Now, leaving many in his eco-friendly base “more than a little unhappy,” he’s touting fossil fuels-particularly natural gas (even though Nancy Pelosi doesn’t think natural gas is a fossil fuel). In the SOTU, the President said: “The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don’t have to choose between our environment and our economy.”
Imagine if he’d had this revelation in 2007. While I oppose federal tinkering with the markets, since the Obama administration was hell-bent on spending-a so-called “stimulus,” what might the world would look like today if the $2.4 billion spent subsidizing electric cars and their various components had been spent on infrastructure to support vehicles powered by natural gas?
Instead, industry, like Chesapeake Energy, and investors, like T. Boone Pickens, are using their own money and are building the needed fueling stations to allow for compressed natural gas (CNG) powered trucks to crisscross the nation. Without government pressure, and without having to retool, Honda is adapting the Civic to make a CNG-fueled car with a 250 mile range that can be refueled in the same time as a gasoline-fueled automobile (rather than the hours needed for an EV). While prices at the pump have doubled since President Obama took office, and electricity rates are “necessarily” skyrocketing, natural gas’ abundance has dropped prices to the lowest in more than a decade.
On its own, the free market is going to create the “transformation of the cars we drive and the fuels we use,” without any help from the White House. Perhaps it is time to stop throwing good money after bad and allow the Volt to go the way of Baker Electrics‘ cars-or keep them for the rich who will buy them even without “generous tax incentives.”
Now that President Obama has had his oil-and-gas-conversion experience and angered his green base, maybe he could go ahead and approve the pipeline. Then we’d know his conversion is real and not just an election-year transformation.