Archive for the ‘Op-ed’ Category

 

Dec 22

CalCars’ Plug-In Campaign: Victory after 8+ Years

 

In 2001, I never expected when I started thinking about better cars that I’d devote a decade to a quest that began as quixotic and ended up as the best work experience of my life. I’ve met amazing people, and joined with them to start to turn around one of the world’s biggest and hardest-to-change industries.

Along the way, we’ve formed a coalition that inspires people to look for –and find! — points of leverage to move mountains. Our success shows what we need to solve two huge global problems — our dependence on fossil fuels and our uncontrolled experiment with our planet’s air and water .

That’s fortunate, since we have just a few decades to transform almost everything. We can succeed only by finding a path that unites unlikely allies around common goals — and shows entrenched interests how they can profit from disruptive change.

I’ll highlight some of my peak experiences, then consider the implications of the plug-in campaign for the giant challenges ahead.

IN 2001, having just sold a small Internet company, I was blown away by the Rocky Mountain Institute’s vision of 99MPG vehicles. I went to Aspen and began discussions about new ways to advance that project. On my way back, I found out I’d need surgery for a benign brain tumor. That summer, things could have gone many ways. I ended up with just one of two balance systems, no hearing on one side and poor hearing on the other. At 52, I could have thought my life had peaked. But this decade’s been my most productive and satisfying. I’m so fortunate to have had a chance to make a difference in as I’d always hoped to do.

In 2002, RMI’s Hypercar, Inc. co-sponsored the founding meeting of what became the California Cars Initiative (CalCars.org) in Palo Alto. There I first met many of the entrepreneurs, environmentalists, engineers, and EV advocates who’ve helped us immeasurably ever since. We started with a basic idea: Let’s figure out what cars we need, then round up tens of thousands of people to say to carmakers, “Here’s what we want, build it for us.” That’s how I described CalCars’ strategy the first time I testified as an unknown newcomer at the California Air Resources Board at the end of 2002.

Back then, I was still thinking about futuristic solutions that could be ten years away. But that same year, when I saw my first plug-in hybrid (PHEV) at the Electric Power Research Institute, after I recovered from the shock of an epiphany, I realized today’s technology could get us started. That’s where I met some of the visionaries in the utility and car worlds who’d been trying to get plug-in hybrids out of the ivory towers of theoretical designs and academic modeling.

Then I met Prof. Andy Frank of UC Davis, who had been converting vehicles to PHEVs for years and needed some outside evangelists. He’s been an inspiration to us all. Thanks, Andy, for NEVER giving up. PHEV fans had the great hope that the cars Andy has been dreaming of since before many of us were born would be in showrooms before he retired. Our wishes and his dream come true today!

How did this happen? We knew we needed to show people something real, and it wasn’t long after I got one of the first Prius hybrids in late 2003 that we realized we could start by adding batteries and charging to that car to make it a prototype. Fortunately, Ron Gremban was thinking along the same lines. He became CalCars’ Technology Lead, and we formed the

http://www.eaa-phev.org/.

Putting that car together in Ron’s Marin garage felt like setting sail for a new world. I have no technical background but I soon got pretty good at banging and bending copper. And Ron and I became great partners, each doing what the other couldn’t. It’s been amazingly virtual. Since April 2004, over 300 weeks, I bet we’ve been face to face less than 50 times.

We worked like crazy and agreed to a tough trip to Michigan to meet the chief auto reporter at The New York Times. When we’d unveiled the first PRIUS+ to the world, we got a giant wave of publicity. That started us on a media rollercoaster with journalists from around the world, and geostrategists like Fareed Zakaria and Thomas Friedman, who repeatedly put PHEVs in his columns, book and documentaries. Dozens of international delegations came to see our cars. I went to Iceland and Ron to Belgium to talk about PHEVs. Now dozens of books feature substantial sections on PHEVs.

By 2007, conversions (for us a strategy to build awareness and support) became the rage, first in California and then all over, as utilities, elected officials and people who wanted to be first to have the “world’s cleanest extended range vehicle” paid lots of money to retrofit their hybrids. They provided battery companies platforms to test their components. Government labs got to document PHEVs’ benefits. It all led Austin Energy to launch Plug-In Partners to expand our “buyer pull” strategy with a national “soft buy order” fleet campaign.

Our open source approach meant we gave everything away. That included advice, plans, and techniques for physical installations and electronic solutions. Companies sprang up to install conversions. And government agencies began to think about how they were going to certify new and converted PHEVs.

That’s when our high-tech roots kicked in. Since 2006, we organized open-to-the-public conversion events by volunteer teams at five Maker Faires. That helped bring in high-power advocates like Silicon Valley Leadership Group. And we got more attention from Google, which supported us and other groups, assembled the first employee PHEV fleet, and brought in Enterprise Car Rental.

Along the way I got educated about climate change. It became so clear that electrifying transportation and cleaning the power grid were an essential and complementary global strategy. Then scientists like James Hansen and Joe Romm of Climate Progress began talking about PHEVs as a “core climate change solution“. By the time Step It Up (precursor of 350.org) started organizing global events to advocate for a rapid transition to a low-carbon future, our cars had become stars of the show.

Environmentalists were slow to embrace PHEVs and EVs. They bet on hybrids. When I went to back to testify in Sacramento in 2004, I said PHEVs were the “elephant in the room” when people were talking about increasing fuel economy by 20-30%.

Some were still hypnotized by hydrogen. Those who worried about coal-fueled electricity didn’t get that electric motors are four times more efficient than gasoline engines. When they noticed plug-in owners who had rooftop solar systems, they began to understand, as EV advocates have been saying for years, that “plug-in cars are the only cars that get cleaner as they get older, because the grid gets cleaner.

Soon media and experts started picking up on it. It was a thrill to join entrepreneurs and environmentalists in mid-2006 to help nail down legislative support for California’s global warming bill, and along the way to successfully pitch the importance of plug-in cars to thought-leaders like venture capitalist John Doerr, Al Gore, Bill Clinton, Maria Shriver, and scores of others.

Once we had a car, we had a potent symbol. We also had a lot of fun finding ways to explain PHEVs and their benefits to people. Some things worked and some didn’t. We never came up with a better name than plug-in hybrid — which describes the design of the car, not why it’s a good idea. We found the slogan, “99MPG” didn’t work, but “100+MPG + a penny a mile of electricity” caught on. We got a screenshot from my dashboard to prove it: 124 MPG plus 123 watt/hours/mile for 50.8 miles.

Soon we boiled down our benefits statement to “cleaner, cheaper, domestic.” Then we tied each word to a constituency: plug-ins “tackle global warming, save money and revive the auto industry, and build energy security, all at the same time.”

We began invoking the idea that we were at a Pearl Harbor moment. In 1942, in one year, a giant American industry went from making cars and trucks to producing planes and tanks at a rate several times faster than they’d told FDR was impossible. Now, three score and ten years later, were fighting for the life of our planet, and to win, we need to rally like that again — at that speed and at that scale.

The fact that people could want this car for any of these reasons — or just to save money — helped spark an inconceivably broad, bipartisan coalition. Former CIA director James Woolsey said it best when he called it “a coalition of tree huggers, do-gooders, sod busters, cheap hawks, evangelicals — and Willie Nelson.”

We saw that coalition in all its glory in 2006 after we flew my just-converted Prius a to Washington DC to show members of Congress the opportunities from existing technology. That’s when we realized that the short “dongle” cable that linked a car and an extension cord could be a powerful symbol of one of PHEVs’ biggest selling points: their ability to plug in anywhere without additional infrastructure or new technology. The legislators who left their offices to see the car acted like the dongle was a sacred object, passing it from person to person as they addressed the audience and the cameras. We’ve presented dongles to dozens of new PHEV advocates as placeholders for a charged-up future.

The press relied on our analyses of every statement by each automaker about PHEVs. We tracked their advances in fits and starts, from denial to put-down to cautious interest, and eventually to acceptance, advocacy, and now, advertisements!

Back in 2004, we told Toyota, “Watch what we’re going to do to improve your hybrid; we’re not asking your permission.” In 2006, architect/designer Bill McDonough brought us to Ford’s Dearborn headquarters, and we tried to get them to be first with a production PHEV. Then when GM announced the Volt as a concept car in early 2007, we switched gears. We began to cheer on all the carmakers and spread the idea, which journalists enthusiastically picked up, of a new race in the auto industry.

GM came out swinging, determined to do things differently. The company embraced transparency. GM opened its labs and welcomed tough questions at press conferences. It recognized plug-in advocates as its allies, and encouraged amazing new communications channels like GM-Volt.com, which never misses a nuance. We kept up the pressure, reassuring those who’d been most bruised by the death of the last wave of electric cars that strong advocates throughout the auto industry were now coming into their own.

One of my favorite afternoons came in August 2008, when the Volt’s Vehicle Line Director, Tony Posawatz, came out to San Francisco and met with a dozen plug-in advocates and drivers to brainstorm and see our cars. We loved exchanging ideas that day. And 28 months later, it looks like some of our suggestions are in this great new car.

In 2006-09 we had the pleasure of seeing two Presidents and legions of candidates and elected officials jump to get photographed in and around PHEVs. It often felt unreal, as did the $7,500 buyer incentives and large loan manufacturing loan and research programs begun under the previous administration and since expanded. And ove time, people stopped separating PHEVs and EVs, and talked instead of plug-ins — the goal being to displace as much petroleum with electricity as possible.

Today we begin a new journey. We new owners and continuing advocates have our work cut out for us, showing off the new plug-in cars, telling everyone what we like about them and what could be improved, combatting misinformation, and working in every way to accelerate their arrival at scale.

In October, 2009 we declared victory on our first goal: getting mass-produced PHEVs. It’s really great to win! We owe it to so many people everywhere.

Now we’re starting all over on a new goal: retrofitting tens of millions of vehicles already on the road. We need to do this because putting a few million new plug-in cars on the road in the next few years — or 10 or 20 million in a decade — while absolutely essential, will make little more than a ripple within the 250 million vehicles in the US and 900 million in the world today.

Cars are part of the built environment. They stay on the road for decades. Just as we need to retrofit our homes, offices and factories, we need to “fix” lots of gas-guzzlers. CalCars and Andy Frank have a few allies like Intel founder Andy Grove who “get” the importance of this approach. We’re demonstrating there are technical solutions and a business case to do it. We promote startup conversion companies, but it’s happening too slowly. We need entrepreneurs and advocates to make the cause their own urgent priority.

We’re calling this “The Big Fix” campaign. Eventually, converters will need to partner withautomakers. Without them, the volume of conversions can’t get big fast enough.

In this and every case, scale and finding new ways to solve our problems together is the whole game. Change agents need to find points of leverage among the richest and most powerful institutions throughout the world, to peel off those that are at all receptive and find ways to make it worth their while to abandon business as usual. That’s what happened when Liggett & Myers broke ranks with the tobacco industry in 1996, and it’s already starting to happen among coal-based utilities.

In October 2010, I spoke to top officials in the oil industry. I said we had to find some way to work together. Because sooner or later they’ll notice that though they’re making tons of money, our country is going broke paying for oil. (Recessions follow every major oil price rise.) And the U.S. military will show them it’s starting to get off oil that costs $400 a gallon — and the lives of many in convoys — to deliver to the battlefield. And their families will tell them that our extreme weather is increasingly unprecedented and deadly. They’ll accept we already have millions of climate refugees from New Orleans to Pakistan, and they’ll understand how millions more will become desperate for water as the Himalayan and other icepacks melt.

This fall, fresh from the BP catastrophe, I urged industry leaders to truly go beyond petroleum, to find business opportunities locking up hydrocarbons in plastic, fibers and building materials, drill for geothermal energy, and invest in biofuels from algae. They have billions to invest and giant business profit and job creation opportunities.

The free market is a myth that hides massive subsidies and decisions. We’ve always picked economic and technology winners — in Silicon Valley, the radio, aerospace, semiconductor and internet industries all thrived because we knew we needed them. It will take a combination of regulations and incentives, just like it always has. If we can’t find a way in Washington, on Wall Street, at many international institutions, to get oil and other key sectors to change course, as we’re now doing in the auto industry, we will all lose. We need to make them an offer they can’t refuse: evolve and make money in new ways instead of pulling down the walls around us all.

The other side of picking winners is that coal is a sure loser. Even if there’s a way to get “clean coal’ (meaning CO2, not other emissions), it can’t scale in time. We need to find ways to close coal plants globally as soon as that doesn’t result in blackouts. Once again, it will take a combination of regulations and incentives — and in this case, as Google puts it, making RERenewable Energy Cheaper than Coal.

That’s the challenge. I’ve talked since 2005 about how to raise awareness about the climate crisis. We’d understand it if we could envision it as a giant asteroid heading towards the earth. We could unite against such a clear external threat. But climate change is too slow and too abstract — until it isn’t. People who are now calling themselves “climate hawks,” who won’t settle for powerlessness, need to be joined by everyone who wants a livable world.

I’ve given recruitment talks about the plug-in campaign and The Big Fix to smart people trying to figure out what to do with their lives at business and engineering schools at Harvard, Stanford and Berkeley, at middle schools and high schools, at Earth Day events and large and small green and energy security strategy sessions. I can imagine no more satisfying or useful activity, no better career to pursue, than advocacy for renewable energy and cleantech solutions to rescue our planet.

Here are the quotes that have sustained and inspire me, in the order they were first said:

* “First they ignore you, then they laugh at you, then they fight you, then you win.” — Mahatma Gandhi
* “Never doubt that a small group of thoughtful, committed people can change the world. Indeed, it is the only thing that ever has.” – Margaret Mead
* “The best way to predict the future is to invent it.” — Alan Kay
* [When we say throw away,] there is no ‘away’–everything is part of a cycle — Bill McDonough
* “Reinvent fire” — Amory Lovins

And I thank all of you who care enough to have wanted to read this for all you’ve done and will go out and do.

Felix Kramer is the Founder of CalCars.org. His family’s two cars will soon be a Chevy Volt and a Nissan LEAF.

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Dec 18

Op-Ed: So Now EVs Are Actually On The Road…What Happens Next?

 

Jeffrey Kaffee Takes First Delivery of the Chevy Volt

[ad#post_ad]I almost entitled this piece, “Why Toyota Prius Trade-Ins Are Bad News for Both GM and Nissan”, but I have been accused of being a little glass empty in my time here at GM-Volt.com, so I went with something a little more ‘vanilla’.

This past Wednesday, General Motors followed through on a project four years in the making, by delivering the very first Volt to a fellow named Jeffrey Kaffee, a 69 year old, retired airline pilot from New Jersey…who not incidenly traded in a 2005 Toyota Prius.

No offense to Mr. Kaffee, but as we say on the internet, “that is…teh suq.”

It wasn’t much better for Nissan when their first LEAF delivery went to 31 year old, Olivier Chalouhi  in San Francisco last week either.  Aside from the first LEAF being black (which naturally means it goes both faster and further than lesser colors), and having been sold to someone not receiving a pension;  Mr. Chalouhi’s last car, was a bike, an electric bike….that he made himself.  /gah

Where is ‘Joe Customer’ moving up and out of a Chevy Malibu/Toyota Camry, or down from his German sedan?

1st Nissan LEAF Picked Up By SF Native, Olivier Chalouhi

Now I am about as enthusiastic as an ‘EV enthusiast’ can get.   Somewhere out there is a LEAF with my name on it, and whenever GM will take my money, a Volt will cozy right up beside it in my driveway.  However, while these first two historic car deliveries are results in a vacuum, one can’t help but wonder if they do not foreshadow the future.

Between writing articles here at GM-Volt.com over the past year and half, and running/writing a LEAF website up to very recently, the very worst news for my inner ‘EV ‘enthusiast’ was when Nissan touted that over 50% of would-be purchasers owned a Toyota Prius, a trend that Chevrolet also saw with the Volt.

Here is the problem with that (and these first two customers).  While it is nice to sit back and gloat about taking something away from the undisputed king of all things eco-friendly, it actually speaks to the shortfalls and challenges facing the Volt and the LEAF, along with the upcoming Focus Electric, Mitsubishi I, etc.

If the Volt and LEAF’s customer base consists of around 50% Prius owners (not 50% of  the car’s total sales mind you), with the Prius only selling about 135,000 total units in 2010 (125,289 thru Nov), we have a reality that is pretty hard to swallow.   The ‘new generation’ of electric cars are mostly competing  inside the same small (less than 3%) of the market that today consists of hybrids (about 300,000 units for 2010).

And if you think salvation lies in selling the electrics internationally if there isn’t enough of a market in the US, it doesn’t.  As an example, Europeans, have already made the sacrifice Americans won’t…the move small cars, frequently diesel. So while gas prices there are higher there, electric cars make even less sense.

All of Europe will barely hit 100,000 hybrids sold for 2010.  Nissan, who already has the LEAF on sale in the UK, are experiencing this non-interest first hand, having only sold 150 units in the first weeks of availability.  Its a pretty strong bet that the Volt and Ampera being sold only from select dealerships, at a price of  £30,500 ($47,580 USD) and £33,995 ($53,000USD) respectively will be met with a similar round of indifference.

Bob Lutz At Volt Recognition Ceremony (Nov 30)

This hesitation to adopt is why we have not have had electric cars on the road before this week, not a lack of technology.  This current round of electrics is actually a referendum on the worth that the American population (and just the American population) put on things like the environment…and getting off oil.  Unfortunately, the early returns are that while that number of willing cutomers have probably increased 10-fold from 20 years ago…it is still not enough to support the industry on its own.

It is a given that the Volt (and the LEAF) will be virtual sell-outs over the next 12 months or so while they are in shot supply.   But in the end, the demographics of would-be purchases is showing that Bob Lutz was right when he asserted that the Volt (and other electrics) will need a major additional outside influences to make them anything more than a niche segment, saying “US fuel prices will have to rise to $5 or $6 per gallon”…there just isn’t enough Jeffrey Kaffees and Olivier Chalouhis in the world who will either pay the premium, or make the sacrifice that is necessary to drive an electric car.

So if you believe in an electric future for this generation, either make the sacrifice necessary to get yourself into a EV…or at least smile when the price of gas goes up.


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Sep 25

EV Range: How much is Enough?

 

[ad#post_ad]Like Lyle and many of you here, I have been following the progression of the Chevy Volt since the concept vehicle was first announced back in January 2007. Back then I had been occasionally searching the Internet for alternative fuel vehicles, as I really wanted to buy a vehicle that would drastically reduce, if not eliminate my use of oil.

I’m not quite sure when I found this site, but it was definitely early on. I registered my “want” for a Volt and began checking in every now and then. Then, in the fall of 2008, while I was reading about the Volt’s progress, I stumbled upon an online application that asked if I wanted to drive and electric car for a year. This was the application for the MINI-E program. I filled it out and basically forgot about it. Needless to say, like Lyle, I was one of the lucky people chosen to be in the program. My thoughts on it were basically the same as Lyle’s: “I’ll drive this car for the year and then I’ll only be a few months from the Volt being available, it will work out perfectly.” Up to this point, Lyle and I probably shared the same idea on transitioning into a Volt after the year was up.

During the course of the year with the MINI-E, I believe we began to develop a different view of the car. While it seems Lyle liked the car and enjoyed his time with it, he had a much bigger issue with the car’s limited range than I did, he even told me he couldn’t use the car on some days because he was determined the range would be insufficient. I understand his position completely, especially in the winter months when the MINI’s range was significantly diminished. I have a huge advantage though, I own the building my restaurant is located at so I can charge while I’m at work. This allows me to basically drive as much as I want, and have on more than a few occasions driven more than 200 miles in a single day. I arrive at work which is 30 miles from my home and plug in, and then in about an hour I’m back to 100% charged so I really always have 100-120 miles of available range. I believe that workplace charging is by far the most important charging location after the home. This will allow many people to use an EV for commuting purposes that otherwise couldn’t. If Lyle had a 220v supply at his office, I’m imagine he would have felt a lot more comfortable driving the car throughout the year, though he still couldn’t make more distant trips. I’m sure he still would have still returned the car anyway since he would be getting a Volt early on.

When the one year program for the MINI-E was almost up, BMW offered us one year extensions, with the caveat that we would then be able to get a BMW ActiveE to drive for a year after the second year was up. At that time, NJ was not one of the initial Volt markets (it was added later) and I assumed I would have to wait another year anyway to get a Volt, so I renewed. The ActiveE is a four seat coupe with a trunk and is based on the BMW 1 series. It will have approximately the same range as the MINI-E and be a much more refined electric car than the MINI-E with an active thermal management system and smartphone-connected electronics. I accepted the lease extension and I am four months into my second year with the MINI-E. I have 41,000 miles on it now, so I’m averaging over 600 miles per week which is much more than the average person drives in a year. While Lyle’s time with the car reaffirmed his belief, and from what he says that of many others, that an EREV like the Volt is what he needs, my time has proven to me that I can live perfectly fine with a 100 mile BEV. I still plan on buying a Volt or a small SUV with Voltec technology if GM ever makes one, but I want use a pure BEV as my primary commuter car since I do not need the range extender for my daily use. I have multiple cars in my household so a pure BEV plus an EREV is the perfect mix for me and what I expect to have soon. If I only had one car, then my choice would be a Volt, hands down, since a 100 mile BEV would not be sufficient and the Volt would give me the best of both worlds.

So my question today is, how much range is enough? The answer is going to be different for everyone. For some 100 miles won’t do it. For me it does, especially since I could charge at work. What kind of range would you need in a BEV to consider buying one?

I maintain a blog that chronicles my time with the MINI-E: http://minie250.blogspot.com/


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May 08

Hi, LG Chem? Its Me, GM. About Those Battery Prices You Quoted Me…

 

[ad#post_ad]There has been much discussion over the past three years about the battery of the Chevrolet Volt. We watched LG Chem and A123 compete for almost two years to win the affections of GM to supply them with cells; a battle eventually won by LG in January of 2009. Then the discussion switched to the actual cost of the cells inside the battery pack that would be built by GM themselves in Michigan.

For a time, the number thrown about was $1,000 per kWh, until Jon Lauckner (GM Vice President) was asked about this price point estimate, to which he responded that GM was paying “many hundreds of dollars less” than a thousand.

Then a study put out by Deutsche Bank in early March of this year seemed to pinpoint exactly what that ‘many hundreds’ less worked out to be, citing the average cell price per kWh in 2009 was $650. It also put out forward looking estimates of a 25% reduction in that cost over 5 years, and 50% over 10 ($325 per kWh in 2020), with some companies seeing bids at around $450 for 2012.

Adding to GM’s cost of the cells is the fabrication of the pack itself, along with the advanced temperature management system, which GM is doing themselves at a assembly plant in Brownstown Township in Michigan.

What had been forgotten over time was whether or not the initial decision to purchase 3rd party cells over producing them themselves was a good one. It has long been GM’s stance to produce a very small quantity of cars at first, then bring on new production (and eventually models) as demand is validated. Obviously, by consciously making a decision to limit your exposure to this new segment in case of failure, buying 3rd party cells seemed like the prudent way to go.

In a recent interview by the Times of London, Nissan senior vice president, Andy Palmer (who is responsible for the company’s global EV strategy), dropped a bomb on the rest of the industry, by being the first to put a dollar figure on the cost of the battery, by saying the Leaf’s battery costs £6,000 ($8,950 USD) to produce right now.

At 24 kWh per pack, that comes to around $370 per kWh, out the door, finished product. This is quite simply a stunning revelation, and Mr. Palmer was not done there, he continues by saying that “our battery is good for 100 miles and will soon be good for 200 miles,” alluding to the next generation which is reportedly due out in 2013. Just for fun he adds that Nissan will make money on the Leaf from day 1, saying, “We not going to lose money on this. I don’t have a boss who would endure that.”

It would seem that Nissan’s decision to partner with NEC to form AESC – Automotive Energy Supply Corporation (of which Nissan owns 51%) back in April of 2007 to produce their own batteries was the right way to go and is delivering a huge competitive advantage.

None of the domestic auto makers followed Nissan’s move to invest in producing the batteries themselves, with Chrysler tying up with A123, and Ford forming a strategic alliance with Magna to produce EVs, with packs supplied by Johnson Controls-Saft.

The only other company to strongly commit to prduction of a complete battery is Mitsubishi, and like Nissan, has a joint venture of their own, with GS Yuasa Corp to produce cells under the name Lithium Energy Japan.

It is thought Mitsu’s pricing position is not nearly as strong as Nissan’s, because they have the minority ownership stake in the company, which is also much smaller than AESC, with a capacity of around 18,000 packs for 2011, and up to 68,000 for 2012 when their main plant comes online in Ritto City, Japan.

While no estimates on the cost of the 16 kWh pack that sits inside Mitsu’s i-MiEV has been given, under pressure from Nissan to be competitive, Mitsubishi spokesperson Maurice Durand at the New York auto show last month confirmed that not only would the i-MiEV be on sale in the US in April of 2011, but also that they “we’re targeting sub $30,000 (msrp) for the U.S. when it launches” before rebates.

GM now finds itself in a bit of a problem dealing with two companies that not only have in-house battery production, but also huge amounts of scale to bring costs down, while GM themselves are left to deal with the problem of a existing contract being in place, and the markup of a 3rd party supplier.

To GM’s credit, the Volt extended range concept may insulate them for a time against the cost advantages of the two other competitors on the market in 2011, as the limited range and lack of recharging infrastructure behind BEVs hurts adoption. But as companies like Nissan bring 200+ mile ranges to market in three or four years, they could be in some real trouble.

And what if demand is strong for the Volt when they announce pricing and start taking deposits this summer? GM is not bringing full production online until 2012…what is to stop Nissan from developing their own extended range vehicle over those same 18 months to compete with GM if the Volt is met with a strong order book?

As Bob Lutz put it in his exit interview with GM-Volt, “I think what we all (at GM) want to do is to let us see how this works…let’s see how customers react” before we move forward.

With Nissan being as aggressive and optimistic as they are, and if GM’s attitude is still wait and see at this point, why get into the business at all? Regardless of the Volt’s reception, it seems like it is turning into a lose-lose scenario when you look into the future.

If I can steal part of one of Bob Lutz’s last quotes at GM to us here, hopefully his “successors at GM would (will) say ‘hey maybe its time to expand’” the program right now, while the opportunity still presents itself.
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Feb 24

Op-Ed: Forecasting Future Demand For the Volt

 


[ad#post_ad]How often has the car buying public been subjected to a headline like “Big Auto Company Introduces it Fabulous Concept Electric Show Car With 22″ Wheels…That Is Coming Soon-ish,” only to have that be the last word we ever hear on it? Fifty? A Hundred Times?

Personally, when I spot a new concept EV, I think to myself, ‘it looks like somebody had a couple thousand pounds of modelling clay getting old somewhere and this is the end result. Or perhaps there was just too many design interns last summer, and they didn’t know how to keep them all busy.’

I doubt the thought of, ‘I wonder what the demand for this car will be once they start producing it,’ crosses many people’s minds. That is of course until recently.

With GM currently ramping up for production of the Volt at its Hamtramck facility in Michigan, and Nissan on the cusp of actually taking orders in a few weeks, we can now focus somewhat on the acceptance of electric vehicles themselves once they hit the market.

Given the Volt’s very low initial production levels (8,000-10,000 for the first year), it is assured that it will be a virtual sell-out heading into 2012. But what happens when full line utilization is reached?

GM hopes to be producing 50,000-60,000 copies a year starting sometime in 2012. Looking even further out to 2015, Bob Lutz (GM’s vice chairman) predicted that the total market for the plug-in vehicles “will reach 250,000-300,000 units annually,” and added “they will mostly be our products.” /that is a lot of Volts Bob.

These are lofty goals, but are they reasonable?

Brent Dewar, while having his ‘cup of tea’ as head of Chevrolet, put it pretty succinctly, “There definitely is demand. We just need to get the cost and infrastructure in balance. Our biggest problem (right now) is infrastructure.” Brent ‘elected to retire’ a few days after making this statement, so we never got a chance for him to expound on just what he saw ongoing demand for the Volt to be…and new boss James Campbell seems to have his hands full catching up with the demands of Volt’s roll out to be making his own predictions at this point. /fortunately I have all the time in the world to do some armchair quarterbacking

For the Volt to achieve a level of 60,000 units per year in 2012, GM would have to sell 5,000/month. To achieve Lutz’s goal of more than half of his estimated plug in market for 2015, GM would have to sell 12,500 copies per month in five years time.

Demand will come from one of three main areas:
-existing customers currently buying vehicles at a similar price point
-current hybrid/eco sensitive buyers
-price trade ups in the same size (middle/compact) class

Existing High End Customers (Luxury/Sedans Over 30K)
This segment is the playground of the more affluent among us. According to NADA (National Automobile Dealer’s Association), 1 in every 13 cars sold in January (7.8%) were in the luxury car segment. More specifically than that, there was 46,000+ 4 door sedans sold in the month that had a starting MSRP of over $30,000 (only 7,000 of which were domestics). At a $40,000 price tag, that number drops to under 15,000. The Volt with a estimated MSRP around $40,000 (pre-rebate) would seem likely to take a portion of this segment.

The most likely casualty from the arrival of the Volt in this niche would probably be the Nissan Maxima, which tips the scales starting at $30,460. (The Maxima also sells the most of any non series/class car priced at this level, with 4,016 units sold last month)

Hybrid/Eco Customers

While this is the smallest of the three groups, statistically the Volt stands to gain the most ground as a percentage here by far. The hybrid group is growing at a year over year rate of almost 30%, and adding electric vehicles into the mix will only expand it further. (Last month there were 14,511 hybrid passenger cars sold compared to 11,221 the year previous)

While it is hard to judge at this point whether the Prius’ numbers (8,484 units sold in January) will take a direct hit from the Volt, it would seem likely that its sibling, the Lexus HS 250h (think suped up Prius with a trunk) will certainly lose some business to Chevy’s extended range car. The hybrid Lexus sold a not insignificant (considering the base price point of $34,650) 1,247 units. That was good for 3rd spot on the hybrid best sellers list. (156 ahead of the Fusion)

The Sell-Up
This is the wild card, and where ultimately the future success or failure of the Volt will be judged. The willingness of a customer to expand their price range to make the massive jump into MSRPs that start with a 3. This is where the Volt’s eventual MSRP and the government rebate ($7,500) really comes into play. At a pre-rebate starting price of $40,000, you are not likely to convert a lot of Honda Accord/Toyota Corolla buyers…but at $35,000, many will choose Volt over traditional best sellers.

The most likely casualty of the Volt’s success in this category, would be GM’s own Chevy Malibu/Impala. (Which I’m sure they would be ok with in the long run)

So What Is the Secret to Demand?
No secrets here at all. Even Brent Dewar knew it in his short stay at the top of the Chevrolet pecking order; GM has to “get the cost in balance with the market.”

With gas prices hovering at $2.60 nationally, the economy not going so well, and Nissan now threatening to make good on the rumor to set the price of the Leaf in the mid 20s after rebate, (“…we promise there will be a “wow” factor with how affordable it is!”) GM will have to do a lot better than $39,999 to sell at the volumes they are looking for.

Hopefully with the benefit of scale, good engineering, and falling battery prices, GM can find a way to get to market with a MSRP in the mid 30s and be a leader in this new segment. But then again…maybe they really don’t want to be. Maybe selling 2,000 Volts a month plus a few hundred even more pricey Volt-based EREVs is good enough for them. /I hope not

There is no debate that GM is years ahead of the competition in getting a extended range EV to market. The platform’s advantages are obvious. Hopefully, GM management doesn’t use this opportunity for short term gain by over pricing a handful of cars (relatively speaking) in lieu of owning a big piece of the future of the automobile.

(My own ‘guesstimate’ for ongoing sales (post initial demand) for the Volt follows below)


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Feb 20

Will the Nissan Leaf Be A Flop?

 

[ad#post_ad]According to an opinion piece by Jerry Flint, Forbes’ senior automotive editor it will.

He writes, “The question isn’t whether the world is ready for the Leaf. It’s whether the Leaf is ready for the world.” He then continues that the Leaf is “is more likely to be a sales failure than a sales success” because of 5 reasons.

Range – it doesn’t have the range of a conventional car
Recharging stations – the lack of them is clearly a problem, and most will be west coast
Recharging time – “eight hours or so for a full charge from ordinary household current, much less with stepped-up voltage at charging posts that don’t exist”
Price – he is “guessing the price will be closer to $40,000 with the batteries”

There was also something else about “it doesn’t have the top speed,” which I thought was a little jejune to the argument; it goes 90 MPH for goodness sake. Tell me the truth Mr. Flint, you just googled an old article that estimated it topping out around 75 didn’t you?

For these reasons, he states “I’ll stick my neck out. The Leaf will get all the favorable publicity in the world but be blown away in the market.” Mr. Flint then goes on to quantify what ‘blown away’ represents in actual yearly sales; a few thousand, or maybe 10,000, or maybe 20,000, ok well no more than 30,000.

In the advantages column he states, “electricity costs less than gasoline” /you don’t say

I guess the Leaf really has very little going for it then. I guess freedom from foreign oil, or a healthier environment/better future for our kids doesn’t come into play here then?

To be fair, I usually end up on the same side of the coin as Mr. Flint. He was ahead of his time warning of trouble with the domestic automakers. He pointed out the dangers involved with their massive legacy costs, and has had a lot of other good insights, all the while being the very best ‘cranky old dude’ that he can be. I can respect that.

However, sometimes he is so committed to his own position, to viewing the auto industry only through Detroit-colored glasses, that he goes completely off the rails.

He has put out such whoppers as the only reason Korean car maker Hyundai has done so well improving on sales of late is because of the currency swap (even though Hyundai offers thousands less in incentives that of their Detroit brethren)…but just you wait, that failure is still coming (because they are over zealous and want to be number one. How dare they!)
— just check back in three years to see he was right.

/yeah, we will all bookmark your article on that one and check back in 3 years (Hyundai success is totally not because of smart/timely product planning at all)

I feel Forbes’ senior automotive editor is putting out another ‘Hyundai’ story when he reflects on the Nissan Leaf’s future prospectus. In fact Mr. Flint has been pretty much negative of a electric future for quite some time now.

A year and half or so ago he was “skeptical about how quickly manufacturers will solve the lithium-ion batteries’ problems, such as overheating,” and questioned if they would “be able to put the batteries into mass production.” This kind of fear mongering is not restricted to just the Leaf and pure EVs, he has suggested that the Volt itself may fall prey to “rebooting at 60 miles per hour,” which could mean “crashing into a highway post.” /oh no!

As for premise of the article, I do agree that Nissan is being way too ambitious with sales forecasts for the Leaf in North America. I think if Nissan does come to market in the low-mid $30s, a sell rate of 20,000-30,000 copies a year sounds just about right.

Also, Nissan building a plant to produce 150,000 cars a year in Tennessee feels more like a DoE money grab than a sound business plan; unless of course they are exporting them to the rest of the world as well. /and there it is…the bigger picture

This is where Mr. Flint falls down, you see his version of success is measured only by its reception in America. If this piece was on the Volt, and he concluded that it was not viable in the US, then the project would then most likely be considered a failure. However, Nissan is not GM, and it is not banking on the US to be the measure of its success for its electric car. The Leaf is being built and marketed as a world car.

The Leaf will be coming to market as the uncontested leader of electric vehicles in many countries around the world. In the majority of these markets gas is much more expensive, a lot more people live on top of each other in big city centers, and the regulations/taxes and tariffs (that the Leaf will be exempt from in many cases) on gas powered cars are steep, making the prospectus of a BEV a different proposition entirely than say in…Nebraska.

The electric cars Nissan sells in the US are the gravy, not the potatoes. Sure they would like to sell hundreds of thousands, but every Leaf that Nissan does ship to North America next year, whether that be 10,000 or 30,000 is purpose sent…as a sale, or at the request of the dealer. There will not be 25 electric cars lined up outside a Nissan dealership because the mothership is forcing inventory down their dealer’s throats with $10,000 ‘red tag’ signs plastered all over them.

/the ‘world’ is larger than the North America Mr. Flint, times have changed.
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