Automakers push ahead on plug-ins despite unknowns
Electric-vehicle technology is ready to go. To scale up, automakers need to navigate uncertainties around consumers, fuel prices, and government policies.
DETROIT--People in the auto industry are opening up a new chapter in its history by transitioning to electric vehicles but they're writing the book as they go along.
The technology to make fun-to-drive, well connected plug-in vehicles is already here. Now, auto and utility companies are grappling with how to make these electric vehicles a commercial success, speakers at the Business of Plugging In conference said here today.
Rather than see predictable and steady demand in the next few years, automakers should expect sales to spike and dip with the cost of gasoline and government incentives, said auto industry executives. Just like hybrid sales have zigzagged over the past decade, plug-ins will likely do the same because they are typically more expensive than gasoline cars.
That uncertainty over how consumers will take to plug-ins, along with several other unknowns, forces automakers into the tricky position of investing in electric vehicle technologies without knowing when they'll yield dividends.
Meanwhile, consumers as a whole don't really understand the technical nuances and trade-offs between a traditional hybrid, plug-in hybrid, extended-range electric vehicle, and a battery-electric vehicle.
"We don't know what we don't know and products haven't been in customers' hands long enough for us to be right 100 percent of the time," said Nancy Gioia, director of global electrification at Ford. "This is a marathon of 50 years to change the fuel source diversity. It's not going to happen overnight."
One of the persistent barriers is the cost of electric vehicles, notably the batteries. The federal government is now offering up to $7,500 in tax credits for consumers who buy battery-powered cars, but that incentive is expected to eventually be phased out.
Speakers said that the cost of batteries for an electric vehicle can go from about $600 per kilowatt-hour to about $300 per kilowatt-hour in the next 10 years by scaling up manufacturing and technical advances. But automakers need to invest in these technologies now if they are able to have a portfolio of EV products to meet fuel efficiency mandates and consumer demand.
General Motors, for example, decided to make its own battery packs for the Chevy Volt and said it will make electric motors, too, rather than source them all from suppliers. Ford, meanwhile, intends to make the technical transition by manufacturing vehicles on the same line with different powertrains--either internal combustion engines, hybrids, or electric.
"You have to have the courage to lead even though the economics aren't great and create the environment where it's one of the things that brings costs down," said Doug Parks, global vehicle line executive and global vehicle chief engineer for electric vehicles at GM. "You have to iterate design, get more volume, and learn with time."
Need for long-term plan
Even as auto and utility industry executives discussed the business issues surrounding the development and rollout of electric cars, speakers regularly noted that government involvement is critical to make the transition possible.
For example, municipal and local governments have created conditions to make it easier for plug-in drivers, such as installing public charging stations and streamlining permits for home chargers.
The lack of a long-term federal policy on energy and industry is holding back investment in these new technologies, speakers said a number of times. During a morning keynote speech, Rep. John Dingell (D-Mich.), often called the auto industry's best friend in Washington, said that the country's inconsistent, "in and out" energy policies result in other countries manufacturing technologies invented in the U.S.
Other countries have industrial policies that give technology companies access to capital, which allows them to scale up, said Ann Marie Sastry, a University of Michigan professor who started a next-generation lithium ion battery company called Sakti3. It is now looking for a location to start manufacturing its technology and is weighing offers from different regional governments.
"We have choices as a high-tech start-up. We could be out raising money from investors...or we could be doing work and scaling up," she said in a briefing with reporters. "If we see our competitors in other countries getting access to capital, we say that we're disadvantaged."
Government entities can also drive demand for new technologies by being buyers. Fleet operators are better customers for electric vehicles in particular because there are predictable routes and they are willing to purchase based on the total cost of ownership.
Meanwhile, the Center for Automotive Research (CAR), which organizes the conference, projects that the U.S. auto industry won't have enough people educated and trained in electric-vehicle technologies. In five years, it projects that there will be a shortage of 10 million skilled workers, said CAR Chairman David Cole.
Even with a long list of challenges, speakers here said they are confident that electrification will take hold over time. The consensus appears to be that hybrids, rather than electric-only vehicles, are the most commercially viable because of costs.
"People are not dealing so much with the technical problems, like batteries, as they were a year ago," said Oliver Hazimeh, director of the auto practice at consulting company PRTM. "The technology is there. Now people are understanding more the deployment challenges."