CEOs endorse 'foothold strategy' for electric cars

The Electrification Coalition of different companies pushes for policies to promote electric vehicles in six to eight regions in the U.S. as a way to build critical mass.

A group of CEOs on Monday came out favor of a regional roll-out of electric vehicles in up to eight cities to demonstrate the viability of the technology and incubate the fledgling industry.

The Electricifcation Coalition held a press conference in Washington, D.C. and released an Electrification Roadmap, which prescribes the business and policy steps required to ramp up electric vehicle adoption .

There are 13 members of the coalition, including the CEOs of Nissan Motor, FedEx, Pacific Gas & Electric, and battery maker A123 Systems. The coalition was spun out of Securing America's Future Energy, a lobbying group focused on reducing U.S. imports of oil.

The Electrification Coalition argues that light-duty electric vehicles are the only technology that can cut oil imports and reduce carbon emissions in the near term. Its report (click for link) focuses on what's required to make electric cars available at large scale.

"I think we have the conditions for the mass market. But it's going to take more time," said Carlos Ghosn, the president and CEO of Nissan. "The investments to be made are huge. To make 50,000 batteries is a $250 million investment."

Of all the major automakers, Nissan is the most bullish on electrification. It is releasing an all-electric family sedan called the Leaf in the U.S. and Japan next year. It projects that 10 percent of new cars sales in 2020 will be electric, which is higher than most analysts' projections.

The shift presents challenges to auto makers that are unsure of consumer acceptance. Utilities and municipalities need to prepare in order to make these vehicles more consumer-friendly but they, too, are unsure what the volume of sales will be.

To take some uncertainly out of the picture, the Electrification Coalition advocates a " foothold strategy ." Six to eight cities would create a number of incentives for electric vehicles, such as preferential parking and public charging stations. They would apply for government incentives and then test out the system to help bring electric cars to "critical mass," explained David Crane, the president and CEO of power generator NRG Energy.

In the first phase, the plan calls for getting 50,000 to 100,000 light-duty plug-in vehicles on the road per year in certain areas starting next year and then expand to 25 cities. Its report sets a target of having 25 percent of new vehicle sales be plug-ins by 2020, which is 5 million vehicles. A jump to 90 percent of new vehicle sales being plug-ins by 2030 would represent roughly 17 million units, according to data from consulting company PRTM.

For consumers, batteries should be owned and financed separately from the car itself , Crane said. Because batteries are an expensive component that makes it more expensive than a comparably-sized gasoline car, auto makers, including Nissan, are looking at ways to keep monthly car payments roughly the same by leasing batteries.

Governments around the world have established financial incentives for electric vehicles because it improves national security and addresses environmental problems, Nissan's Ghosn said. He noted that France, the U.S., and Japan each have established a tax credit of about $7,500 to consumers who buy an electric car.

In addition to federal tax credits, the coalition endorses incentives for municipalities dedicated to bringing in electric vehicles. Also required is technology to allow consumers to charge at off-peak times.

Speakers at the coalition launch also underscored the economic reasons for which governments are pushing electrification. Reducing oil imports would mean that billions of dollars of U.S. wealth would stop being exported, said Crane.

Government programs to drive investing in electric vehicle manufacturing also help the U.S. auto industry adapt to emerging technologies.

"We can do this. This is something we have the ingenuity for--we have enough innovation. What we need to do is capture that and use that to our advantage to build factories," said David Vieau, the CEO of A123 Systems.

Click for larger image. Electrification Coalition
Updated at 11:40 a.m. PT with corrected figure for sales projections.

 

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