Tuesday, January 12, 2010

Electric Vehicles: It Might Sound Like a Good Idea; But There's At Least a 15-Year Payback Period; What Were They Thinking?

From today's Detroit News:
As automakers aggressively pursue electric vehicles, a study released today shows the cost targets behind the plans are unlikely to be achieved, making it hard for consumers to recoup the extra cost of buying electric. The study by Boston Consulting Group, released at an Automotive Press Association event in Detroit today, concludes the cost of electric vehicles is unlikely to drop to the $250 per kilowatt/hour threshold that is cited by many carmakers for these vehicles to be competitive in price.

That benchmark is not possible without a major breakthrough in battery technology, and no such breakthrough is on the horizon, said Xavier Mosquet, the Detroit-based leader of BCG's automotive group. As a result, the payback time for an all-electric vehicle in the U.S. is about 15 years, and for an extended-range vehicle such as the Chevrolet Volt it would be 19 years, the study finds.

For consumers to break even on their electric car purchase, one of the following things must happen:

• There is a chemistry breakthrough that keeps material costs the same while creating a battery that can store twice as much energy, reducing the cost from $400 per kW/hr to $215.

• A new $7,700 government incentive is offered.

• Owners triple the number of miles they drive annually so the extra cost pays for itself.

• Oil prices increase from $100 a barrel to $375 a barrel.

• A 210 percent incremental gasoline tax is implemented.

While any of them are possible, or a combination of each could add up to enough, Mosquet said he sees it as unlikely. As a result, he expects electric vehicles will continue to play a minor role in most automakers' portfolios.
MP: Aren't they supposed to do a cost-benefit analysis ahead of time?

Thanks to R_Adams.


At 1/12/2010 4:47 PM, Anonymous CompEng said...

I've heard some interesting things about potentially much denser lithium storage cells using nanotechnology. But generally, these things aren't price/performance competitive. What they do have the potential to offer is amazing acceleration at very low noise levels. Hybrids make a little more sense efficiency-wise, but again, they're still in the "almost as good as a gasoline car" category economically.

At 1/12/2010 5:13 PM, Blogger jeppen said...

Well, the EU countries have big gasoline taxes and are used to smaller cars, so we will do electric cars long before the US does.

Perhaps the big auto makers arent that us-centric. After all, there is a world outside of the US.

At 1/12/2010 5:38 PM, Blogger Bruce Hall said...

It's really very simple: Create shortages in presently abundant energy sources so that inefficient energy sources can "compete." I believe that is the EPA's unofficial motto. Or is it: "A penny saved is a pound of CO2 produced?"

At 1/12/2010 5:44 PM, Anonymous Lyle said...

Since this will be an option the customer gets to do the cost benefit analysis. GM admits the first volt will not be cost effective, but they think they can wring some cost out of the electronics. Note that if GM can get some to buy the volt thats all that matters. There is a major dispute among auto companies on the electric versus hybrid, versus diesel issue. Diesel gets 20% better mileage right off the bat, because the Carnot Cycle allows it due to higher combustion temps.

At 1/12/2010 5:47 PM, Blogger juandos said...

"Well, the EU countries have big gasoline taxes and are used to smaller cars, so we will do electric cars long before the US does"...

Silly socialists but with the present administration and Congress we can be silly socialists too...

You'll know that electric vehicles will finally be practical when you see an all electric road plow running up and down the highway with the same endurance and power as today's diesels have...

At 1/12/2010 6:45 PM, Blogger OA said...

It's stunning that people are still talking about all electric when carrying an electrical generator (hybrids) works with a reasonable payback period.

I guess failing with the EV-1 a decade ago is no deterrent when the government keeps handing out taxpayer money.

But even though not fully electric, the price on the Chevy Volt is stunning considering how long hybrids have been around. All it seems to offer is a bigger battery pack.

At 1/12/2010 7:07 PM, Anonymous LAD said...

A market is the most effective method of conservation. In fact, if there is a market for a good or service, then any additional conservation efforts will only lead to waste.

At 1/12/2010 7:13 PM, Blogger W.E. Heasley said...

A cost/benefit analysis ahead of time? Central planners know what is best hence no need for C/B analysis!

However, Mr. Market will apply its own C/B analysis and sales will drag. Mr. Market will function at least as long as we are free to choose among alternatives.

Milton Friedman would be having a field day on this one!

At 1/12/2010 9:02 PM, Blogger Ryan said...

So lets raise the tax on gasoline by 210 percent?

At 1/12/2010 10:07 PM, Anonymous Rersli said...

Yes, the should do a cost benefit analysis in advance. Environmentalists never bother with such socially irresponsible obstacles to progressive reform.

It is likely that standard automobiles have negative externalities of at least $7700, so this might be an admissible alternative. However, I doubt that anyone has examined the negative externalities of the rare earth metals, nickel, and other environmentally hazardous components of electric vehicles. Then, there are the costs and environmental damage associated with installing new infrastructure and removing/disposing of the old.

Meanwhile, we are committing ourselves to an extensive natural monopoly which may be obsolete in a few years.

Finally, how are we going to power the recharge of all these electric vehicles? Coal, natural gas, nuclear, solar, wind?

There has been absolutley ZERO rigorous analysis of this proposal to make sure it is helpful to the environment much less economically cost effective.

At 1/12/2010 11:00 PM, Blogger rufus said...

The auto business is a long lead-time business. In a couple of years gasoline will be twice what it is, today (if not more,) and the battery system will cost half what it does today.

They'll sell a ton of these things.

At 1/12/2010 11:15 PM, Anonymous Anonymous said...

Wasn't it Milton Friedman who said that if liberals (aka progressives aka central planners) ran the Sahara Desert, that in five years it would run out of sand?

Liberal democrats have now taken over not one, but TWO American automobile companies and are running them out of business. Just wait until the Automobile Purchase Reform Act is implemented, and all Americans will be required to purchase an electric vehicle or pay a fine and go to jail. They're doing it with health care, why not cars?

At 1/12/2010 11:49 PM, Anonymous Anonymous said...

Its sounds like we'd better build a few hundred extra coal-fired energy plants in order to generate the power we'll need to run these electric cars. I wonder how many they'd sell if they labeled them "coal powered?"

At 1/13/2010 12:30 AM, Anonymous Lyle said...

RE Anon at 11:15 IF it is just the US government pushing why is Nissan definitly not a US car company pushing an electric vehicle, let alone the hybrids from the Koreans or more from Honda? Clearly they see a market for them. The foreign companies are far more innovated than the US dinosaurs, which is why the US big three are where they are. Toyota is big on hybrids, announcing a mini Prius.
The old big car model assumed a 1950s style family which is no longer the norm, and assumed 1 car per family so that it could fulfill all uses. It seems that a commuter car would make an Ideal second car for many situations.

At 1/13/2010 12:59 AM, Blogger PeakTrader said...

Lyle, U.S. automakers had a profit squeeze from lower perceived quality, which kept prices low, and higher production costs, from union contracts.

The profit margin on American SUVs is over three times more than Japanese hybrids. Perception is often more important than reality.

At 1/13/2010 2:43 AM, Anonymous Anonymous said...

They meant $250 per kilowatt*hour threshold, I assume.

At 1/13/2010 6:57 AM, Anonymous geoih said...

"... a chemistry breakthrough that keeps material costs the same while creating a battery that can store twice as much energy, ..."

See, it's simple. Just change the laws of physics to better suit our desires. How hard can that be? The government claims to change the laws of economics everyday and that seems to be working great. Why should this be any different?

At 1/13/2010 7:53 AM, Blogger sykes.1 said...

Does the cost/benefit analysis include replacement of the battery, which will probably be required once every five years or so.

Also, after almost 200 years we know almost everything there is to know about electro-chemistry. There are no new discoveries to be made in the reduction half-cell series or energy density. Electric vehicles are doomed to be short-range commuter vehicles for ever.

At 1/13/2010 8:39 AM, Anonymous DrTorch said...

People have an option. What's so bad about that?

There are all sorts of products you could bash for being extreme. Think of the cost of HiDef TVs just 8 years ago.

"$10,000 dollars for a TV; what were they thinking?"

Or Bugatis. "$1.2M for a car; what were they thinking?"

Similarly, there's a whole industry associated with high-performance stock cars that you could ask the same question.

And there are a variety of characteristics w/ electric cars that some consumers find appealing: such as the high torque allowing for rapid acceleration.

Anyway, if there's interest then battery (or more likely supercapacitor) researchers will be more diligent and find something. Or other factors may come into play.

The point is, this adds to the market. It's exactly what a libertarian wants. Why the criticism?

At 1/13/2010 9:00 AM, Anonymous Lyle said...

As evidence of non us automakers going electric here is an article from business week on Nissans plans.
It will eventually build their electric car in Symrna Tn, and could build up to 150k a year cars. So Nissan is doing the market test which is of course the best way to test ideas out.

At 1/13/2010 9:09 AM, Anonymous Rand said...

Note to Lyle:

I don't foresee a competition between diesel and hybrid technology, I foresee a consolidation of the two. A diesel-electric hybrid would combine the best of both technologies.

The hard part would be converting the refineries from optimized gasoline production to optimized diesel production.

At 1/13/2010 9:29 AM, Anonymous DrTorch said...


Yeah, a diesel hybrid would be a great merger!

Been looking for this for years.

At 1/13/2010 10:07 AM, Anonymous geoih said...

Quote from DrTorch: "The point is, this adds to the market. It's exactly what a libertarian wants. Why the criticism?"

Because it's all subsidized, political and arbitrary. It adds nothing to the market. It subtracts from the market. It's just another special interest using the corrupt power of government to fund their pet projects at other people's expense. If it was a good idea, people would pay for it outright, but it isn't. So they have to use government guns to take the money from people by force.

At 1/13/2010 10:15 AM, Blogger PeakTrader said...

DrTorch, yes, but if you were fooled into buying a product for a reason that turned out to be false, would you still be satisfied?

Misinforming people to the point of mass hysteria is one way to sell a product.

At 1/13/2010 11:14 AM, Anonymous DrTorch said...


If subsidies are the real problem, then say so. I didn't read a single point in this re: GM received subsidies to build this vehicle.

BTW, we're all saved b/c the "Committee on the Fiscal Future of the United States; National Research Council and National Academy of Public Administration" have all gotten together to write Choosing the Nation's Fiscal Future.

Now we have science to back up government central planning!


At 1/13/2010 11:39 AM, Blogger juandos said...

There's at least one excellent reason not to buy hybrid vehicles...

At 1/13/2010 11:53 AM, Anonymous geoih said...

Quote from DrTorch: "If subsidies are the real problem, then say so. I didn't read a single point in this re: GM received subsidies to build this vehicle."

You're being obtuse. The company is owned and controlled by the government. Nothing it produces is driven by the market.

Quote from DrTorch: "Now we have science to back up government central planning!"

Welcome back to the 1930's.

At 1/13/2010 1:46 PM, Blogger Patrick said...

In reference to your first comment about diesel electric snow plows:

You might be surprised to know that some of the larger mining haul trucks in use today utilize diesel generators to power DC-electric motors in each wheel. I know the point you were trying to make, but interestingly enough DC-electric motors have more desirable torque curves than internal combustion engines for heavy-duty applications. It's also why the Tesla is an interesting concept -- crazy low-end torque!

At 1/13/2010 2:20 PM, Blogger OA said...

Besides the straight forward tens of billions of dollars thrown into GM, here's the early subsidy story for the $40,000 Volt:

$7,5000 in the US.

CAD $10,000 in Canada.

I believe the Prius sells in the mid 20k range. And there are many other hybrids well under $40,000.

At 1/13/2010 2:23 PM, Blogger OA said...

Oops, one more subsidy:

$136 million in tax abatements to build the Volt plant. Over 30% of the cost.


At 1/13/2010 3:00 PM, Anonymous Lyle said...

Re diesel production, it is not that hard since fuel oil, jet fuel and diesel come from the same part of the crude. Yes you would need some finishing processing however.

On the diesel electric issue recall that railroad locomotives are almost all diesel electrics. If you want torque you want electric power you may have to limit the torque or you will snap the drive shaft however. Generally diesel electic makes sense where trying to run a drive shaft is difficult and high torque is needed with no transmission.

At 1/13/2010 6:00 PM, Anonymous Anonymous said...

Don't you know that the failure of the EV-1 was actually a giant conspiracy by big oil and the carmakers? :)

Even with the subsidies the govt will provide for purchasers of the volt it won't likely be a good purchase. Also, I have a hard time believing that the quality will be where it should be. It'll be another status car for elites.

At 1/13/2010 10:39 PM, Anonymous Anonymous said...

People buy cars for all sorts of reasons, it's a lifestyle choice. A fiat pays back sooner than a Mustang, what's the point?

Also, isn't the idea with any new technology that it will improve over time? I bet Kodak laughed themselves silly at the first digital camera.

At 1/14/2010 4:56 PM, Blogger VangelV said...

People buy cars for all sorts of reasons, it's a lifestyle choice. A fiat pays back sooner than a Mustang, what's the point?

The point is that people will not buy overpriced cars if their goal is to save energy costs.

Also, isn't the idea with any new technology that it will improve over time? I bet Kodak laughed themselves silly at the first digital camera.

It is possible that the technology will improve but it has a very long way to go before it is remotely attractive if the goal is to save money and energy.

At 10/14/2010 8:34 AM, Blogger VangelV said...

Here we go people. It seems that GM lied about the Volt. The payback figures cited here were way too optimistic because the Volt will not get the great mileage that was being touted by GM. The company lied.


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