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Tesla Model S

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  (Source: LucasFilm)
"Always with you, what cannot be done"

Most would agree that U.S. President Barack Obama's goal of having 1 million electric vehicles on the road by 2015 is ambitious.  But with the first modern electric vehicles like the 2011 Chevy Volt and 2011 Nissan LEAF EV selling out their low-volume of pre-orders, and with competitors like Ford and Tesla Motor Company waiting in the wings with upcoming offerings, it seems possible.

However, a panel of government, industry, and academic experts opines that despite that optimism, the goal is likely impossible to be reached without major changes.  The panel was held at Indiana University's School of Public and Environmental Affairs in Bloomington Indiana. 

The panel's report is entitled "Plug–In Electric Vehicles: A Practical Plan for Progress" [PDF].

John D. Graham, Dean of the School of Public and Environmental Affairs at IU sums up the report's sentiments, stating [press release], "President Obama’s dream is appealing and it may be achievable, but there are big barriers to overcome before the mass commercialization of electric vehicles will occur."

To put things in perspective, at expected 2015 volumes, 1 million electric vehicles would likely be around 0.4 percent of the vehicles on American streets, at most.

Some environmental groups were quick to attack the report.  Roland Hwang a San Francisco-based blogger [blog] with the National Resources Defense Council's Transportation Program is cited by The Detroit News as stating that the figure is feasible.

Whether or not environmentalists like Mr. Hwang realize it, the report is likely less of an effort to knock EVs, but more of an effort to appeal to the government and public for more funding.  That is evident by the fact that the panel responsible for the report contained representatives from Ford (who is preparing an EV), from the Center for Automotive Research (an industry group whose reports have argued that the government needs to provide greater funding to meet fuel efficiency targets), and the International Council on Clean Transportation (a global warming advocacy group).

Many of the panel's members seem designed towards this end; take the panel's chairman, former Ford Motor Company executive Gurminder Bedi comment -- "A successful national program for electric vehicles will require an unusual degree of cooperation between industry and government, and a clear focus on the needs and concerns of consumers."

The report does offer some seemingly accurate insight into some of the critical problems/challenges facing EVs -- namely high costs and the question of consumer confidence (resale value/reliability).

Regardless of the accuracy of the pressing need for more government funding of EVs, these groups are walking a dangerous tightrope.  As the saying goes "the squeaky wheel gets the grease" and if they don't lobby, they will likely miss out on a promising business opportunity.  On the other hand, if they lobby too hard, they risk alienating the U.S. public and facing backlash from the U.S government.

The report comes at an opportune time, when President Obama and Vice President Joe Biden are trying to push a new EV incentives bill through U.S. Congress, which would, among other things, change the $7,500 tax credit to an instant refund and expand the quota of EV refunds per automaker.  The bill, sponsored by Michigan Senator Carl Levin (D) would cost taxpayers $19B USD over 10 years.

In that regard, what on the surface might appear a report running counter to the Obama administration's vision, is likely a calculated effort on the administration and auto industry's behalf to try to sell the need for more funding for "green vehicles" to members of Congress and to the public.



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RE: Okay here we go...
By Iaiken on 2/3/2011 12:59:30 PM , Rating: 3
The problems that dragged down the US (and other) financial sectors were numerous, but the banks that wound up in trouble had many aspects in common that were not shared by banks that managed to remain solvent. These aren't mom and pop shops that will go unnoticed if they go tits-up. The banks have demonstrated that unless mandated to do so, they will put as much money at risk as they possibly can in an effort to maximize profits.

The fact is, there still need to be some enforceable ground rules in the financial sectors as well as proportional fiscal assets set aside by the banks to offset the risks they undertake. The bigger the risk, the more capital reserve they should set aside. This creates a natural limitation on how much risk a bank can undertaken by removing the additional amount that needs to be apportioned to the reserve from the risk equation.

How many rules should their be? Well that's hard to say, I'm of a mind that there should be as few rules as possible, but that those rules should have a reasonably high enough impact as to achieve the desired effect. Ideally such rules would have already been in place in other nations so that their impact can be analyzed and the fewer the rules, the easier it is to ascertain their individual and synergistic effects.

Something like the electric car subsidies to encourage buyers is completely different as it is difficult-to-impossible to gauge the affect the subsidy has. Especially considering the costs of the vehicles which are priced out of the range of the "average consumer". The average cost of a new car in the US last year was ~$28400 and this number was slightly skewed higher because of "cash for clunkers" and is an after tax figure.

The Leaf ($32,780), Volt ($41,000) and upcoming Model S ($57,400) are all significantly out of the reach of the overwhelming majority. The cheapest of which would leave you with monthly payments of $637 (60 months at Nissan 4% Financing) or $460 (60 month at Nissan 0% lease). These payments have to be carried by the owner until they receive their tax credit.

This is also why Tesla's current strategy is going to play out better. They are competing against the Lexus IS350, the BMW 335/528 and the Mercedes E-series. It aims to offer comparable size, performance and luxury as these cars at a price point that is only helped by the $7500 credit for people who didn't otherwise need it.

For these buyers, a $7500 tax credit is not the difference between buying a Tesla Model S or not. They can afford to buy the car either way and so it's just $7,500 + the interest that they didn't have to pay on it over the term of the loan in their pocket. In this regard, the subsidies are a huge swing and a miss as they don't help anyone who would actually need the help.


RE: Okay here we go...
By hathost on 2/6/2011 4:17:39 PM , Rating: 2
RE: Iaiken

There are ground rules in place for lending. Its called going bankrupt and closing up shop. Bank takes too many risks and looses all of it's money then it goes out of business and the people involved have learned an important lesson about appropriate risk management. When the government with nearly unlimited amounts of money and the power to tax and print money decided to bail out these irresponsible lending practices (which they forced through regulation) then you have government causing problems in the market and having to then institute new programs to fix the problems with their old ones.

Next, susidies are only going to push up the cost of an EV because the companies making them are going to be under less constraint to hold down costs and be able to take the subsidies as extra profit. I'm all for making profits by companies but not when they are skipping over the competition to WIN my business and just getting the government to TAX me and then give it to them.


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