"The Volt: Not Ready to Roll"
By Charles Lane
Wednesday, April 29, 2009
General Motors has announced a plan to stave off bankruptcy that
includes cutting 21,000 jobs, reducing its dealer network and
eliminating its Pontiac division. "I'm a believer in dealing with
reality," GM chief executive Fritz Henderson said.
Better late than never. GM wouldn't be in quite so deep a hole if it
had not sunk a billion dollars, and much of its corporate reputation,
into a not-very-realistic plug-in electric hybrid vehicle known as the
Likely to cost consumers more than $30,000 even after a big government
tax rebate, the little four-seat Volt "is currently projected to be
much more expensive than its gasoline-fueled peers and will likely
need substantial reductions in manufacturing cost in order to become
commercially viable," President Obama's automobile task force reported
on March 30.
Translation: Unless and until gas prices shoot up, you'd be crazy to
buy one of these much-ballyhooed vehicles, which will run 40 miles on
a single charge if GM can overcome difficult battery-engineering
To be sure, the green-leaning Obama administration has not ruled out
allowing a restructured GM to continue pouring (federal) money into
the Volt. But I hope it won't. The Volt and other electric vehicles
could gobble up more subsidies than ethanol.
Though Obama promised to have 1 million plug-in hybrids on the road by
2015, the dream of a mass-market electric car remains implausible and
probably will be for years.
For some people -- environmentally friendly Hollywood stars and other
wealthy dabblers -- cost is not the top concern in deciding what car
to buy. For them, a Volt or even a $101,500 all-electric Tesla
Roadster might be of interest.
Everyone else looks at total cost of ownership, which includes not
only the purchase price but also taxes, fuel consumption (electricity,
in the case of an electric car) and depreciation.
A 2009 study by Boston Consulting Group found that the five-year total
cost of owning an electric car would remain "relatively unattractive
to consumers in 2020, unless its cost is subsidized."
And that's in Germany, where high fuel taxes give drivers much
stronger incentives to use alternative-fuel vehicles than in the
United States. So if the electric car isn't practical in Europe's
biggest car market, it's even less so in the States.
In fact, Boston Consulting Group found that the total cost of
ownership of existing hybrids and advanced internal combustion engine
cars is more attractive than that of electric cars as long as oil
prices are below $280 a barrel. Oil is trading at around $49 a barrel
today; in the United States, gas costs about $2 a gallon.
Small wonder that venture capitalists have pulled the plug on one of
the most promising new electrics, the Norwegian THINK, a two-seater
built for city driving. At last check, the Norwegian government was
refusing a request to bail out the company.
And small wonder that the Obama task force looked askance at the Volt,
which offers the size and power of some small Volkswagens at Cadillac
prices. Geoffrey Styles, founder of the energy consultant GSW Strategy
Group, recently reported that it would take a minimum of six years for
drivers to recoup the differential between the Volt's projected price
and that of a Toyota Prius -- even assuming $4 per-gallon gasoline.
Electric cars might ease a lot of problems related to auto emissions
-- global warming not least among them. This is why green-minded
politicians love them and entrepreneurs tinker with them.
Of course, to the extent that they relied on coal-fired electric
plants for power, electric cars might simply move the emissions
problem around. And who knows what environmental challenges might be
posed by the disposal of millions of big, used-up lithium-ion
More fundamentally, the electric car is hostage to the oil-price
cycle. Indeed, to the extent that we use more electric cars, we reduce
the demand for petroleum, which drives down the price of petroleum,
which makes electric cars less competitive with gas-burning ones --
and so on.
There's no way to change this pattern unless and until a breakthrough
radically cheapens electric-car technology -- or the U.S. government
drastically and permanently increases gas taxes.
In the meantime, we would probably accomplish more in terms of
sustainable fuel savings simply by driving less, trading in big cars
for smaller ones, and improving existing hybrid and internal-
The Obama administration should refrain from lavishing public money on
losing propositions such as GM's Volt -- and let the entrepreneurs
keep on tinkering.
[Charles Lane is a member of the editorial page staff.]