Mass Market Electric Cars Finally Due for Launch

After so much media coverage, money and let’s face it hype it will be a welcome development when the first two “mass market electric cars finally come to market at the end of this year. The Nissan Leaf and GM’s Volt will be released in the US and Japan according to a Financial Times article this week.

Somewhat surprisingly, the US came out top in a McKinsey research paper as the country most likely to lead the emergence of electric cars as a means of mass transportation. To stem the flow of righteous indignation letters let me clarify why I say surprisingly. It is not because I don’t think Americans care about the environment, it is not because I don’t think Americans embrace new technologies, both statements are clearly nonsense, it is because electric cars at this stage of their development are limited in range and the one of the biggest hurdles facing widespread acceptance of electric cars according to a different FT article is “range anxiety, especially given the initial scarcity of battery charging facilities. Couple that concern with the size of continental North America and actually the US looks a rather unlikely early adopter. Places that have shown an early enthusiasm such as Israel, Singapore and certain European countries with small land areas but highly developed road infrastructures appear better suited.

But such barriers haven’t dented President Obama’s enthusiasm for creating a new Industrial Policy around such green tech industries. According to a Bloomberg article by the end of 2011, the White House plans to channel more than $50 billion to thousands of clean-technology companies through tax credits, low-interest guaranteed loans, and grants. Add in money for a smart grid, research and consumer tax breaks, such as the $7,500 credit for buying an electric car, and the commitment rises to $69 billion. In auto batteries alone, the article quotes the White House as saying that it will take the country from two factories producing 2% of the 2009 global output of high-performance batteries to 30 factories accounting for 20% of the world’s output by 2012.

In all probability it will be in cities that electric cars are taken up with any real enthusiasm. The Nissan Leaf will carry a price tag of $32,780 although it will qualify for a $7,500 federal tax credit, but with a range of 100 miles before the battery needs a re-charge the “range anxiety will kick in for many potential buyers. Perhaps to overcome this and foster greater familiarity, Nissan has a done a deal with Enterprise Rent-A-Car and Hertz to take electric cars and run them from city locations. Enterprise is taking 500 cars and putting in charging locations at downtown Manhattan locations and one of New York’s airports. Nissan hopes this will get the car into the hands of people who would not otherwise consider buying one.

GM’s Volt is a more practical proposition although it comes with a hefty price tag at $41,000 before tax credits. The Volt will travel only 40 miles on battery alone but the combined small petrol engine will extend the range via a generator to about 340 miles, much as a small conventional car. GM is pushing the lease route to market offering the Volt at $350/month for 36 months.

There is plenty of precedent for governments spending taxpayers’ money supporting fledgling industries, from the railroads in the 19th century onwards governments have attempted to pick winners and accelerate their adoption or roll out. How viable the billions being invested in green technologies will prove to be remains to be seen but over the next few years car makers in particular will certainly need a great deal of flexibility in their business plans as the relative success of the technology is realized.

–Stuart Burns

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