How Prepaying for Plug-In Cars Can Save and Transform the Auto Industry
By Felix Kramer
The following proposal will be distributed at the Electric Drive Transportation Conference in Washington, D.C. during the week of December 1, 2008. EV World is reproducing it here to elicit discussion on the idea.
INTRO: "How Prepaying for Plug-In Cars Can Save and Transform the Auto Industry" is CalCars' proposal for federal actions in December-January to aid the auto industry. We hope that the concept and perhaps the specifics of this proposal can be incorporated into Congress's response to the "sustainable plans" the carmakers will be bringing to Washington DC.
HOW PREPAYING FOR PLUG-IN CARS CAN SAVE AND TRANSFORM THE AUTO INDUSTRY
Congress and the President-Elect have asked Detroit's automakers to come back with a plan. What if that plan, and automakers' credibility, could be based in large part on delivering the fuel-efficient low-emissions plug-in cars people want, using today's technology and today's infrastructure?
We propose a way to give carmakers the cash they need to keep going -- while making sure they devote maximum effort to rapidly transform their companies and their product lines. We build on the breakthrough $7,500+ plug-in tax credits enacted in October -- when the federal government quantified the public benefits of displacing petroleum with cleaner, cheaper, domestic electricity.
Our "end of business as usual" proposal is a multiple win: for car buyers, communities whose plants will stay open, automakers, energy security, and efforts to slow global warming. Here's our plan, followed by some additional explanations:
A FEDERAL "PREPAID PLUG-INS PLAN" FOR A 21ST CENTURY CAR INDUSTRY would give carmakers real targets and quick funds. Here's how it can work:
CARMAKERS PRE-SELL PLUG-INS. They're encouraged to accept $10,000/vehicle deposits on highway-capable PHEVs and EVs with at least 4kWh battery capacity (the minimum for existing tax credits), to be delivered ASAP and NO LATER THAN YEAR-END 2012. The sooner they issue PRELIMINARY specifications and maximum prices, the sooner they become eligible to collect prepayments. Any carmaker that wants to receive loan guarantees beginning in January 2009 must commit by year-end 2008 to have at least one eligible plug-in vehicle for sale by the end of 2010 in volumes greater than 10,000.
INDIVIDUAL CAR BUYERS get a 100% refundable federal tax credit on their $10K prepayments.
FLEET BUYERS get 100% refundable federal tax credits. (Public fleets receive 100% grants.)
U.S. GOVERNMENT The level of loans guarantees to carmakers is based on the volume of prepayments received by each carmaker. Government also provides bonus payments to automakers for every plug-in vehicle delivered by year-end 2012 -- large incentives in 2010, declining in later years. Deposits with carmakers that don't deliver by 2012 become debt to U.S.
CONVERSIONS are included in tax incentives to consumers and automakers for safe and reliable plug-in retrofits of existing internal combustion engine vehicles.
THE PROGRAM AND THE MATH: We aim to enlist five million pre-purchasers. At an average of $10,000, this will generate $50 billion for carmakers. Buyers will get the money back in less than a year via tax credits. Credits for deposits made by 4/15/09 can be counted for the 2008 tax year.
OUR IMMEDIATE GOAL: To get buy-in on this concept -- or some variant of it -- so it's on the agenda of automakers, Congress and the incoming administration. This can happen if ANY ONE OF THESE PARTIES steps up in the next few weeks.
NOTES: This is an outgrowth of the "fleet moratorium" idea by Steve Marshall of the Cascadia Institute and Denis Hayes of the Bullitt Foundation plus CalCars (see the second half of "Can Fleets Help Rescue Auto Industry? Four Actions Could Make a Difference" at CalCars-News). It also reflects strategic thinking by Craig Lewis, VP of Government Relations at GreenVolts and formative member of Clean Tech for Obama.
Please consider endorsing it on behalf of your company or organization; convey comments to firstname.lastname@example.org (Felix Kramer) or call 650.520.5555, and by all means forward the proposal.
ISSUES TO BE RESOLVED:
How does this connect to the $7,500 already available to the first 250,000 purchasers?
We need an adjustment mechanism for buyers of vehicles whose specifications/price change significantly from when they were prepaid to when they become available.
This program can be oriented to automakers that most need support if the incentives they receive include small levels of government equity.
A possible parallel program that would expedite the initiative is a federal "feebate." This revenue-neutral measure will incentivize high-MPG vehicles in multiple vehicle classes and disincentivize gas-guzzlers, while having no impact on most mid-range MPG cars.
WHY ARE CAR SALES FALLING? Not just because of the economic crisis. The more Americans hear that better cars are on the way, the more individuals and fleets will be reluctant to commit to inefficient vehicles whose resale value may fall quickly because they run only on price-volatile, polluting fossil fuels. We can harness these impulses.
WHAT ARE TIMING ISSUES FOR CARMAKERS TO SURVIVE LONG ENOUGH TO EVOLVE? The low-carbon, high-MPG plug-in hybrids (PHEVs) and electric vehicles (EVs) they want to sell are two to four long years away from mass production. General Motors says it plans to electrify its whole fleet, beginning with the Volt and the Vue in 2010-2011. Chrysler CEO Robert Nardelli says choices must be made -- so he's focusing on electricity. Chrysler plans to build one of three "production-intent" plug-in prototypes. Ford has PHEV prototypes of its Escape hybrid; Bill Ford has talked with President-Elect Obama about support on electrification. But Ford Motor Company plans no plug-in production until 2015. At this rate, vehicles won't arrive soon enough to save the auto industry -- let alone U.S. industrial leadership or the climate.
WHY NOT ENLIST THE AMERICAN PUBLIC'S BUYING POWER? We're inspired by how Americans rose to past challenges: We raised $17 billion Liberty Bonds in two years in World War I. And 85 million Americans bought $185 billion in War Bonds during World War II. Especially since dollars back then were worth over ten times more than now, our proposal is small in comparison.
WHO WILL PUT DOWN $10K IN ADVANCE? The proposal challenges automakers to explain, market, and promote plug-ins as energetically -- and urgently -- as they have other vehicles. Plug-in advocates will pitch in. It requires having cash on hand, but telling buyers they'll get the prepayment back in a tax credit within months will help. Auto industry supporters are prime candidates.
FLEETS ARE ALREADY CONSIDERING PURCHASES: The November 14, 2008 Wall Street Journal reports, Hey, Auto Industry, Need a Jump? Utilities Consider Buying Electric Cars "to put weight behind development and, perhaps, persuade Congress to give the auto industry the assistance it needs." (Find the story at CalCars-News). Auto rental/car sharing companies are other likely candidates.
HOW DO CONVERSIONS FIT INTO THE PICTURE? Retrofits will speed plug-in market penetration beyond new cars; even "partially electrified" vehicles will significantly reduce fossil fuel use. They will provide revenues to carmakers for vehicles they've already sold. And they will create local green retrofitter/installer jobs. Both independent companies and carmakers partnering with third party QVMs (Qualified Vehicle Modifiers) can participate in conversion businesses.
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