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EV World Open Access Article
Honda Insight II could close the price gap between green cars and gasoline models.
2010 Honda Insight resumes the Insight model line, but this time as a roomy, four-passenger sedan that could cost under $20,000US when it goes on sale the Spring of 2009.

Solving the Green Car Conundrum

Technology and smart policies can make the unprofitable profitable.


By Bill Moore



Open Access Article Originally Published: December 28, 2008

Detroit, we have a problem.

Congress is demanding you build more fuel-efficient cars, especially hybrids, and as soon as feasible, plug-in hybrids. Even battery electric cars are back on the agenda. And you've got until April 1, 2009 to come up with definitive, workable plans on how to do it.

The government's call comes at what might be regarded as the worst possible moment. Any consumer incentive to shift to green cars has just had the steam let out of it as gasoline prices at the pump here in America have fallen to where they were the morning of September 11, 2001. Americans can top off their fuel tanks again for a $20 bill, instead of having to rob Peter to pay Hugo. It was low gasoline prices that helped stimulate demand for Detroit's highly-profitable gas guzzlers, and may do so again, it is feared.

The conundrum Detroit is facing is this: it knows it needs to build greener, more fuel efficient vehicles in order to continue to garner support in Congress for its proposed technology shift, but the very cars it is being asked to build will, for some time to come, be significantly more expensive than less efficient, less pricey and more profitable models.

Simply stated, Detroit cannot become profitable again by building unprofitable vehicles that few consumers are willing to buy. Yet, those are the very vehicles Congress is demanding they build.

Concerned about their own personal finances and future, American consumers are either postponing their car purchases or are going with less costly choices. The two most popular vehicles now being bought in North America are the Toyota Corolla and Honda Civic, both relatively fuel efficient and priced thousands less than their hybrid counterparts.

The Civic Sedan retails for between $15,505 and 23,655 depending on how it's equipped. The Hybrid model starts at $23,650 and tops out at nearly $27,000. The Civic DX is rated at 26 mpg in the city and 34 mpg on the highway, while the hybrid model turns in 40 city and 45 highway. Weighing the price and mileage differences, most American buyers usually opt for the non-hybrid model. You can buy a lot of gasoline, they will argue, for the difference in sticker prices, vehicle taxes and accumulative finance charges.

To solve the problem, carmakers have to find ways to narrow the price gap between their green vehicles and the not-so-green models. Here there are two bright spots on the near horizon.

Honda claims that is has found ways to seriously cut the cost of its hybrid technology to the point where it will be on an even par with its non-hybrid models. The new Insight, a four-passenger, dedicated hybrid sedan due to go on sale Spring 2009, is rumored to be under $20,000; and speculation places it as low as $18,500. The company has not formally announced its MSRP yet, but a sub-$20,000 Honda hybrid is going to pose a serious challenge to the competition.

The second encouraging sign -- unless you're a beleaguered Detroit automaker -- is the introduction of the BYD F3DM, the world's first commercially mass-produced, range-extended electric car. Equipped with proprietary battery technology, the Chinese-built sedan can travel 60 miles as an electric car, and another 240 miles as a hybrid. The key to the F3DM -- and succeeding models -- is its battery pack, which the company claims is good for some 2,000 charges. That's enough recharging cycles to drive the car, the company claims, over half a million miles in electric and hybrid mode. But the exciting news is that the car sells in China for just under $22,000, meaning BYD has found a way to dramatically lower the cost of its battery manufacturing.

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15 comments so far...

08-Feb-2009
65754
  

This is exactly what our nation, our country, and our country's auto industry needs and it should be getting more attention by our leaders.  Most of the points in this article have been well known by experts for a long time now, but our leaders always seem reluctant to endorse anything that could lead toward unpopular higher gasoline and/or energy prices.

We need leadership willing to make these obviously necessary -- though unpopular -- decisions.


Posted by: Mark Wagner

01-Jan-2009
65385
   The oil industry's talons into politics and legislative decisions need to be loosened before an even playing field can be possible.

To continue with tax breaks and subsidies for oil businesses is endangering our future.

Are there any calculations for the return on investment to the US for promoting ev's and electric alternative infrastructure? Such as the savings from the horrendous costs of conflicts to secure oil resources?

If the oil industry's products can be scientifically proven to be detrimental to health (and national security to boot), like tobacco and boose, cannot the government also limit its advertising?
Posted by: Tom N


29-Dec-2008
65328
   That is a very good program. After all seatbelts only came when they were made mandatory, so the solution to a low gas price environment competition between gas-guzzlers and plug-in hybrids is indeed changing the circumstances in favor of the hybrids by increasing the price of gasoline and by making the beter cars mandatory.

Altough it should be warnned that precausions should be taken as to the allocation of the tax and tariffs revenues, because governments made interested by giving them a large portion of the final retail price of gasoline tend to be poor green governments in other aspects. For instance, they don’t support transition to electricity since this is directly cutting into their revenues. They also are cold on biofuels for the same reason. As a anecdote, the small state of Luxemburg has been known as a strong opponent of biofuels, as it considers them a treat to their gasoline sales bonanza to passing motorists from the Nederland’s, Belgium, Germany and France. They, on purpose, put the gasoline taxes slightly lower then in those neighboring countries to attract the people and thereby paradoxically tremendously boost their gasoline tax revenues. Since biofuels like E85 are sold in Germany with very low or no tax, they can’t do the same trick with those kinds of fuels. As a consequence, they do whatever they can to harpoon the E85 and the biofuels in general at all levels including the EU and even at the royal families’ levels. The King of Luxemburg happens to be family of the King of Belgium and the Queen of Nederland. As a result of so-called “high level private discussions”, the Belgian nepotist minister Bruno Tobbak made a Royal decree that bluntly ban E85 sales to the public in Belgium. In the Nederland’s, the Queen Beatrix, the main Shell shareholder, authorized the sale of E85, but at more then13 $ per gallon. As you can imagine, today the Luxemburg gasoline business is still flourishing as ever.

In another register but for the same environmental purpose, I would also extend the carbon tax to an additional carbon tariff on fossil fuel made imported goods; either in the constituent materials or in the type of energy used to make them. In this way, a biopolyethylene Barbie processed with wind power electricity will be cheaper to import then a fossil polyethylene Barbie processed with coal made electricity.
Posted by: Patrick Leonard


06-Jan-2009
65439
  

For more than 20 years, I've thought that there should be a heavy tax on non-renuable energy and that the income tax should be reduced.  That way, the average tax payer would come out even, but there'd be a powerful incentive to conserve fuel.  Implementing the change could be politically difficult, but I think that people would accept it if they could see the benefits.

We also need better city planning to make public transportation more efficient.  In addition to reducing our dependence on oil, that would reduce our dependence on private automobiles.  Then, low income people wouldn't be forced to spend $$  on cars and could spend more on education and other things which would be of greater benefit to them.  Think also about people who, because of miscellaneous disabilities, cannot drive safely.  They are put at an extreme economic and social disadvantage because of the lack of convenient and efficient public transportation.  Many of us, as we age, will find ourselves in that situation.

Of course the emphasis of EV World is on electric vehicles, which is good.  In general, EV does a good job.   But, I'd like to see an ocassional article aimed at reducing our dependence on private automobiles.

 


Posted by: Frank Eggers

30-Dec-2008
65338
   Have a big price subsidy on highly fuel efficient vehicles (plug-ins and all electrics), have a small price subsidy on conventional small cars, and sliding scale of increasing sales tax on private use vehicles as they grow from Camry to Hummer size. Increasing conventional biofuel use drives up the price of food causing more starvation to the world's poor. Also, it destroys rainforest as prices for palm-oil and sugarcane increase and corrupt officials in Brazil and Indonesia take bribes to turn a blind eye to deforestation even when it is illegal. Algae grown in desert areas in seawater or saline ground water (or in tubs in the oceans) would not displace much food production and might provide acceptable biofuel production.
Posted by: Shane Wilson

30-Dec-2008
65342
   One of the first things Congress should do is to make the federal tax on fuel to be 18 cents per dollar instead of 18 cents per gallon. Per gallon is probably the dumbest tax rate that I have ever heard of from any government anywhere. Imagine how they could have cleaned up when the price per gallon was at $4.50 and only the oil companies were cleaning our clocks!
Posted by: Michael Scholey

30-Dec-2008
65343
   I really like the proposals put forward here. These are a huge step in the right direction, but I have an issue with the whole flex fuel and biofuel scenario IF it takes food material to make the fuel. It also has to be carbon neutral. They say that ethanol produced from corn is carbon neutral as the corn gets its energy from the sun, but it is far from being so. The production of foodstocks takes a lot of oil derived energy (ploughing, water pumping, etc.) and until the whole production line is driven by renewable energy then the fuel produced in this way will never be carbon neutral.

I really like the idea of giving financial incentives to the new technologies. Why is it in California that cars are taxed on their value? Why should you buy a new car (more efficient) when your taxes on that purchase (not sales tax - road tax) are huge compared with running your old gas guzzling banger? Road taxes should be based on vehicle weight. This has a direct co-relation with mpg and road damage. This would promote the building of lighter cars leading to less energy used (gas or electric). Granted it takes innovative engineering to do this, but we are innovators are we not?

And, lastly, why is GM not looking at building transmissions for windturbines? They need them and GM has the factories to do it.
Posted by: Peter Fynn


30-Dec-2008
65354
   Great article Bill. It's a real problem but has some simple solutions.

1- Stop the subsidies to big oil. Congress tried to stop the 13.1 Billion, yes BILLION we give big oil every year bit it failed to pass. Read HR 6 Jan 2008 to see the numbers.

2- Like Germany add a tax to gas for the pollution, spills and CO2 levels.

3- Keep the gas guzzler tax on B I G Vehicles and charge it every year not just at the new sale. They guzzel for a long time and actually are worse so increase it as they age. 4- Charge higher fees for registering heavy vehicles (SUVs). They cause wear more on the road and bridges so make them pay more.

5- In accidents charge the heavier vehicle more since it is larger and causes more damage. They also cost more to repair and use more materials.

So we use common sense, change the past laws that are very poor and encourage safer , lighter vehicles that pollute less and use less energy. The vehicle makers follow the rules and wants of the majority. Give them poor laws and they build poor vehicles. Make smart laws and demand for better vehicles will come.
Posted by: jim stack


30-Dec-2008
65357
   Some good ideas here, but there's one major caveat I would like to highlight, concerning the Chinese BYD battery-driven car so enthusiastically applauded: When a Chinese-made product is able to deliver comparable quality for a much lower price, it usually isn't the management getting shorted on profit. And Chinese industry isn't exactly setting a record for minimizing pollution, either. I want to know just how China's managed to reduce the cost of their battery manufacture first; just what safety concerns are they cutting in their factories, and how little are they getting away with paying their workers?

It also occurs to me that the last thing we want to do for oil-producing nations with an entrenched record of political hostility is reassure them of a guaranteed minimum petrodollar income.

And putting hard deadlines on requirements for fuel infrastructure is foolish if you aren't also regulating that infrastructure. What's the point of requiring flex-fuel capability in every vehicle made by 2012 if you know there isn't going to be enough E85 sold to justify every car having the option? Not to mention that requiring V2G capability by 2020, while admirable, presumes we can overhaul the entire North American grid itself in only 10 years to be ready for the flexibility and power loads needed. (I'm not saying the overall goal is impossible, merely that it requires a more detailed and more encompassing plan than simply slapping a few deadlines on the vehicle manufacturers.)

I'm all for the government doing what it can to encourage the market developing in the right direction, but there's a difference between pruning your hedges and strangling them. And the Law of Unintended Consequences should always be borne in mind.
Posted by: Stephen J.


31-Dec-2008
65360
   I find it interesting to see how very little progress the automakers are willing to share with the buying public. Each had the capability to offer dramatically more efficient offerings, but no desire. They acted like a deer caught in the headlights when gas prices went sky high and consumers said no to their advertising and started looking for something with better fuel economy. We never saw it coming, they exclaimed. Of course not, they don't live in the same society that most regular people do.

In my opinion, the way we'll get EV's in our driveways from the manufacturers is simple, if somewhat drawn out. One or more of the battery makers (who produces something that would work well in an EV) is going to realize that the OEM's aren't going to be buying their products (or their company) are going to offer the product direct to the EV conversion companies and to enthusiasts directly. Conversion vehicle companies will become a big enough threat to the entrenched industry that they are forced to respond. They will be unable to pretend that there is a technology problem, since the vehicles will be somewhat common by then.
Posted by: Mark Chapmon


07-Jan-2009
65446
  

Tom N wrote:

"Are there any calculations for the return on investment to the US for promoting ev's and electric alternative infrastructure? Such as the savings from the horrendous costs of conflicts to secure oil resources?"

That's a good point.  Our dependence on imported oil is one of the drivers of our foreign policy and probably has a significant effect of how much we spend on our armed forces.  It's a cost that doesn't seem to be taken into consideration.

It may be that efforts to promote fuel efficiency and electric vehicles would be more successful if people were made aware of the effects of imported oil on our foreign policy and military costs.  Surely part of the money we spend on imported oil us used to support terrorists.


Posted by: Frank Eggers

01-Feb-2009
65686
  

 In 1908 the GE electric was a useful and practical car for the times and here we are 100 years later and I can't beleive that we don't  have a useful and practical car of the times. Where are the thinkers and inventors. I personally know a man who built a electric , used it for over 20 years then gave it to his son in law. Somethings wrong with this picture.


Posted by: charles beaubien

23-Jul-2010
91094
   The problem that I foresee with this one is that how will they be able to provide adequate supply of online auto parts provided the influx of electric cars.
Posted by: Sam Daniel

14-Aug-2010
91977
   Nowadays,it is our responsibility to protect the environment. So we should try our best to use"green" products, especially for car and
23-Jul-2010
91095
   If they plan to release more electric cars, they should also consider looking at the availability of its online auto parts.
Posted by: Jon Woo

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