America’s Automotive Future Goes Beyond the Big Three
December 1st, 2008
The discussion about bailing out the Big Three has been couched in terms that imply that the Big Three represent the complete future of the automotive business in the U.S. As I have suggested, if they are to be bailed out they should be given money based upon measurable metrics. I have also suggested that they represent thinking from the 20th century, the century of the internal combustion engine, which is not the future of automotive transportation this century.
I am for providing help for the Big Three assuming they come up with an intelligent plan for spending tax payer money. As stated in a prior column any such plan would include rapid conversion to selling a fleet that has an average 45 mpg and the developing of electric plug-in vehicles. What I would like to suggest is that if there is some $25 billion on the table, that the American taxpayer be given either alternative or additional ways to invest for America’s automotive future.
As I said in a prior column, at the beginning of the 20th century there were dozens of car companies and by the end there were three standing. That is a good metaphor for what is going in the electric car business today. There are numerous small companies that manufacturing electric cars, converting internal combustion engine cars to also run on battery power and many other companies working flat out to create new types of batteries that might power our cars in the years ahead.
The most widely known electric car company is Tesla Motors, who is currently selling 2-3 cars per week at $109,000 each. These two seat roadsters go 0 -60mph in 3.9 seconds, get over 200 miles per electric charge and are completely quiet. There is a long list of buyers. At the other end of the price spectrum is the Aptera , which is selling a three wheeled futuristic looking vehicle at an expected price of $30,000. You could go to their web site right now and put down a $500 deposit for a vehicle that will be delivered in 2009.
The U.S. and the world will enter the age of the electric car 2010-2015. This will be the time that many companies will not only sell them but will be quickly ramping up production volume. There will be the electric hybrids and pure electric plug-ins. There will also be many small companies – the 10,000 garage small scale businesses – that will partially or fully convert existing internal combustion engine vehicles to run on electricity. As there were dozens of car companies 100 years ago making internal combustion engine vehicles, so there will now be a similar blossoming of entrepreneurship of limited production electric car companies all around the world.
If the federal government is thinking about $25 billion for the Big Three, why not set aside a couple of billion to seed and support innovation and ultimately production for the existing companies such as Tesla and Aptera and a thousand garage scale enterprises that are high in innovation but low on capital? Fund the future, not just support the past.
Another interesting development that I have written about here is the compressed air car. Here is a vehicle that is in the early stages of production but runs on compressed air and needs an oil change of vegetable oil every 50,000 miles. Millions of dollars lent to a company willing to produce these in the U.S. would make a difference.
Another automotive investment that should be part of any large scale tax payer bail-out would be providing funds for hydrogen internal combustion and hydrogen fuel cell cars. While the electric car will most likely get to scale first, hydrogen will soon follow, particularly if accelerated with federal funds. According to the National Hydrogen Association, it would cost about $9 billion to put 6,500 hydrogen stations into service over the next 10 years. This is exactly the large scale type of endeavor perfectly suited for federal support as we move toward our new national goal of energy independence in the next 10-15 years.
If we as a nation are going to provide money to the Big Three, who represent our automotive past, why should we not also provide money, at no greater risk to companies and organizations that represent our automotive future? The Big Three represent the special interests and constituencies of our past. The companies that want to manufacture the electric car, the compressed air car and the hydrogen fuel cell car represent the national interest that is, and must be our future.
December 2nd, 2008 at 8:32 pm
Very nice post.
If we are able to reduce air pollution caused by automobiles significantly in the future, fewer children may miss school because of asthma attacks, fewer parents may miss time from work to take care of sick children, and fewer senior citizens may be harmed by air pollution.
Have you thought about writing about the attack in India by terrorists?
If we bought less foreign oil, terrorists would obtain less funding from us.
I recommend people read The Art of War by Sun Tzu.
The terrorists want to make things worse between Pakistan and India. Sometimes, you need to think about the unexpected and then do it. Pakistan and India should work together to go after the terrorists in Pakistan. Pakistan and India should increase trade, student exchanges, and other things.
I ran for United States Senate from New Hampshire in 2002. My website is http://www.myspace.com/kennethstremsky
December 5th, 2008 at 2:36 pm
The past i.e. 20th Century reflected the cars that consumers wanted to buy, which the Big Three correctly claim. But, the consumer has shifted. While there hardly is market consensus, there is growing demand for downsizing. That includes both smaller cars and smaller engines. Transition to alternative energy will be slow for many reasons, but including the likelihood
that only the early adopters and also relatively affluent will surrender the combustion engine soon. Mainstream motorists are surrendering size and power which makes it possible to achieve 30-35 mpg urban fuel efficiency, on top of an evident trend of doing less driving which is
likely to stick and grow. Even electric, compressed air and hydrogen are not likely to bring motorists back to the extravagent driving of the 20th century. People are beginning to like spending less time in cars. The
demand for downsizing makes the present fleet a
giant scrap heap that motorists will replace over the
next decade. It will be only marginally with non combustiion engines. The big question is whether the Big Three will mobilize to gain market share by building exciting low cost and high cost downsized
cars that deliver 30-35..even 40mpg with combusion
engines. They know how to build such cars very well and
can match production to consumer demand relatively quickly.
December 5th, 2008 at 3:44 pm
David:
Indeed, the transition to hybrids and higher mileage vehicles will take much longer than you predict.
Check out: Electric Car Sales in Freefall; Industry Risks Collapse – http://www.dailytech.com/article.aspx?newsid=13601
I sold automobiles for two years, mostly Ford, some Chevrolet and some Volkswagen. Supply of all high mileage vehicles is limited: current generation hybrids because of limited availability of NiMH batteries and clean diesels because of limited supply. I read autonews.com headlines every day and still see no sign of production ramp ups of NiMH batteries, LiIon batteries or clean diesel. Also, how interested will people be in clean diesel if it remains at the high premium that it is today over gasoline? I believe that I last saw it at 65% higher price than gasoline which means that it is currently much more expensive to use than gasoline. This will change in the future but, in my experience, people almost only look at today’s numbers when making these types of decisions.
Even when high mileage hybrids are available, many buyers are risk averse. I sold as many Escape Hybrids, new and used, as anyone in the Ford dealership where I worked. They are still an early adopter phenomenon. I cannot count the number of people who were scared about battery problems even though the unique hybrid components, including NiMH batteries, were warrantied for 8 years or 100,000 miles, whichever comes first. In fact, according to a story earlier this year in the New York Times, some hybrids in taxi service in New York City and San Francisco are already getting over 200,000 miles. There was no report in the article of any NiMH batteries being replaced.
There are only rumors of the cost of replacing battery packs if and when they go bad (and are not under warranty). The rumored price for NiMH was $3,000/pack and the rumored price for LiIon was $10,000/pack!
Of course, these prices will come down with mass production. However, these are batteries and obey the experience curves of chemistry, which are not as favorable as Moore’s law for semiconductors, by a long shot.
Sincerely,
Jonathan
December 27th, 2008 at 12:46 pm
I find all of these topics to be very, very interesting. I am in the transportation business and can’t help but to wonder how all of the changes will affect industries such as trucking, trains and the airline business?
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