The Comeback of Electric Cars

Stephen DeAngelis

July 3, 2008

Conspiracy theorists have long rumored that solitary inventors, toiling in their garages and basements, have created technologies that can make internal combustion engines (choose your favorite): (1) run on water, (2) achieve gas mileage of over 100 mpg, (3) run on garbage (like in the movie Back to the Future), and so forth. The conspiracy involved in these rumors is that the big auto makers and oil companies have bought the technologies and silenced the inventors. ‘Twere it only true. I guarantee that the big auto and oil companies, which are now under heavy criticism, would be trotting out these inventions and declaring themselves heroes. That is especially true for big auto makers, some which are drowning in debt. General Motors has invested heavily in hydrogen technology, but widespread use of hydrogen is years way at best. In the meantime, hybrid cars are selling like hotcakes and electric cars are getting a lot more attention. The latest individual to jump on the bandwagon is the presumptive Republican presidential nominee John McCain [“McCain Proposes $300 Million Prize for Electric-Car Advance,” by Michael D. Shear, Washington Post, 24 June 2008].

“Sen. John McCain [has] proposed a $300 million prize, paid by the government, for the inventor of a better battery to power electric or hybrid vehicles, with the goal of spurring innovation to get Americans off their gasoline habit. The Republican presidential candidate proposed the reward — which equates to about $1 for every person in America — along with tougher mileage standards for automakers and large tax credits for the purchasers of alternative-fuel, hybrid or electric cars. … The $300 million prize would be given for ‘the development of a battery package that has the size, capacity, cost and power to leapfrog the commercially available plug-in hybrids or electric cars,’ he said.”

In a recent online BusinessWeek article, Matt Vella writes about a new electric car on the market that hopes to make it big [“The Electric Car Lives,” 16 June 2008].

“Clean, quiet, and relatively profitable to produce, electric vehicles have had a rough start in the U.S.: Five years after General Motors nixed its innovative EV1 electric car program, just a handful of automakers have committed to making and selling electric vehicles on a mass scale any time soon. Enter Think Global, a Norwegian upstart plotting a U.S. invasion via pint-size, affordable electric cars. Think has been selling gas-free, Lilliputian city cars in Europe and will start peddling them to fuel-crunched Americans in 2009. The company’s newly formed North American division has high hopes for Think’s existing models—and even higher ones for the upcoming Th!nk Ox, a concept unveiled at the Geneva International Motor Show earlier this year.”

That fact that Think Global is a Norwegian company demonstrates that even oil producing nations are starting to see the end of the oil economy. Norway has been remarkably far-sighted in investing its oil profits so that it will continue to prosper after its oil runs out. This long-view philosophy undoubtedly encouraged Think Global to get into the electric car business. According to Vella, the Ox may fill a niche that is missing in the current U.S. auto market.

“An electrified people’s car for the 21st century, the Ox is a preview of Think’s next-generation production vehicle, due out in 2011. Roughly the size of a Toyota Prius, the Ox can travel between 125 and 155 miles before needing a recharge, and zips from zero to 60 miles per hour in about 8.5 seconds. Its lithium-ion batteries can be charged to 80% capacity in less than an hour, and slender solar panels integrated into the roof power the onboard electronics. Inside, the hatchback includes a bevy of high-tech gizmos such as GPS navigation, a mobile Internet connection, and a key fob that lets drivers customize the car’s all-digital dashboard. Pricing has yet to be announced, but the company’s current vehicles cost less than $25,000. … The Ox’s killer app could be its design. To date, most electric cars available in the U.S.—small, unsafe, and underpowered—have been intended strictly for the earliest early adopters and the most faithful green believers. In contrast, Think’s senior vice-president for design, Katinka von der Lippe, says the Ox is a ‘real car, a big step away from the cuteness of [other] electric vehicles.’ All that distinguishes the Ox from name-brand, fuel-sipping compact cars, in fact, is its silent hum and zero emissions. The Ox also embodies the characteristic simplicity of Scandinavian design, featuring uncomplicated lines and clean, uncluttered surfaces. A band of unpainted metal stretches from the front of the vehicle to its rear, revealing the Ox’s interior architecture, an aluminum frame. An unassuming grille is tucked between sophisticated sloping headlamps. ‘The Ox is a leap forward for the design of electric cars,’ says von der Lippe.”

Not everyone is sanguine that the electric car will sell in America.

“The American market for electric vehicles ‘is virtually nonexistent,’ says John O’Dell, a senior editor specializing in green vehicles for car-buying site Even well-established gas-electric hybrids such as the Prius and Honda’s Civic account for barely 3% of U.S. auto sales. ‘Until you’ve got a compelling product, you won’t have a market,’ adds O’Dell. Aside from the sleek Tesla Motors Roadster, which carries a price tag of nearly $100,000, there are almost no fully functional electric vehicles that meet average drivers’ requirements. The Ox could fill that gap. ‘It’ll take a lot of time,’ Wilber James, RockPort’s managing general partner and acting president of Think North America, says of the challenge of selling electric vehicles to American drivers, who still overwhelmingly prefer trucks to thriftier small cars. ‘We’re going to focus at first on niche markets—cities, universities, and fleets.'”

It might not be as difficult to break into the market as some think. In some states hybrid cars are selling above sticker price. Although hybrid car sales are predicted to remain flat this year, the problem is on the supply side not the demand side. Shortages of key components such as the hybrid batteries are reportedly dampening sales. According to the Los Angeles Times, “Sales of hybrid cars surged 25% during the first four months of this year compared with the same period last year. And the pace accelerated last month, when sales jumped 58%. That outpaced the overall April sales gain of 18% for small fuel-efficient cars and comes as total new-vehicle sales are slumping.” [“Hybrid sales are zooming,” by Martin Zimmerman, 23 May 2008] In concluding his article on the Ox, Vella discusses its innovative business model.

“The company’s business model, says James, is similar to that of PC maker Dell, which fueled its rise by ruthlessly optimizing its manufacturing and supply chain. Think’s ultralean manufacturing system lets it build production facilities for about $10 million, compared with the billions invested in new plants by old-line manufacturers. That means more factories closer to customers, further cutting costs. In addition, factories ‘could also be the retailers,’ says James, which would add a unique element to Think’s branding. The company, he says, will be profitable if it can sell 10,000 vehicles a year. At 20,000 to 30,000 units in annual sales, Think can cut its component costs in half. That focus on innovative manufacturing, in addition to the high-tech Ox itself, may ultimately set the company apart from previous attempts—and, Think is betting, finally help jump-start the U.S. market for electric cars.”

There are people, of course, who need cars that go further than 150 miles and can’t be delayed for an hour waiting for the batteries to recharge. That is why McCain’s proposal to offer a prize for better battery technology plays a role in the future. It may take a while for electric cars to catch on, but for most people, most of the time, I suspect they would suffice. It’s those long cross-country treks that keep tripping up sales. Once manufacturers figure out how a family can take a long vacation in an electric car, I suspect sales will soar.