The Future of Electric Cars

Stephen DeAngelis

September 10, 2009

The “cash for clunkers” program has ended in the U.S.; General Motors is still struggling to sell its Opel division in Europe; a group of investors believes it can make Saab profitable again; and GM has signed an agreement to sell small trucks in China. All that sounds like business-as-usual for the auto industry but there are many things afoot in that sector. Consider, for example, Zero Pollution Motors (ZPM) which is trying to create and market a car that runs on air [“Entrepreneur developing air-powered cars,” by Dan Strumpf, Washington Times, 27 May 2009].

“Most car companies are racing to bring electric vehicles to the market. But one startup is skipping the high-tech electronics and making cars with an energy source that is pulled literally out of thin air. Zero Pollution Motors (ZPM) is trying to bring a car to U.S. roads by early 2011 that’s powered by a combination of compressed air and a small conventional engine. ZPM Chief Executive Shiva Vencat said the ultimate goal is a price tag between $18,000 and $20,000, fuel economy equivalent to 100 miles per gallon and a tailpipe that emits nothing but air at low enough speeds.”

Analysts are highly skeptical of the engineering behind the kind because “compressing air is notoriously energy-intensive.” Engineers say it would be a lot more energy efficient to use the electricity directly.

“The ‘air cars’ plug into a wall outlet, allowing an onboard compressor to pressurize the car’s air tank to 4,500 pounds per square inch. It takes about four hours to get the tank to full pressure, then the air is released gradually to power the car’s pistons. At speeds less than 35 mph, the car relies entirely on the air tank and emits only cold air. At faster speeds, a small conventionally fueled engine kicks in to run a heater that warms the air and speeds its release. The engine also refills the air tank, extending the range and speed. … A look at some of ZPM’s specifications illustrates the issue. With four hours of charging, the air car’s 5.5-kilowatt compressor would eat up 22 kilowatt-hours of electricity. That means the same energy used to turn on 10 100-watt light bulbs for 22 hours would allow the car to travel 20 miles. By comparison, General Motors Corp. has said its Chevrolet Volt will use about eight kilowatt-hours of energy to fully charge, and it will be able to travel 40 miles on battery power alone.”

Of course, the Volt will also cost over $40,000 to buy. The Volt, like many other cars, will be a hybrid. One purely electric car that has been touted for the past few years is the Tesla Roadster [“Electric roadster maker making money,” by Julianne Pepitone, CNNMoney.com, 7 August 2009]. In July, Tesla Motors turned profitable for the first time, when it shipped a record 109 vehicles.

“A surge in sales and reduced manufacturing costs of Tesla’s Roadster 2 sports car helped boost the company to $1 million in earnings and $20 million in revenue. … The Roadster has a range of about 244 miles per charge — the first production electric vehicle to cross the 200-mile mark. … The Roadster is the only highway-capable electric vehicle for sale in North America or Europe, and the company says it is faster than a Porsche and twice as energy-efficient as a Toyota Prius. … Tesla has also partnered with Daimler to develop an electric version of mini vehicles called Smart cars. The company said it plans to launch a test fleet of 1,000 electric Smart cars in late 2009.”

Although Tesla Motors is currently the only manufacturer to offer all-electric cars in the U.S. (aside from companies that make street legal golf carts), it’s about to be joined by a number of other manufacturers [“Rivals jostle in the electric car charge,” by John Reed, Financial Times, 19 August 2009]. Reed writes:

“In spite of the deep crisis in the automotive industry, several large carmakers are taking a gamble on a technology that has not yet proved it can win over consumers – electric cars. National and local governments globally, including the US, the UK, Japan and Australia, are abetting this drive into the unknown with generous subsidies and tax breaks for zero- and low-emission vehicles due to launch over the coming three years. Carlos Ghosn, chief executive of the Renault-Nisson alliance, which has the biggest plans for battery-powered cars, this month unveiled in Yokohama the all-electric Nissan Leaf. Mr Ghosn dismissed the notion – voiced by many analysts and some competing carmakers – that the limited driving range of electric cars, their higher price and need to recharge regularly will limit them to niche markets. ‘We see this as a mass market car,’ he said. Nissan wants to sell 200,000 Leafs globally by 2012. In keeping with Mr Ghosn’s bullish view, Renault will next month unveil in Frankfurt a range of several all-electric cars aimed at “different kinds of uses and consumers”, according to the company.”

Reed goes on to discuss other manufacturers that are plugging in to the elecric car business. They include: Mitsubishi who is “taking orders for the i-MiEV, a car that can drive 160km (100 miles) on a single electric charge”; Daimler, who, as mentioned earlier, will be partnering with Tesla to market an electric Smart Car; and Toyota, who, in January, introduced the FT-EV, a small electric car it wants to mass-produce by about 2012. With all the talk about hybrids and all-electric cars, one would think that they represent the future. The fact is that the future of all-electric cars as the predominant form of personal transportation is probably a long way off and may remain somewhere over the rainbow. One of the reasons is cost. Hybrids can cost up to $5,000 more than conventionally-powered vehicles and all-electrics are expected to cost $7,000 to $10,000 more. The higher price for these vehicles makes many analysts wonder if there will be a market for the cars. It all depends on the future price of oil and gasoline. When gas prices go up, so do the sales of efficient vehicles.

 

If fuel efficient cars do represent the future, then a new standard for judging efficiency will likely be needed [“New Vehicles Leave MPG Standard Behind,” by Carl Bialik, Wall Street Journal, 26 August 2009]. Bialik writes:

“High mileage claims for the Volt and other planned plug-in automobiles highlight a deep flaw with the mpg standard: As automobiles increasingly rely on multiple fuel sources, or on electricity alone, gauging their efficiency in terms of gasoline risks giving consumers inaccurate information about the financial and environmental costs of driving. One problem is that in hybrid vehicles mileage variation could be extreme, depending on which fuel source is being used. In addition, the Environmental Protection Agency hasn’t finalized rules for how it will measure fuel economy on the Volt or other cars that can be plugged into an electrical outlet. Until then, manufacturers’ claims won’t be fully comparable. For instance, the 230-mpg figure for the Volt, which will be able to run on both electricity and gasoline, doesn’t incorporate the use of electricity. The Volt’s mpg claim also is based only on city driving — a standard that favors electric cars.”

A graphic that accompanies Bialik’s article shows how many gallons of gasoline various brands of automobiles use to travel 1,000 miles. The Nissan Leaf (an all-electric car) will use 3 gallons based on its 367 mpg estimate. “That number, a combined city/highway figure, is based entirely on converting electricity usage into a petroleum equivalent, because the Leaf won’t use gasoline at all.” The Chevrolet Volt (with its 230-mpg city rating) will use approximately 5 gallons of gas. The Toyota Prius (with an estimated 51 mpg) uses about 20 gallons. A conventionally-powered car with an estimated 21-mpg rating (like the Honda Accord) uses approximately 48 gallons. Car makers are clearly betting that in the long run, gasoline prices will continue to rise.

 

Before declaring that the future belongs to electric cars, however, there is another issue that must be addressed — most highly efficient cars use rare metals in their manufacture and those metals may be in short supply [“As hybrid cars gobble rare metals, shortage looms,” by Steve Gorman, Washington Post, 31 August 2009]. Gorman reports:

“The Prius hybrid automobile is popular for its fuel efficiency, but its electric motor and battery guzzle rare earth metals, a little-known class of elements found in a wide range of gadgets and consumer goods. That makes Toyota’s market-leading gasoline-electric hybrid car and other similar vehicles vulnerable to a supply crunch predicted by experts as China, the world’s dominant rare earths producer, limits exports while global demand swells. Worldwide demand for rare earths, covering 15 entries on the periodic table of elements, is expected to exceed supply by some 40,000 tons annually in several years unless major new production sources are developed. One promising U.S. source is a rare earths mine slated to reopen in California by 2012. Among the rare earths that would be most affected in a shortage is neodymium, the key component of an alloy used to make the high-power, lightweight magnets for electric motors of hybrid cars, such as the Prius, Honda Insight and Ford Focus, as well as in generators for wind turbines. Close cousins terbium and dysprosium are added in smaller amounts to the alloy to preserve neodymium’s magnetic properties at high temperatures. Yet another rare earth metal, lanthanum, is a major ingredient for hybrid car batteries. Production of both hybrids cars and wind turbines is expected to climb sharply amid the clamor for cleaner transportation and energy alternatives that reduce dependence on fossil fuels blamed for global climate change.”

Some countries, like China and Bolivia, are likely to benefit in a future dominated by hybrid or all-electric cars. In post entitled Commodity Economics: Feast or Famine, I noted that “almost half of the world’s known lithium reserves can be found in Bolivia. With the demand for lithium batteries on the rise (to power everything from iPods to hybrid cars), Bolivia has become the Saudi Arabia of lithium.” As Gorman noted, China, too, is blessed with an abundance of rare metals. Chinese leaders also see the shortage coming and are set to restrict their export [“China Tightens Grip on Rare Minerals,” by Keith Bradsher, New York Times, 31 August 2009]. Bradsher writes:

“China is set to tighten its hammerlock on the market for some of the world’s most obscure but valuable minerals. China currently accounts for 93 percent of production of so-called rare earth elements — and more than 99 percent of the output for two of these elements, vital for a wide range of green energy technologies and military applications like missiles. Deng Xiaoping once observed that the Mideast had oil, but China had rare earth elements. … Even tighter limits on production and exports, part of a plan from the Ministry of Industry and Information Technology, would ensure China has the supply for its own technological and economic needs, and force more manufacturers to make their wares here in order to have access to the minerals. In each of the last three years, China has reduced the amount of rare earths that can be exported. This year’s export quotas are on track to be the smallest yet. But what is really starting to alarm Western governments and multinationals alike is the possibility that exports will be further restricted.”

China’s actions are likely to spark at least two outcomes — higher prices and better recycling of products containing rare metals. China is not necessarily trying to hurt the rest of the world. It is trying to protect its own future, which includes the manufacture of automobiles [“As Detroit Crumbles, China Emerges as Auto Epicenter,” by Kendra Marr, Washington Post, 18 May 2009]. Marr reports that China is expected to surpass Japan as the world’s largest automobile manufacturer by the end of this year. Already plagued by significant air pollution, China is likely to make the manufacture of hybrid and all-electric vehicles a priority in the future.

 

There is one other interesting twist on electric cars that is being explored in South Korea — electric cars that draw power from cables beneath the road rather than relying on batteries [“New drive for creative thinking,” by Christian Oliver, Financial Times, 13 August 2009]. According to the article the Korea Advanced Institute of Science and Technology (KAIST) has been thinking about battery-less electric cars for some time.

“The Kaist model argues that world supplies of lithium are too scarce for mass production of lithium-ion batteries and that the batteries themselves are too heavy for practical purposes. Instead, the cars should suck up power from the road in a process similar to how an electric toothbrush charges in its holder. Kaist’s research suggests that two nuclear power stations could provide enough energy to run 6m cars, cutting the need for 35m barrels of annual crude oil imports.”

The Koreans admit that there are many technical challenges to implementing such a system. The bottom line is that the oil age isn’t yet over. The future may belong to electrical vehicles, but there remain a number of issues that must be worked out to make that future secure.