By on July 15, 2010

Just in time for today’s tour of Michigan’s “battery belt,” the Obama Administration has released a study [full PDF here] of its electric vehicle stimulus efforts which concludes that the money was all well spent. Though the report covers a number of programs, from the ATVM “retooling loan” program which is backing companies like Nissan, Tesla and Fisker, to charging station subsidies, the major accomplishment of these billions of dollars is encapsulated in a single claim:

By 2012, thanks in part to the Recovery Act, 30 factories will be online and the U.S. will have the capacity to produce 20 percent of the world’s advanced vehicle batteries. By 2015, this share will be 40 percent.

As you can see from one of the report’s graphs (above) the US will achieve this 40 percent share of the world’s EV battery production just as two-thirds of the cost is beaten out of the things. And because batteries don’t follow Moore’s Law, it’s all diminishing returns from there. So what happens come 2015?

The obvious answer: oversupply. A study released earlier this year projects that

Planned investments will thus result in significant overcapacity between 2014 and 2017, especially in the US and in Japan. Given the announced investments, capacity in 2015 will already reach 200% of the demand projected for 2016. In addition, not all investments have been announced; as-yet unknown investments by key players will lead to further overcapacity, and national subsidies will stimulate even more investments.

Though that number likely includes the Obama Administration’s spending, it certainly doesn’t include the just-announced $12.5b investment by the Korean government into its Li-ion battery industry. And that investment comes at a time when two Korean firms (LG Chem and Samsung) already control 40 percent of the world’s Li-ion cell production. That investment will not only water down the Obama administration’s claimed benefits of EV stimulus, it will also greatly accelerate fears of oversupply. Given the beating that EV battery maker stocks (like A123 Systems) have taken of late, it’s not a fear to be taken lightly either.

Meanwhile, let’s look at the Obama stimulus’s main claim to fame: a stark reduction in battery costs between now and 2015. That claim is already looking like a red herring, considering the starting point of the Obama study’s graph. Since the hypothetical battery used for the graph is 33.33 kWh (100 mile range at 3 miles per kWh), the Obama administration’s estimate values currently-available batteries at about $1,000 per kWh. That number flies in the face of the Nissan Leaf, which has reportedly cracked the $400/kWh mark with its current battery pack. In short, the Obama Administration’s 2015 battery price of $10k would be a mere $3k reduction in price from currently-available prices… realized over 5 years and at a cost of billions of taxpayer dollars.

These lower-than-anticipated prices are yet another indication that oversupply is on the way, and that multi-billion-dollar governmental investments in the Li-ion sector are simply inflating a bubble that will have to pop at some point. Meanwhile, Obama’s much-touted stimulus program funneled nearly as much money to foreign firms like Nissan and LG Chem as it did to homegrown outfits. These foreign firms, which are able to double-dip into US and (say) Korean government investments will be able to beat prices even lower, squeezing out the more marginal recipients of only US investment. Meanwhile, the limited range, capacity degradation and relatively high cost of EVs compared to gas powered cars will keep demand relatively inelastic even as competition and overinvestment drives competition.

And then there’s one final element to this story that can not be ignored: just as global battery supplies hit 200+ percent of global demand in 2015, a number of firms are planning to release their first generation of hydrogen fuel-cell cars. Toyota, Honda, GM and Hyundai have all targeted 2015 for the release of $40k-$50k production fuel cell cars, which should suck a lot the early-adapter oxygen out of the (by then) oversupplied EV market. At this point, the lessons learned by Toyota with its hybrid program will start to be felt: having binged on high-priced early-adaptor sales, Toyota was able to pay off its hybrid development program, but big profits are proving elusive as EVs are coming into their own. Firms like Nissan are positioned to do for EVs what Toyota did for hybrids, but as a result, Toyota can sit out the five-year cycle, and slowly build on its hybrid technology, before creating a whole new fad for the well-heeled and greener-than-thou segments just as EVs start to pay for themselves and reach a reasonable price point.

With cutting-edge consumers migrating towards hydrogen cars, and battery oversupply reaching dangerous levels, 2015 will not be a happy year for firms that have invested heavily in EVs. Government stimulus between now and then might help, but it won’t be the major factor in driving down prices, nor will it guarantee a sustainable business model. With competitors (namely Nissan) already established to serve much of the market by 2015, and with other competitors already looking past EVs for 2015 and beyond, the government can’t expect stimulus alone to keep EV startups (like Tesla and Fisker) and EV catch-ups (like Ford and Chrysler) on a solid footing.

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32 Comments on “Obama Touts EV Stimulus, But What Will It Really Do?...”


  • avatar
    gslippy

    (Relatively) lower-priced batteries are nice, but someone has to be willing to buy them. As much as I like the Leaf, I’m not interested in a $10k battery replacement every 8 years.

  • avatar
    DC Bruce

    This looks a lot like the synfuels project of the late 1970s — a complete loss of taxpayer dollars in subsidies for something that never happened.

    At the moment, electric cars are vaporware. Sure, there are operational prototypes. But, there is no marketplace experience as to how they really work — and, in certain parts of the country (like the mid-West), they are dirtier than gasoline cars, since the electricity that powers them is generated by burning coal. Let’s assume that recharging stations are as ubiquitous as gasoline filling stations. Even so, how are people going to respond to a vehicle that, in the best of circumstances, will take hours to “re-fuel” as opposed to minutes for a gasoline-powered vehicle and one whose range, on a “tank” of “fuel” is, under even the most optimistic scenario, less than one half of the range of any gasoline-powered vehicle.

    Re-charge your electric vehicle overnight? How many Americans live in houses that don’t have garages? How many Americans live in houses that don’t even have driveways? And how many Americans don’t live in houses at all, but in apartments?

    Lots.

    As far as hydrogen cars go, how are they going to be different than CNG cars? Methane (CNG) is mostly hydrogen anyway and, despite the presence of an existing distribution infrastructure, no one but a few fleet buyers (and municipal transit companies) is adopting them.

    All this stuff could work out . . . or it couldn’t. But doesn’t it make more sense not to risk public money on this? Because the problem with public money is that, unlike private money, its allocated for non-economic reasons: just look at Amtrak, or the whole ethanol mess, which nearly everyone admits does not decrease emissions, when the full fuel production cycle is accounted for.

  • avatar
    redmondjp

    Bruce,

    You are incorrect regarding the state of EV technology which has been field-proven for well over ten years now. Here’s a short list of PRODUCTION EVs from the major automakers that have been made and used in recent years:

    Honda EV+ (never heard of it, I suspect)
    Chrysler TEVan
    GM EV1
    GM S10EV
    Ford Ranger EV
    Toyota RAV4 EV

    All of these vehicles could hardly be described as working prototypes. These were fully engineered and production-ready EVs that proved that EVs work and that there is a market for them (and there was service provided at certain specially-equipped dealers for them as well). What truly killed the pure EV was the Bush administration’s involvement into the cased filed against CARB by the automakers which (falsely) claimed that by mandating zero-emission vehicles (ZEVs), California was in effect setting fuel-economy standards which was only the fed’s job. Once this case was settled in favor of the automakers, production of full EVs ceased, and the automakers have made every effort to wipe these vehicles off the face of the earth, lest the public be reminded that they even existed. Watch “Who Killed the Electric Car” and draw your own conclusions.

    And if we powered these cars using clean, carbon-free nuclear power plants, there is no air pollution or greenhouse gases produced. Zero.

    • 0 avatar
      RogerB34

      These vehicles were not produced because there were no adequate batteries. Volt is high risk because no one knows how the battery will perform. Leaf is higher risk. Toyota Prius makes sense as it is a bridge car using improved battery technology as available and not repeatedly deep discharged.

    • 0 avatar
      redmondjp

      Roger,

      These vehicles WERE produced and were in operation for years, what are you talking about? Yes, there were some battery issues, no surprise there. GM had both a lead-acid and then a second-generation Nickel-metal-hydride battery pack for the EV1. The RAV4 EVs were known to go as high as 150 miles on a charge, and many of them in fleet service in CA had well over 100K miles on their original battery packs.

      There is plenty of available information out there on this subject. Join an EV club in your area, I’ve been a part of one in Seattle which is very active. You’ll learn a lot!

  • avatar
    chuckR

    Moore’s Law depends on continuous improvemenst. With batteries we are still in the phase of waiting for a miracle breakthrough. Its like Moore’s Law in the vacuum tube analog computer days.

    Plus, if the Obama Administration told me the sun was shining, I’d need to go outside and check for myself.

  • avatar
    lahru

    I remember walking by the Sears store in Taos NM and seeing a pocket calculator in the window being sold for $120.00 and I lived there from 1974 to “76 and I also remember walking through a Sears store 5 years later and a similar calculator was on sale for $39.00 and I also remember getting one in the mail with a magazine subscription in 2001. I also remember microwave ovens at selling for $999.00. Get my point?

    • 0 avatar
      picard234

      +1.

      How much was a Blu-Ray player just a couple years ago? Mine was $250, which was the cheapest you could find anywhere, and it was only discounted because I bought a HDTV. Now they are available for about $67 (http://shopping.yahoo.com/blu-ray-players/;_ylt=Avnu5SZQwnzDg64x1_76XJcAwIwC?p=blu+ray+dvd+player&sortby=priceA)

      In this regard, the chart might be overly conservative (gasp!) as to how quickly batteries will decrease in cost over time.

  • avatar
    FleetofWheel

    @redmond
    So the automakers made the all those great EVs you listed then those same car makers filed suit (with the help of mean ole Bush) so that they could wipe their very own EV creations from public memory.
    So they made’ em and then got rid of ‘em. Does not make sense.

  • avatar
    obbop

    Why do politicians believe they are capable of actually running anything as complicated as a modern industrialized country or nation-state?

    What may have worked two hundred years ago is an outmoded system today.

    We must progress or face a multitude of catastrophic failures in the decades to come.

  • avatar
    KixStart

    There may be much more battery demand following Smart Grid development. It would be useful to store excess electricity generated by wind and solar during times of low demand to shift to times of high demand. Batteries could do that.

    And, even if it’s not the current intention, if you should develop oversupply of batteries, perhaps this would be a good strategy for using the excess capacity.

  • avatar
    mcs

    There is another alternative that I think could threaten both hydrogen powered vehicles and battery powered EVs. With the Pickens Bill, BloomEnergy’s Solid Oxide Fuel Cells could be a strong alternative.

    Rather than use hydrogen directly, they can reform natural gas. They also do not use precious metals. Even better, they actually have products already on the market with some high profile customers. One downside is that they need to bring the cost down, but they expect to have the cost of a unit that can power a house down to $3k within 10 years. No mention of automotive uses yet – at least as far as I know.

  • avatar
    Facebook User

    What an interesting topic, especially today with the empulse announcement:
    http://www.brammo.com/empulse/
    http://www.engadget.com/2010/07/15/brammo-goes-street-fighting-with-the-100mph-empulse-electric-mot/

    A somewhat viable (100mph max, range “up to” 100 miles) electric motorcycle for $10k. Not the battery, the entire thing.

    If Obama absolutely has to toss $$ at batteries, why not motorcycles? It’s a lot easier to push around 200-400 pounds + single passenger than 3000+ pounds and 4 passengers + cargo.

    • 0 avatar
      picard234

      You should see the post about the Smart scooters.

      You can get a gas-powered scooter for WAY less than $10K that gets 100MPG.

    • 0 avatar
      Robstar

      The problem is, that short of a burgman, most gas scooters ~ 150cc and below aren’t highway ready with their wheel size, top speed, and acceleration.

      Does the smart scooter have wheels large enough to handle potholes, acceleration to keep people from running you over (0-60 in 10-12s) and can they go 80+?

      Sure you can get a 250cc ninja that is highway ready for sub $3k, but my point is that if Obama has his eyes set on promoting “electric” then he should focus on motorcycles, not cars.

  • avatar

    I’m skeptical about EVs amounting to anything more than a niche anytime soon. (In France, tehre was a study that Sarko suppressed, I think because he has some sort of financial interest in battery companies, that said EVs would not be significant even as far out as 2030.) I do think they will eventually invent a battery flexible enough that EVs could replace ICE I don’t say that lightly; my biases are in favor of ICE. My Accord may not be Mozart, but it IS Salieri to the Boxster’s Mozart. And although today roughly, oh, I don’t know, I didn’t look at it that carefully, but according to the July Sci Am, maybe 1/4 to 1/3 of the US is territory where EVs are more polluting than conventional hybrids because of the concentration of coal power. There’s a nice graph, on page 62, I think.

    My sources also indicate that H isn’t going to be ready for prime time anywhere near 2015. Yeah, maybe they will come out with the H-cars cars, but they will be very expensive, as Ed implied, and they will probably not go for more than 3-4 years before the very expensive fuel cells need replacement. (But the Honda Clarity, which I have driven, is an absolutely lovely luxury car.)

    @Redmondjp: yeah, fine, but how many people would have bought ‘em?

    KixStart raises an important point. (Where have you been? Welcome back!)

    • 0 avatar
      redmondjp

      David,

      Tens of thousands of people would have bought these cars if they had been able to. Only a few on the list were even available for public sale. Most were leased directly by the manufacturer, and then were taken back and CRUSHED. Many of the people who had leased these cars begged and pleaded to buy them outright but were refused. Fortunately, some of the RAV4 EVs were sold and are still on the road today, the vice-president of Costco has one (or at least did a few years ago).

      The automakers, their suppliers, the oil companies, and all of the aftermarket repair businesses stand to lose a huge amount of profits if EVs ever become mainstream, and this is why the industry is fighting so hard against them.

      YES, it is a conspiracy, in the same way that GM and the american tire companies conspired to get streetcars removed from the public transportation system in this country, so they could sell more buses and tires. Those darn streetcars just didn’t wear out fast enough! Look this up if you don’t believe me.

    • 0 avatar
      cstoc

      GM did try to get cities to buy buses and abandon streetcars, but that was but one of the factors. Another was a law from the Feds saying that electric utility companies could no longer own streetcar companies. The street cars had been supplied with cheaper power from the utilities. Once the utilities were forced to sell the trolleys to their cities, they started charging market rates for the power, and streetcars became uneconomical for the cities to operate. Buses cost the cities less money to operate. It’s yet another example of a government action having unintended consequences.

  • avatar
    Ron

    We must (underlined) come up with a replacement for oil. Not only is burning it bad for the environment, but we are using it up rapidly (imagine what will happen to prices when Chinese and Indian use catches up with the West) and are dependent upon nations not exactly friendly towards the U.S. (Russia, Venezuela, the Middle East).

    Unfortunately, current batteries (weight, storage capacity) and fuel cells (platinum-based catalysts) aren’t the answer. Like most economists, I would prefer that the U.S. had European-level prices for gasoline, which would obviate the need for subsidies to make alternatives competitive with fossil fuels. If I had to pay much more for fuel (with an offsetting reduction in personal income taxes), demand for solar energy would soar, helping that industry achieve economies of scale. However, the short-sighted public is against anything labeled as a tax.

    • 0 avatar
      FleetofWheel

      1. There’s probably 50-100+ years of oil remaining. We do not need a replacement for a long time.
      2. India and China will be greatly motivated to pursue alternatives once they are fully car dependent and will be restrained by their lower consumer purchasing power until then.
      3. Europe uses gas and diesel as their primary motor fuels and not alternatives, so where is this great effect of their higher gas/diesel prices?
      4. Simply deeming gas to be say $10/gallon by govt fiat does not make costly alternatives any cheaper in real terms
      5. If you pay an extra $500 a year in fuel taxes but save an equal amount in income tax offsets, then you have the same net disposable income and can spend it on gas anyway.
      6. Paying more for fuel would not lead large numbers of people to buy solar panels for their cars or homes as solar is very limited in practical application
      7. The public does support a lot of various taxes, just not some of your well meaning but flawed ideas

  • avatar
    slance66

    I’m with Bruce. Not only are there tens of millions of Americans without garages, but they are, for the most part, the same Americans who live in dense urban areas, with shorter driving distances, who could realistically use EVs. I think this technology is DOA. Has anyone even considered that many urban areas suffer brown-outs all summer b/c the electric grid can’t supply the needed juice? How could it handle millions of cars, recharging over and over? I can see EVs working in a zipcar scenario, the Blue Rhino of vehicles, where they get returned daily to a central garage/charging center.

  • avatar
    Adamatari

    So, the point of this article is that batteries are getting cheap too fast, and we might have too many cheap batteries, because everyone will be driving hydrogen vehicles? HYDROGEN? Hydrogen that now all comes from natural gas, and is a lot harder to get a hold of than electricity? I’m sorry, this is pure speculation based on one thing we do know (a lot of money has been invested in batteries and many factories are scheduled to come online) and a huge number of things we don’t (what the vehicle mix will be in 5 years, how popular electric and hybrid vehicles will be then, what the market is for hydrogen powered vehicles, how many of the scheduled factories and such actually open). We’re already talking about there customers moving to hydrogen when they haven’t even moved to hybrid or electric vehicles in large numbers?

    Oversupply isn’t a good thing, but right now we don’t know what effect this will have or what environment this will occur in. I could paint an equally likely rosy scenario where hybrids become the standard even in cheap economy cars, EVs become popular and affordable, and charging stations are as close as the local 7-11. Heck, we could follow the graph and see EVs becoming cheaper than ICE cars. Do I think that’s how it’s going to work out? Probably not in a 5 or 10 year time span, if at all. But it’s just as likely, if not more likely, than a drastic oversupply crisis while hydrogen vehicles suddenly become as common as the Prius.

    Predicting the future is fun, but ultimately makes fools of us all. All we can do is put money and effort into what we think is useful and good. I’d rather the money flow to battery makers than flow to oil drilling (yes, lithium mining isn’t pretty, but the Gulf oil spill is uglier still). I hope batteries become cheaper than they even expect, a world of cheap batteries has many more good options.

  • avatar
    Carlson Fan

    Hydrogen vehicles by 2015, I don’t think so. Battery technology will continue to improve and offer a better product for a lower price making EV’s that much more attractive. Right now EV’s make perfect sense for the millions of 2 car families w/garage to plug them into. Most will be recharged at night when electrical energy demand is at it’s lowest. Maybe not the answer long term but expect them to have a nice run. HECO(Hawaii Electric Co.) is already planning for EV requirements on the islands.

  • avatar
    L'avventura

    One thing that is missed here relative to li-ion oversupply is that excess supply will likely be moved to increase range.

    So if there is an oversupply of batteries, the battery price should fall, and Nissan, as an example, will use a larger battery then their 24 kwh battery, and increase range from over 100 miles, to whatever the price/weight ration make the most business sense.

    Judging by that estimation, say by 2015 say Nissan is able to drop their $400 per kwh battery down to about $130 per kwh. Which means their 24kwh will be a little over $3k. Which means Nissan will be able to drop their EV price by around $7k.

    The likelihood is that the $7,500 subsidy will be gone, but the Leaf will sell for around $25k if they pass the cost-savings onto the consumer to increase demand. Or Nissan can keep selling the EV for $32k and increase the Leaf’s range to around 200+ miles.

    The problem with Obama’s EV stimulus is that its half-assed. $2.4B is not nearly close to what the Asians are spending, and the Asians already have a massive lead in this market.

    Much like with the Volt, this tax-payer money is going to the South Koreans to build their battery factory in the US. Like the LG Chem/CPI factory being built near Detroit (using UAW labor no less).

    If the US is truly serious about EV development they should match what the Asians are spending, more importantly explore lithium sources around the world.

  • avatar
    vww12

    Ahh, the folly of government “stimulus”.

    Like the Spaniards, who spent billions in 2007-2009 to kick-start their solar industry. Got plenty of “investment” in techs that are now obsolete, plenty of graft, and Spain is now bankrupt and cutting those subsidies and the “new tech” co.’s are going out of business.

    Like the British, who spent billions in 1970-1990 to kick-start the computer industry. Where is your PC made? Ahhh, thought so.

    • 0 avatar
      John Horner

      You seem to be ignoring the role the Chinese government continues to play in China’s rapid industrialization. Almost nothing significant happens in China without the government being involved, and China is growing like gangbusters. How is that possible?

    • 0 avatar
      psarhjinian

      For every failure of central planning, there’s also failures of the market. How about we say that both can, and do, fail and succeed, generally according to the will and aptitude (or lack thereof) of their proponents.

  • avatar

    While I don’t ever see EVs as being more than a niche product… we’re far more likely to see an occassional EV on the street within the next five years than hydrogen cars.

  • avatar
    slance66

    I still do not understand the environmentalist pitch for EV’s which are, in the U.S., fueled (indirectly) primarily by coal, and will be for the forseable future. They also create a “fuel” pricing discrepancy, as electricity in about 7-9 U.S. states (essentially those not reliant on coal) runs 3-5 times what it does in the other 41-43 states.

  • avatar

    Well… you have to look at it this way:

    An EV actually costs less per mile in terms of energy use (of course, the upfront cost largely negates this saving in most cases, but we’ll let that slide for now) than an ICE vehicle.

    This is because EVs can take advantage of the huge economies of scale to be had from plugging into the grid. Some of the off-peak electricity EVs are fueled with would usually go to waste.

    With those economies of scale, an EV will still emit less CO2/pollutants per mile than a comparable ICE car. It would be a much different matter entirely if you were generating the electricity yourself… which is why nobody at GM ever talks about the Chevy’s MPG on charge-depleting mode running on the generator… but the miles driven using plug-in power are really cleaner than for comparable ICEs.

    But then… there’s that pesky up-front cost… again…

  • avatar
    blowfish

    “Recharge in hydroelectric-intensive Norway and the CO2 emitted when fully charging a battery is nearly zero. Charge up in nuclear power-friendly France and the CO2 is between 35 and 50g/km; charge via a coal-fired power station and the CO2 equivalent is around 130g/km.

    Across Europe, the average CO2 emitted when recharging an electric car was calculated to be between 90 and 130g/km.

    So why bother, when you can buy a car today that easily beats those figures?”
    quote from autocar
    http://www.autocar.co.uk/blogs/carsandtheclimate/archive/2010/07/15/what-s-undermining-the-electric-car-adventure.aspx

  • avatar
    Geo. Levecque

    The cost of Petrol(Gasoline) in the U.K and all of the E.U. has always been more expensive that here in North America, in the UK 90 percent of the cost of a litre of Petrol is Tax! and it gets worse from this year onwards.
    You can see why most people in the EU drive smaller vehicles than people in the USA! Here in Canada we too like smaller vehicles for many of the same reasons as do the Europeans!


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