Is Hyundai eyeing PSA’s compressed-air hybrid system? If you believe the scuttlebutt out of France, the answer is yes.

While PSA is heavily touting this new technology as a possible CO2 emissions savior, their technical partner Bosch has been much more cautious. Bosch cautioned that “…Unspecified technical challenges have yet to be overcome before a commercial launch…“, a statement which is at odds with PSA’s ambitious 2016 launch schedule for this technology.

One theory being floated by industry experts (off the record of course) is that this technology is akin to the Volt – a “green vehicle” enticement that PSA can use in the event that it needs to raise bailout funds. At the very least, it is a symbol of what PSA can be capable of.

Hyundai has bucked the trend of fully embracing EVs, with hydrogen being a central focus of its zero-emissions strategy. Even its hybrid lineup is relatively sparse. The compressed-air technology and any notion of technology sharing in itself would be out of character for the Hyundai of Toyota (as opposed to another era, when the cars were Fords and Mitsubishis), but stranger things have happened.

Tesla has officially launched their long-awaited “Supercharging” network last night to a star-studded crowd in Southern California. (We assume it was star-studded since our invitation got lost in the mail.) The EV network promises to enable Model S and Model X owners to charge 150 miles of range in 30 minutes. What about your Roadster? Sorry, you aren’t invited to this charging party. Have a Tesla and a LEAF? You’ll have to be satisfied with separate but equal charging facilities as the Tesla proprietary charging connector restricts access to Tesla shoppers only. Is this class warfare or do we parallel the computer industry where connectors come and go with the seasons?

What’s the big deal with charging? Let’s go over the Model S’s charging time chart and you’ll understand. From a regular 120V wall outlet the Model S will gain 4-5 miles per hour of charging and consumes about the same amount of power as a space heater. Charging at 41 amps, the car gains 31 miles per hour and consumes as much power as TWO average electric clothes dryers. Charging at 81 amps (a service that many homes with older wiring or smaller services cannot support) the Model S gains 62 miles an hour and consumes more power than an average home’s A/C, dryer, washer, stove, oven, lights and small appliances put together. With a range of 300 miles and a 10 hour charge time at the 41A rate, it’s easy to see why fast charging stations are appealing. Tesla’s Supercharger’s specs are yet to be revealed, but by the numbers it is apparent the system is delivering a massive 90kWh charge which is likely 440V DC at around 200A. An hour of charging at that rate is 70% of the power that my home uses in an entire month.

Is this a Tesla issue? No, it’s an EV issue. If you expect your EV to drive like a regular car, modern EVs are a delight. If you expect your EV to refuel like a regular car, we’ve hit a snag. But it’s more complex than that, you see, only three of the four Model S trims support DC fast charging and the only other EVs on the market with a DC charge port are the Nissan Leaf and Mitsubishi i-MiEV. Except they don’t use the same connector or the same standard. Oops. Adding more complications to the mix are the EVs with no DC charge connector like the RAV4 EV, Volt, Prius Plug-In, Accord Plug-In, Focus, Active E and Coda while the new Chevy Spark is rumored to début a third standard: the SAE combo plug.

Of course, if you think of your car like you think of your cell phone, this makes sense as the phone you bought last year wont use the same charger as the phone you buy today. If you think of this in car terms however it’s like buying a new car and finding out that most of the gas stations have a nozzle that won’t fit your car.

Back to those Tesla charging stations. Tesla opened the first four in Southern California and announced two more stations will go online in October with stations in Las Vegas, Northern California and Oregon by summer 2013 with the 100 station network being complete by 2015. If that network sounds familiar then it should, because the recent settlement in the California vs NRG lawsuit means there will be 200 new CHAdeMO stations in California over the same time frame in addition to the 8 already installed and the 75 commercial stations planned or under construction. It isn’t just California on the CHAdeMO bandwagon however, the Department of Energy claims there are over 113 CHAdeMO stations in the USA and a 1,200+ unit installed base in Japan.

What does this mean to Tesla owners? Until Tesla creates a CHAdeMO to Tesla charging adapter cable (much like they have a J1772 to Tesla cable for use at public AC charging stations), Tesla owners will be restricted to regular AC charging or the smaller Tesla only charging network. On the flip side, Tesla is promising the Tesla charging stations will be free to Tesla owners, positioned next to trendy restaurants and you won’t have to mix with the Leaf owning rabble. You can also feel superior because Tesla’s newer standard charges 80% faster than the 50kWh CHAdeMO connector.

What does this mean to LEAF and i-MiEV owners? It means this is just the beginning of a standards battle. If you bought an EV before this raft of new J1772-connector-toting models, you know what I’m talking about. While CHAdeMO has the lead now, depending on what standard the rest of the industry supports this could change rapidly.

What about the rest of us? If we continue to build more battery electric vehicles and continue to develop batteries that are more and more power dense, you can expect even the snazzy Tesla charging connector to be outdated on a few years. If you expect an EV SUV to deliver 300 miles of electric range, AWD, decent performance, mild off-road ability and Range Rover quality luxury trappings, then expect it to have a battery that is 50-100% larger than the Model S’ massive 85kWh pack. This means you have to either take all the charging rates and nearly double them, or you have to develop a charging method that charges 50-100% faster to keep the same performance.

Of course, just like LEAF owners experience battery degradation caused by repeated use of DC quick charge stations, Tesla owners should be mindful that batteries don’t last forever and the faster you charge them the shorter their life will be.

In the eternal quest to adhere to “sustainability”, Lamborghini will apparently be fitting the Aventador with a start-stop system and cylinder deactivation. Am I the only one that finds the recent trend of eco-friendly supercars ridiculous?

We can argue over their relevance in today’s wider world, what direction they should take (lightweight and pure, like a McLaren F1 or obese but rapidmissiles like the Bugatti Veyr0n) and what even qualifies as a supercar when there are record numbers of Ferraris and Gallardos being built, to the point where they no longer turn heads in major urban centers.

One thing we can agree on is that the supercar, in all its forms, is the absolute zenith of what the automobile can achieve in terms of performance and technological achievement. That doesn’t mean that they can’t strive for greater efficiency. I see no negative effect on making cars more efficient. But it must be done in the right way, rather than in a manner that panders to the pseudo-religious zeitgeist that demands we be “green” without ever really explaining why, beyond a bunch of theoretical doomsday scenarios that would send us back to pre-Industrial agrarian communities (which is a positive development for some hairshirt green types…but that’s another topic). That path is why we have all kinds of technological solutions which impose significant weight penalties while returning minimal gains in fuel consumption and emissions reduction.

Nowadays, you can’t attend a Porsche product demonstration without hearing their spiel about a committment to the environment and the planet. It’s so transparently contrived and disingenuous that it’s almost nauseating. My driving partner and I sat through it at the 2013 Porsche Boxster launch, and after a minute of dealing with the start-stop system, we promptly hit the “Off” button. On the other end of the spectrum, we have silly systems like GM’s eAssist, which are pseudo-hybrid systems that don’t give the car a competitive advantage in terms of “MPGs”, but take up weight and space.

The one true path to creating a “greener” supercar – or any car – is light weight. There is no way around it. Yes, cars have become heavier, and despite what the auto-dork purist crowd will tell you, it’s not all bad; you probably won’t be horribly mutilated or killed in an impact anymore, and they’re quite nice places to be, what with satellite radio and heated  and cooled seats (which are apparently more efficient than using the climate control system) – but something has to give.

Imagine if the next Acura NSX didn’t have a hybrid system; just an Earth Dreams V6, making 350 horsepower (say we sacrifice some efficiency in the name of power) but the car was radically light weight – kind of like what Honda did last time around. Yes, the NSX wasn’t terrible fuel-efficient by our standards, but the powertrain and the mindset behind it, is now 20+ years old. What could be done with current knowledge in the fields of engines, aerodynamics and lightweight construction, minus the heavy battery packs and hybrid motors?

The NSX is a supercar that can theoretically be driven every single day. The Aventador isn’t. Focusing on a efficiency for a car that will be used sparingly seems like a foolish misallocation of brainpower and resources. Even if it does get 11 mpg around town (likely less with all the revving at stoplights and burst of acceleration the cretin owners are likely to engage in), it’s on the road for perhaps a couple of hours at a time, once or twice a month. The net gain in carbon emissions is inconsequential. The V12 engine is an endangered species, and anyone looking for that carnal blast of noise would be let down by the pedestrian drone of a V6 once the cylinder-deactivation system kicks in.

This is why the Lexus LFA is so admirable. There is a contingent that cannot look past the numbers, and can only type out a spastic admonishment that “(Insert supercar here, or a Nissan GTR) would smoke this thing”. The accomplishment at hand is lost on them, as well as those who rightfully appreciate the amazing, hand-crafted V10 and gorgeous styling. The LFA mostly exists as a test bed for carbon fiber vehicle construction, a way to justify the costs of all of this R&D in the guise of a halo car marketing exercise for Toyota and Lexus.

Subsequent breakthroughs will allow us to have our cake and eat it too; all the safety and supplemental comforts that we are used to, with no drop-off in performance and efficiency. It is expensive, difficult and time-consuming, which is why most car companies are unable to explore radical solutions for reducing mass at this time. And lest we forget how pleasing it is to drive something free of unnecessary mass, light on its feet, with sharp reflexes and the unparalleled feeling of not knowing where you end and the car begins.

The likelihood is that we’ll continue to see more of these measures, like start-stop systems and hybrid drivetrains in the dream machines of tomorrow. In some cases, like the Porsche 918 and the Acura NSX, they do exist in the name of pushing the performance envelope. In the case of the Aventador, they are a naked PR move to appease a contingent of people who are not going to be Aventador customers, and often have a reflexive distaste for “the rich”, without ever realizing that they too are human beings, with insecurities and regrets and a hankering for escapism through consumption. Which is what compels them to buy the Aventador in the first place.

What is behind those missing links? Who is the nice man who goes thumbs up next to China Communist Party Polit Bureau member Li Keqiang? And why has he allegedly just bought Saab?

Trollhättan’s newspaper TTELA reported yesterday (translation via The :Local) that “the sale of assets of bankrupt Swedish automaker Saab is complete.” The source was Trollhättan’s city manager Annika Wennerblom who told the Trollhättan newspaper that the deal is done. Hope springs eternal and makes a bad editor. Even worse, an unchecked story raced around the globe, leaving a string of 404s in its wake as editors hastily yanked the erroneous story.

Hours later, Trollhättan spokesman Peter Asp, called the news “Wennerblom’s own speculation that went awry.” He stated that “neither she, nor our local councilor Paul Akerlund, nor I have been informed that the administrators have completed their work.”

Now, NEVS spokesman Mikael Ostlund only wants to “confirm that NEVS is interested in buying Saab Automobile’s assets.” This is old hat. The allegedly Swedish company National Electric Vehicle Sweden (NEVS) had been rumored for a while as a bidder for the Saab assets that are on the block in a bankruptcy sale. What is more interesting is who is behind that freshly minted National Electric Vehicle Sweden.

It is two shadowy companies.

One company, often played into the foreground, is a  low profile Japanese investment company named “Sun Investment LLC.”

The other company is National Modern Energy Holdings. According to media reports, this company is registered in the British Virgin Islands, but is in turn owned by a Hong Kong based company named China Dragon Base Holdings.

“And behind it all stands the Swede Johan Kai Jiang,” writes TTELA, happily translated by our friends and fans at Saabsunited.

Here he is. Alleged Swede Kai Johan Jiang became famous for turning garbage into power. Literally.

Kai Johan Jiang was born in 1965 in China’s Shandong province. As Jiang Dalong, definitely not as a Kai Johan. Later, Jiang became a minor celebrity in China. His Beijing-based Dragon Power Group received an RMB 28 billion ($4.4 billion) loan from the Chinese state-owned enterprise China Construction Bank, which provided the capital for the National Bio Energy Company, a subsidiary of Dragon Power, to construct biomass plants across the country.

Later, Dragon Power was renamed to State Power Group, Ltd., and Kai Johan Jiang is the Chairman of that Chinese power company. State Power Group sounds confusingly similar to China’s energy moloch State Grid, and Jiang likes it that way. Writes China Daily:

“Chinese energy giant State Grid Corp, through its subsidiary National Bio Energy and China’s Dragon Power Group Ltd have invested in a Swedish bio-energy joint venture called NBE Sweden. “Our investment in cellulose-based ethanol production in Sweden is aimed at developing technology for biomass power generation projects in China,” said Kai Johan Jiang, chairman of Dragon Power Group and National Bio Energy Group Ltd China.”

You follow?

In this 2004 picture, Kai Johan Jiang, (right) explains the garbage to power process to Wu Bangguo, Chairman of the Standing Committee of China’s National People’s Congress.

A year later, Kai Johan Jiang is seen with a Chinese government delegation led by Liu Qi, member of the CCCPC Polit Bureau, Secretary of the Party Committee of Beijing Municipality, touring a biomass power plant in Denmark.

In this 2010 picture, “top leaders Liu Qi, Liu Yandong and Guo Jinlong, etc. listen to Chairman Kai Johan Jiang’s report at the 13th China Beijing International High-Tech Exposition.“ We already met Liu Qi. Liu Yandong is a member of the Communist Party’s Politburo and State Councilor, Guo Jinlong is Beijing Deputy Party Secretary and mayor of Beijing.

The fact that Swede Kai Johan Jiang wasn’t always a Swede becomes obvious in a few seconds. The rest can be found through a few hours of googling and some phone calls. The true scandal is how many dewy-eyed Saab blogs keep polishing the Swedish charade. They stress that Kai Johan Jiang was “a senior adviser for Volvo,” they look the other way when the newly minted Swede appears on the side of Politbureau members. They write that the senior adviser worked for Volvo from “1993 through 2000.” They forget that the senior adviser’s career started at a youthful age of 28. They also forget that Kai Johan Jiang is China’s conduit into western energy infrastructure. They also overlook that the former Volvo adviser  Kai Johan Jiang is also “an economic adviser to the Shandong provincial government on policy matters.” That job however, is performed under his Chinese name Jiang Dalong.

Here, Kai Johan gives an interview to a Swedish TV station.

The keep-Saab-alive blogs also play up that Japanese venture capital company, possibly knowing that it is hard to get information on a Japanese company. Unless you are in Japan.

Even then, this one is a hard nut to crack. Simply because “Sun Investment LLC” does not exist, at least not as a Japanese corporation. Not surprisingly, because there is no LLC in Japan. There is, however, a company called Ippan Shadanhojin Taiyo Keizai No Kai, a.k.a. “Sun-based Economy Association.” It was founded last year in Tokyo with a Sanefumi Sammy Shoji as a partner. Shoji, who twitters as @Samdog45, is not a deep-pocketed financier. Shoji-san graduated in 2003 from the Tokyo University as a Master of Planetary Science, then he was hired out of school by Goldman Sachs. He left in 2009 in the wake of the Lehman shock that severely thinned the herd of bankers and patrons of Roppongi bars.  Shoji dabbled for two years in the “boutique clean technology/investment firm” by the name of Japan Core Partners, before helping to launch the “clean technology-focused venture capital firm” that is erroneously called Sun Investment LLC.

Art this point, a little excursion into the byzantine world of Chinese capitalism is in order. Companies in Hong Kong, the Virgin Islands and oddly enough Japan are favorite vehicles for investments in China. The bulk of “foreign” companies investing in China are companies registered in offshore tax havens, financed with recycled money from China. These companies also are a favorite stepping stone for Chinese companies that want to invest elsewhere without immediately rubbing it in that they are Chinese.

Because Caribbean-registered, and even Hong Kong based companies have the onus of fast money, smarter Chinese ventures like to use Japanese companies as alleged parents. Often, after a little scratching on the Japanese lacquer, the Chinese veneer comes through.

Ippan Shadanhojin Taiyo Keizai No Kai is the perfect vehicle for this. The office of the company is on the 6th floor of a fancy Tokyo building near the Japanese Emperor’s residence. One wrong step, and you land in the Emperor’s moat. More than 100 tenants are in this building. Taiyo Keizai No Kai  resides in the same office as Japan Core Partners. They share phone and fax. The address is also used as the secretariat of the Biomass Expo 2012. The same company occasionally organizes get-togethers with Chinese business interests.

The “Taiyo Keizai No Kai” can loosely be translated as “Sun Ecology Group”. An “Ippan Shadanhojin” is an intermediate company, halfway between profit and non-profit. (On its Facebook page, the sunny company bills itself as a non-profit, a perfect partner for Saab.) Typically, an “Ippan Shadanhojin” represents Cayman-based Special Purpose Vehicles in Japan. This is not a deep-pocketed investment company. It is a stand-in for someone else. Taiyo Keizai No Kai has as much history and experience as National Electric Vehicle Sweden, i.e. the history and experience of a toddler. Draw your own conclusions.

Back to our main man, the Swede from China. In an interview, Kai Johan Jiang remembered his days in poverty in rural Shandong province, and said that he does “not care that much for personal wealth.”

He is the perfect man to invest into Saab. As history shows, Saab is the ideal vehicle to destroy wealth.

Old habits die hard. Whether it’s GM’s desire to slice-and-dice its fuel economy achievements to make them look better than they are, or our instinct to correct the record, it’s all just a little bit of history repeating.

GM, like most of the Detroit automakers, has never had an easy time marketing its fuel economy achievements. With a huge percentage of its sales and an even higher percentage of profits traditionally coming from full-sized trucks and SUVs, GM has had to respond to rising gas prices with some questionable claims. Perhaps the most infamous: 2008′s campaign touting the assertion that Chevrolet sold more cars getting 30 MPG on the highway than Honda or Toyota. Not only did this claim ignore the most accurate measures of fleet-wide efficiency, but it also stretched the truth rather badly. When TTAC’s readers analyzed this claim, they found that Chevy was counting different bodystyles as different models, effectively “double counting” cars like the Aveo (which was counted the four- and five-door models as separate cars). When the same counting technique was applied to Toyota’s model range, it was shown to have even more 30 MPG-capable cars than Chevy, essentially invalidating what was already a fairly marginal marketing claim.

But since 2008, the pressure has only mounted on GM to show improvement in its fuel economy. Though gas prices aren’t higher than they were back in the Summer of ’08 (yet), GM’s bailout has created a new kind of pressure. As I pointed out in a December 2010 NY Times Op-Ed, President Obama’s green justification for the bailout seemed to be something of a mirage. With gas prices then falling and pickup and SUV sales picking back up, Detroit was hardly living up to Obama’s vow that

This restructuring, as painful as it will be in the short term, will mark not an end, but a new beginning for a great American industry. An auto industry that is once more outcompeting the world; a 21st-century auto industry that is creating new jobs, unleashing new prosperity and manufacturing the fuel-efficient cars and trucks that will carry us toward an energy-independent future.

Now, not only is GM facing pressure put on it by a President who seemed to offer fuel economy leadership from Detroit as a public reward for the public’s investment, but gas prices are also beginning to rise once more. And though GM has absolutely improved its fuel economy in the meantime, it still significantly lags the rest of the industry on an objective fleet-wide basis. And what’s worse, it’s marring its modest but admirable achievements by falling back on the old “most models over 30 MPG” chestnut.

In a post titled “Digging Into GM’s Fuel Economy Record” at his new “BTW” blog, GM’s VP for Communication Selim Bingol resurrects GM’s pre-bailout canard by arguing

GM has been selling a lot of fuel-efficient vehicles in many different sizes and styles – and more than you may think.

Just look at March.  We sold more vehicles in the United States that deliver an EPA-estimated 30 mpg or better on the highway than ever before – more than 100,000 – and the figure includes cars like the Chevrolet Camaro V-6 and crossovers like the GMC Terrain.

It might surprise you to know that these results make GM far and away the leader among the “Detroit” Three automakers, and we’re not that far off the pace set by Toyota.

So, instead of “more models over 30 MPG than Toyota,” GM is claiming 30 MPG option leadership over its Detroit competitors. And, to its undying credit, it’s not misleading the public by double-counting models this time around. Thanks to its genuinely improved offerings, GM legitimately has 12 options rated at over 30 MPG on the highway. On the other hand, the fact that GM sells more 30 MPG cars than its Detroit competitors is, as Bingol admits, at least

partly a function of our scale.

But although Bingol makes a more credible case for the “more models over 30 MPG” claim than his predecessors, achievements like these don’t get better with age. For one thing, the competition has moved on: Hyundai, for example, now reports the percentage of its sales that are rated at 40 MPG on the highway… some 41% as of March. Bingol as good as admits that GM is still playing catchup when he notes

Of course, 30 mpg is not the goal line.  We can and will move the needle higher because customers and our CAFE commitments demand it.  Soon enough, 40 mpg will be the new 30.

Here’s the thing: it already is. GM is touting a claim that might have been impressive four years ago… had it been accurate. Today, with well over 20 models available with at least 40 MPG highway ratings, it’s a yawner.

But not only has the industry moved on since 2008, the market has as well. Thanks to the rise of sites like TrueCar and Edmunds, consumers have access to more data on new cars than ever before. And since transparency has improved in the auto market, there are now far more accurate ways to compare manufacturer fuel economy than existed in 2008. With the fuel economy leader Hyundai self-publishing its sales-weighted fleet fuel economy numbers, TrueCar has stepped in to provide similar data for the entire industry. And isn’t the best way to compare fuel economy by measuring what the manufacturers actually sell?

By this measure, however, GM does not come out looking like an industry leader. In fact, as a manufacturer, GM doesn’t even make the industry average fuel economy. And its greatest deficit is in the car segments, where it’s nearly two MPG off the industry average. Moreover, GM’s rate of improvement in March was one of the lowest in the industry, which means it’s actually falling behind the competition. By brand, the picture is similar: each of GM’s brands comes in below the industry average, with truck-free Buick coming the closest at just .1 MPG off the mean.

This is not to say that GM hasn’t made improvements. As Bingol points out, GM sells a far more balanced mix of cars, trucks and crossovers than ever before. By segment, GM’s offerings beat the industry average for Large Cars, Large and Small Trucks and Large and Midsized SUVs. In fact, TrueCar shows that GM’s Midsized SUV offerings are by far the most efficient in the industry, at 24.1 MPG compared to a 21.9 MPG average.

Though these are clearly signs of movement in the right direction, they’re not enough to give GM a credible claim to fuel economy leadership… even among the Detroit automakers. But then, that was fairly apparent from the moment The General dusted off an ineffective marketing claim from  2008. Thanks to the relatively slow run-up in gas prices, pickup and SUV sales are remaining strong and GM needs their profits far more than it needs to become a fuel economy leader. But if the market experiences another Summer ’08-style rush towards high-efficiency cars, GM is going to have to come up with a better pitch to economy-minded consumers. And ultimately, it’s going to have to work harder than everyone else if it ever wants to make good on Obama’s promise of fuel economy leadership.

When government, media and industry agree that a trend exists, it’s generally taken as fait accompli. After all, these three institutions wield immense cultural power, and together they are more than capable of making any prophecy self-fulfilling. But there’s always a stumbling block: acceptance by the everyday folk who actually make up our society. And when a trend is taken for granted, the ensuing rush to be seen as being in touch with said trend often generates more heat than light. Such is the case with the trend towards “green cars.” Few would deny that they are “the future,” but at the same time, there’s been precious little examination of how this future is to be realized. And when such examination does take place, it tends to raise more questions than it answers.

Case in point: the Union of Concerned Scientists recently published a report examining just how “green” the “greenest” cars available, namely electric cars, are. By examining the average C02 emissions of the various regional power grids, they are able to show on a roughly apples-to-apples basis how carbon-efficient EVs are in comparison to their gasoline-sipping cousins. And their findings show that in broad swathes of the US, pure-electric cars are little better than hybrids like the Prius in terms of average C02 emissions.

This ACS report is something of a dual-edged sword. On the one hand, it makes an important point about EVs: that they are only as environmentally-friendly as the grid from which they draw their power. This fact has long been ignored by policymakers who take the “greenness” of EVs for granted and create uniform national EV stimulus, as if EVs were uniformly “green.” On the other hand, the ACS clearly has a pro-EV agenda, and its report concludes that

There are no areas of the country where electric vehicles have higher global warming emissions than the average new gasoline vehicle.

Given that EV offerings are currently limited to the Compact and Subcompact segments, this is hardly a fair comparison. And since the EPA includes cars like the Bentley Continental GTC as a “subcompact,” a fair comparison would take some real work. To be fair though, the UCS is correct when it points out that 45% of Americans live in the coastal regions where relatively clean grids offer strong environmental incentives for EV use. More importantly, those areas which have dirtier grids tend to be the same regions (the South and Midwest) where geography and development patterns create more practical disincentives for EV use. For this reason, the somewhat disappointing results of the study are unlikely to dramatically hurt the nascent EV market.

Still, this geographical distribution has important consequences for public policy. For one thing, it points out the futility of a nationwide EV incentive program, at least as an environmental policy. Luckily, this reality seems to have taken hold in D.C., where EV-only incentives are being broadened to include multiple fuels and encourage local solutions. On the other hand, the fact that EVs are a hot trend means local governments are often more anxious to show off their trend-awareness than craft sensible policy based on local realities.

For example, Colorado has one of the least “green” grids in the country, and yet its state government has been one of the most aggressive in handing out EV tax credits. Prior to 2010, Colorado allowed Tesla buyers to take up to $42,000 in credits. Today EVs get a $6,000 incentive in addition to the $7,500 (soon to be $10k) federal credit, and a local group has received half a million dollars in federal grants to promote EVs in the state. Given that Colorado-based EVs emit equivalent emissions to a 33 MPG combined gasoline car (think: Hyundai Elantra), this is proof that hopping on a PR-driven bandwagon often outweighs the actual benefits of such “environmental” policies.

But, in a profoundly ironic twist, Colorado may well become a leading market for EVs… and not just because of its generous government incentives either. In fact, Colorado’s relatively dirty grid actually makes it one of the cheaper states in which to operate an EV. In its cost analysis of individual cities, the UCS finds that Colorado Springs’ 2.4 cents-per-mile operating cost for a Nissan Leaf is one of the cheapest in the country, especially when compared to cities with the best emissions scores. Though there’s not enough evidence in this study to support a direct link between the cost and cleanliness of electrical grids, it’s no surprise to find that they do trade off with each other to some extent.

This is one of the key takeaways from the report for the simple reason that running cost, rather than pure environmental benefit, is what will drive the EV market beyond its early adopter niche. And as utilities invest in ever-greener powerplants in hopes of improving the environmental performance of EVs, running costs will rise. And as EVs become more popular, increased demand on the grid will further drive up prices. This tradeoff encapsulates the dilemma of all EV stimulus: the hoped-for environmental benefits are dependent on the mainstream economic viability of EVs, which in turn depends on cheaper (rather than cleaner) power and much, much cheaper EVs. The UCS report’s conclusion attempts to square this circle by pushing EV adoption as the overriding concern, noting

Of course, cleaning up the nation’s electricity production won’t deliver large reductions in the transportation sector’s emissions and oil consumption unless electric vehicles become a market success. While they are now coming onto the market in a much bigger way than ever before, EVs still face many hurdles, including higher up-front costs than gasoline vehicles. Lower fueling costs for EVs, however, provide an important incentive for purchasing them, and our cost analysis of 50 cities across the country shows that EV owners can start saving money immediately on fuel costs by using electricity in place of gasoline.

While this is true enough, it fully ignores how the market works. For one thing, the fuel savings touted in the report are in comparison to an “average gasoline compact vehicle,” and therefore fails to account for most of the market segments. Consumers buy cars that fill their needs, and many Americans need cars larger than a compact. Furthermore, though those savings are estimated to be as much as $1,220 per year (for a Nissan Leaf), these savings do not include amortization of the EV’s up-front cost premium. Consumers will see “immediate savings” on fuel costs, but will be far behind on total ownership cost for years.

Currently the EV market is truly a “green” market, as potential EV consumers are currently motivated by the desire to reduce their carbon emissions. But EVs simply won’t have much of an impact on national emissions until they offer the kind of “green” that actually motivates consumers: money, in the form of real savings. As long as federal and state governments focus, as the UCS has, on carbon emissions, EVs simply won’t find much of a market. If, as the UCS claims, reductions in transportation-sector C02 emissions require mass EV adoption as a prerequisite, the carbon question is currently little more than a distraction. Environmental benefits must give way to economic reality, lest all of the possible “green” benefits of EVs remain a permanent mirage.

Ontario’s 2012 budget was released this morning, and while the United States under the Obama administration seems intent on boosting subsidies for alternative fuel vehicles, including EVs, those in the Great White North’s most populous province are able to see the writing on the wall with regards to EVs.

Two programs, designed to encourage EV charging station infrastructure and provide generous tax rebates to EV owners (as much as $8,500 for vehicles with a 20 kWh battery like the Fisker Karma) are being merged. Despite the provinces vision to have one out of every 20 vehicles on the road in 2020 powered by electricty, only 200 grants have been handed out under the Electric Vehicle Incentive Program and only six charging stations have been built. That’s in a province with an estimated 7,000,000 vehicles on the road, and a far cry from the projected 350,000 EVs that were supposed to be on the road in 8 years time.

Details of the merger are murky, but the move is expected to save $43 million dollars for the cash strapped province over three years, but the news merited only a brief blurb in the addendum to the 2012 budget.

“The electric things have their life too. Paltry as those lives are.”

Phillip K. Dick, Do Androids Dream Of Electric Sheep?

At the High School I attended, progress reports were never a good thing. Halfway through each term, students who were averaging a D or lower would receive a print-out of their grade accompanied by a line from the teacher explaining how the miscreant in question was failing to live up to expectations. True to form, the White House’s just-released “One Year Progress Report” [PDF] on President Obama’s “Blueprint For A Secure Energy Agenda” includes some devastating evidence of abject failure. But unlike my post-progress report conversations with the parental stakeholders, Obama has a lot more to explain to voters than a simple “insufficient homework turned in.”

Just over a year ago,  in his 2011 State Of The Union, President Obama unveiled plan to stimulate “One Million Electric Vehicles By 2015,” arguing that

“With more research and incentives, we can break our dependence on oil with biofuels, and become the first country to have a million electric vehicles on the road by 2015″

Shortly thereafter, his Department of Energy released a report that touted wildly-optimistic production goals for several pure-electric cars, concluding that

Reaching the goal is not likely to be constrained by production capacity. Major vehicle manufacturers have announced (or been the subject of media reports) that indicate a cumulative electric drive vehicle manufacturing capacity of over 1.2 million vehicles through 2015.

Strong incentives, research and development, and assistance in establishing manufacturing and infrastructure is underway or planned. These activities directly support consumer demand of these technologies, and mitigate some of the uncertainty associated with the large-scale adoption of electric drive vehicles.

That argument became conclusively moot this year, when production of the Chevrolet Volt was stopped for the third time in its short lifetime, as unwanted cars piled up on dealer lots. Though the Volt has been defined as a symbol of GM’s bailout, it is even more politically significant as a component of Obama’s bold million-plugin plan. In last year’s report, the Department of Energy estimated that 120,000 Volts would be put on the road in the US this year, when the Volt hs actually only just broke 1,000 units sold per month for the first time in February. That 90% discrepancy between expectation and reality is crucial to Obama’s pledge, as the “1.2m production capacity through 2015″ that the DOE took for granted included some 505,000 Volts (at 120k/year from 2012-2015). With the Volt selling at 10% of DOE estimates, the entire goal falls apart (the next-closest vehicle, Nissan’s Leaf, isn’t estimated to hit 100,000 units per year until 2014).

Having seen the Volt’s underperformance coming, I’ve been wondering when the Obama Administration would recognize reality and admit that its goal was out of reach. But this being politics, you can’t just hand ammunition to your opponents. Admissions of failure must be couched in obfuscation and swaddled in unrelated good news. Which brings us to the just-released “Progress Report,” which is something like the polar opposite of landing on an aircraft carrier festooned with “Mission Accomplished” banners.

A sunny, upbeat document, the “Progress Report” introduces itself with wide-eyed optimism:

On the one-year anniversary of your Blueprint for a Secure Energy Future, which outlined your goals for American energy, we wanted to present a report on the significant progress we have made. During the last year alone, we established new incentives to increase safe and responsible domestic oil and gas production; proposed the toughest fuel economy standards for cars and trucks in history; provided millions of Americans with efficient and affordable transportation choices; launched new programs to improve energy efficiency in our homes, buildings, public transit, aviation and roadway systems; and took unprecedented steps to make the United States a leader in the clean energy
race.

But if we skip ahead to the section regarding EVs, we find that all the sugary good news is just helping mask the rank scent of failure. So, how does a sitting president admit failure? It’s as easy as writing

“By 2015, the United States will be able to produce enough batteries and components to support one million plug-in hybrid and electric vehicles.”

Notice the key difference: then, the argument was that government action would put a million EVs on the road, now the argument is that the infrastructure will be in place to meet the goal. Oh, and in case you’re a fellow ADD-sufferer, remember that the DOE determined just one year ago that

Reaching the goal is not likely to be constrained by production capacity.

In essence this report repeats the exact same thing. The difference is simply that a year ago, the President could pretend that the market would simply soak up whatever number of EVs the car companies (most of whom had received some form of government support) said they would build. Now even the most hardened partisan can’t maintain such obvious self-delusion, as the demand for EVs (the Volt in particular) has been proven to be well below expectations. This failure is made explicit in the Progress Report, which notes that

in March 2012, the President launched a clean energy grand challenge to make electric-powered vehicles as affordable and convenient as gasoline-powered vehicles for the average American family within a decade.

In short, the message has gone from “thanks to government intervention, the future is now” to “thanks to government intervention, the future might be here in a decade.” Or, to quote a certain former presidential candidate, “whoops!”

Some might argue that this is a textbook example of government wasting money trying to affect the market, and a clear sign that the market is going to do what it wants regardless of our publicly-funded exercises in futility. Instead, President Obama is “doubling down” by requesting a billion dollars be spent on a “Community Deployment” scheme aimed at boosting demand for “advanced technology vehicles” through local partnerships, and tax credits for advanced technology vehicles be bumped to a maximum of $10,000. To be fair, the retreat from EVs is reflected in the new “technology neutral” approach, which doesn’t limit subsidies to EVs but

allow[s] communities to determine if electrification, natural gas, or biofuels would be the best fit.

But the proposed changes to the consumer tax credit [PDF] have some very vague and confusing stipulations, namely that

(1) the vehicle operates primarily on an alternative to petroleum; (2) as of the January 1, 2012, there are few vehicles in operation in the U.S. using the same technology as such vehicle.

The vagueness of those rules makes them hard to interpret, but it seems that clause (1) excludes high-efficiency, small battery plug-ins like the Prius Plug-In while clause (2) could well exclude natural gas vehicles (there were well over 100k NGVs on the road as of 2010). In which case, this policy is merely a continuation of the attempt to create a market for EVs (and since we’re talking disappointing technologies, possibly hydrogen cars). The community deployment scheme seems more technologically neutral, but is flawed in the extent that it assumes that local solutions will be more broadly applicable. Besides, most local governments with strong “green car” demand potential are already incentivizing public EV charging stations and the like. And don’t get me started about the fact that the government is even pretending that biofuels are a serious solution to either environmental or energy security concerns.

As gas prices go up, we could see EV and plug-in sales improve, but it’s clear that there won’t be one million EVs on American roads by 2015. Especially with policy appearing to shift towards a more “technology neutral” mode, there is a very real threat that the huge oversupply of natural gas could create a short term market for NGVs that could doom EVs for another decade or more. If the goal of Obama’s energy policy were to improve energy independence or help the efficient use of resources, this would be good news as it’s much easier and cheaper to build (and therefore, subsidize) NGVs than EVs (even without considering the low cost of natural gas itself). Unfortunately, we have already made a significant national investment in EV/battery technology, which satisfies yet another political constituency: environmentalists.

Without clearly communicated goals, government policies will never gain the credibility with markets they need to impact. And given President Obama’s track record so far, it’s clear  he needs to more clearly admit that his EV initiative has failed and express a clear set of goals for America’s transportation and energy sectors. Unfortunately, the fact that that he’s chosen to admit that the EV dream is over in such an oblique manner indicates that expecting such forthrightness would seem more than a little naive. All of which simply confirms that this issue, like so many others facing the nation, is no longer a question of policy, but of politics.

General Motors announced changes to the Chevrolet Volt’s design after a NHTSA investigation into why a Volt caught fire following crash testing.

The changes will go into effect once production restarts at the Hamtramck, Michigan facility, but customer cars already sold will follow a different protocol.

Starting in February, GM will initiate a “voluntary customer satisfaction program” to make the necessary changes to the Volt. According to GM’s Rob Peterson said that  formal recalsl must be initiated by NHTSA, and their lack of movement prompted GM to enact a voluntary one instead.

The fix involves changes to the Volt’s battery pack housing, as well as a coolant temperature sensor and a special bracket to prevent overfilling. The previous system allowed the battery housing to be punctured, which then resulted in coolant overflowing onto a circuit board causing an electrical short. The short was determined to be the cause of the fire.

Click here to view the embedded video.

This is one of my favorite music knock offs, the Hindi version of Europe’s “The Final Countdown”. My point? If the folks at Mahindra Planet are right, it’s only a matter of time before the Bollywood Music types rip off Skynyrd’s classic, “Sweet Home Alabama.” Which will be pretty awesome, I assure you!

The big box of a building in Muscle Shoals is rumored to be the future home of the Mahindra TR20 and TR40 compact pickups. The truck gurus at Navistar supposedly signed a 10 year lease on the facility this October: could the company that fought Ford tooth and nail take Ford’s compact truck market share once the Ranger officially dies next week?

But let’s not get too excited about our prospects for a pure compact pickup, a stickshift, gutsy Miata with a bed if you will. Nothing’s ever perfect.

If the EPA figures are right, the TR40 is a bit of a buffet slurping Yankee. Considering the price volatility of diesel and the fuel economy of gas trucks, that’s a big problem. And who knows if these rigs have enough engineering prowess to overcome the road/dirt driving dynamics of a Tacoma. It’s same (potential) Achilles’s heel that put the Model T out of production and Chevrolet on the map.  Then again, this interior shot suggests the TR isn’t a bad place to do business.

Rear HVAC vents?  Not too shabby! Who knows what the future will provide?

Off to you, Best and Brightest.

With NHTSA opening a formal defect investigation into the Chevy Volt, GM is moving to defend its rolling lightning rod (no pun intended) and allay consumer fears about its safety. Yesterday I briefly appeared on Fox Business’s Your World With Neil Cavuto show to talk about what the intro to my segment referred to as “the hybrid from hell” and the “killer in your garage.” I tried to explain that the danger to consumers was basically nil, and that the real concern is for rescue, towing and salvage workers. And I would have explained why NHTSA’s tests still leave some serious questions open, but my “fair and balanced” approach meant that my segment ended up being extremely short. So let’s take the opportunity now to look past the hysteria and pinpoint the real issues with NHTSA’s investigation into the Volt.

A recent GM press release on the issue was accompanied by a conference call to reporters [transcript in .doc format here], in which GM’s top product executives, North American President Mark Reuss and Product Development Boss Mary Barra, gave GM’s perspective on the flap. But in a key passage, Barra confirmed that the most reasonable criticism of GM is essentially legitimate, as she confirmed that GM had not fully developed post-crash safety procedures before putting the Volt on the market.

Three weeks after the [initial NHTSA side-pole] test, the Volt caught fire.  This vehicle crash test was conducted before GM had finalized its battery depowering procedure.  We have learned that significant electrical charge, or energy, was left in the battery after the test.  When electrical energy is left in a battery after a severe crash it can be similar to leaving gasoline in a leaking fuel tank after severe damage.  It’s important to drain the energy from the battery after a crash that compromises the battery’s integrity – or you risk potential fire.

That’s why we have developed a process to depower the Volt’s battery after a severe crash.  We have been using the protocol since July of this year and we have now shared this process with the NHTSA and are working to extend this process and the needed equipment to those who handle or store vehicles after a severe crash.

Unable to deny that it should have had post-crash protocols in place before launching its first lithium-ion battery-powered car, GM seems to be trying to broaden the issue to extend beyond the Volt. Said Barra

But I also have to put this into the proper perspective:  Battery safety isn’t just a Volt issue. This is an issue we’re already working within the industry.  In fact, we are currently leading a joint electric vehicle activity with the Society of Automotive Engineers and other automotive companies to address new issues such as a process and protocol for depowering batteries.

The problem is, this does appear to be a Volt issue. Between the Nissan Leafs already on the road and the Prius Plugins that Toyota has been testing for years now, there are no documented thermal events that I’m aware of. Furthermore, the loss of battery integrity that the Volt experiences in side impacts seems to be caused by the lack of a steel battery case, which Nissan fits to its Leafs. Though it’s not clear what post-crash procedures Nissan has proliferated, it seems that its decision to protect its batteries with steel casings maintains battery integrity in government crash testing, eliminating the risks seen in the Volt.

Meanwhile, there is one question that nags at me. In the wake of the June fire at a NHTSA facility, GM shared its post-crash safety protocols. But the latest Volt fire, which happened a week after NHTSA, DOE, DOD and GM engineers test-ruptured a Volt battery, ”sparked a fire of a wooden structure” at the DOD’s Hampton Roads facility. Here’s what’s not clear: whether that battery pack was subjected to GM’s post-crash protocols. If it was, this fire proves that GM doesn’t have a handle on this problem, and that its safety procedures are insufficient. If the post-crash protocols were not followed, NHTSA, DOE and DOD were incredibly stupid to store a battery pack they knew might catch fire in a wooden building. Furthermore, GM’s communications team has yet to clarify whether this latest fire was caused because safety procedures were not followed intentionally. One way or another, this needs to be clarified, even if it makes the government testers look foolish.

Based on GM’s reaction, deploying top executives, offering loaner cars, and vigorously defending the Volt in the press, it’s clear that The General takes this situation incredibly seriously… which is why I’m a little shocked that it hasn’t cleared up the circumstances of the most recent fire. After all, the Volt is easily the most controversial car in America, and based on my experience on Cavuto yesterday, it’s clear that many hope to use this investigation as the final nail in its coffin. But there is still much we don’t know about these thermal events, and what we do know indicates that they are not an immediate danger to owners and drivers.

So where is the danger? Clearly to the afore-mentioned rescue, salvage and towing workers… but also to the Volt’s sales. The Volt already has marketing challenges based on its price and association with the bailout. Even the hint of a fire risk is going to add the Volt’s sales headwind, making it even tougher to meet its goal of selling 45,000 units in the US next year. Meanwhile, the White House’s goal of putting 120k Volts on the road next year is pushed even further out of reach.

In short, this does not appear to be the death blow that Volt-bashers were hoping for, and GM appears to be handling the situation as well as can be expected. But this incident does highlight the downsides to pioneering new technologies, and shows how just one overlooked detail can create huge PR issues.

As Bertel pointed out earlier today, peak oil is here: the graph above is not from some fly-by-night EV firm, but Toyota, an auto industry giant. What years of environmental and security arguments failed to communicate, economics is now explaining with little difficulty. Namely, that demand for oil is growing faster than supply, forcing developed economies to look beyond oil for future growth. And, as you might expect from a conservative player in a conservative industry, Toyota argues that the solution to this growing disconnect is a portfolio of drivetrain technologies. But what if, instead of trying to adapt an existing business model to the new oil reality, you built a new business model from the ground up? That’s exactly what Project Better Place is trying to do, and the contrast between its approach and that of Toyota is fascinating to anyone interested in the future of the automobile.

Toyota’s approach to a world of constrained oil supply in the incremental manner that one would expect from a giant company selling millions of cars each year. In the words of Satoshi Ogiso

To control this gap, we must go multi track. We must improve gasoline and diesel engines. We must increase the number of hybrid models. We must produce the plug-in hybrid. We must develop city commuter electric vehicles. We already started small production of fuel cell vehicles.  We must do all these improvements at the same time.

That approach seeks to serve the entire global marketplace for cars, and places a huge demand on R&D efforts, requiring a company of Toyota’s size to execute the strategy. Better Place’s approach on the other hand couldn’t be more different. Rather than taking a multi-technology approach, BP is focused on one technology: EVs. And rather than building cars itself, BP is focused on providing the services, infrastructure and grid management tools to make EVs viable for more than “city commuter vehicles.” In short, whereas Toyota seeks to evolve, BP is attempting to create the circumstances under which EVs are the natural choice of technology for all automakers.

These vastly different approaches to the same problem have, at their cores, a conflict over philosophy. Toyota, along with the rest of the car industry, is trying to maintain the market for cars as best it can, while slowly introducing new technologies at higher prices which will then trickle down throughout the lineup. As conditions evolve, the market will demand different technologies from Toyota’s toolbox in different amounts. On the other hand, markets are notoriously bad at foreseeing and managing energy price spikes, as witnessed by the crazy segment fluctuations during and after the Summer of 2008. In contrast, rather than promising a steady evolution towards oil independence, BP offers the opportunity for a quantum leap. Its basic mechanism is the government, rather than markets, which can better prepare a nation for the future rather than relying on often-painful,inefficient market mechanisms. And with demand unlikely to drop below supply any time soon, Better Place is the only option for governments with enough political consensus to preemptively force themselves through petroleum-based transport withdrawals.

But just because Better Place is more fundamentally dependent on government assistance than its alternatives in the auto business does not mean it’s another Solyndra. In fact, Better Place has raised some $750m in equity financing, including a $200m round that was announced at the end of last week. Its backers now include, HSBC, Vantage Point, Lazard, Morgan Stanley, UBS, GE, and Israel Corp… none of which are blue-eyed dreamers. And their fiduciary reasons for backing BP appear to be well-grounded: although the company is “pre-revenue,” its valuation (post money valuation on a fully diluted basis) is now $2.25b. That’s an 8x increase for the first round of investors, who would have been hard-pressed to find a stronger return over the 2007-2011 period. So, where does all this value come from if there are no revenues yet? According to the firm’s communications director, Joe Paluska points to

the uniqueness of our model (i.e., investor confidence that we can unlock a hyper growth category for affordable electric cars) and the major trend lines of oil forecast to go up and battery prices continuing to decline with the delta being our operating margin.

Better Place also has another secret weapon that’s sure to attract investors: its CEO, Shai Agassi. The former software maven who created Better Place after being passed over for CEO of SAP, Agassi is one of those rare people who can communicate an idea as complex as Better Place’s network of battery swap stations, its decoupling of the EV and its battery, its under-covered grid management capabilities, and the macroeconomic backdrop that he insists will make it all work. Having met a number of brilliant and intimidating luminaries of the auto industry, it’s safe to say that none of them made quite the impact on me that Agassi did when I met with him earlier this fall. Between the sheer scope of his ideas, and his flinty, intellectual-street-fighter demeanor, it’s safe to say that Agassi is the closest to a truly historical figure that I’ve met in my years covering the auto business. And with the auto industry stuck in the model of slow technological evolution exemplified by Toyota, Agassi embraces the revolutionary approach that a clean break from the past is not only possible, but necessary.

When I ask Agassi if he wanted to “destroy the auto industry,” a charge often leveled against him by industry executives, he smiles and answers with another question:

Did Jeff Bezos want to destroy the publishing industry? Because that’s what he did. But he did it because he saw the potential for an entirely new business model with the Kindle. In effect, the world’s biggest bookseller killed off its existing business, selling paper books, in order to create an entirely new business in digital media.

No wonder then, that Better Place faces such resistance from the established forces in the auto industry, despite the market’s clear optimism for his approach. Thus far, only Renault has signed on to partner with BP; elsewhere, Agassi says the industry is deeply resistant to the idea that infrastructure can make electric cars viable for the majority of the auto market. He sketches a quick graph showing total cost of ownership over 300,000 miles: the cost of a car, gas and maintenance on one side, and the cost of a car, several batteries and electricity on the other. With battery prices near $500/kWh and headed downwards while gas heads upwards, he points to the difference and says

I don’t want to destroy the car industry, I want to destroy the oil industry. I want to share this money with the car companies. When was the last time they got a check from the oil companies?

It’s a question that’s as provocative as Better Place’s business plan, and the fact that it doesn’t convince the automakers shows how deeply conservative the industry is. But then, why get in bed with a plan that aims to kill off your entire gas-powered business when Better Place can’t even prove that there’s a market for their model?

That’s the challenge Better Place faces right now. Its first networks, in Israel and Denmark, are being built up as we speak, ahead of a slow rollout next year of the Project’s services and vehicles. And says Agassi, the first year will be slow and there will be problems. Like what kind of problems? Agassi smirks slightly and says

We’re going to find out. Imagine the first guys to install gas stations… you think they didn’t run into a few unexpected problems?

But it seems that Better Place’s problems thus far have little to do with implementation and everything to do with the fact that big ideas are scary and draw knee-jerk reactions. For example, take a recent Wall Street Journal [sub] piece which cites the concerns of one Moni Bar, chief executive of Budget Rental Cars Israel-Domicar Ltd. For example:

Mr. Bar said that he fears vehicles with switchable batteries might lose as much as 70% of their original value in four years

An interesting complaint, but one one that seems borne of paranoia rather than reality. After all, one of Better Place’s key advantages is that you don’t buy an EV battery, but just the car. The battery is owned by BP, which you then buy a mileage plan from, allowing you to swap batteries at will and insulate yourself  from the 70%-range depreciation that will afflict EVs where you do have to buy the battery. Though BP does not have a buy-back scheme to maintain resale values, it insists that the 70% depreciation number is way off. And with its new Fluence EVs selling for less than the Mazda3 (Israel’s most popular car) and offering a 20% improvement in Total Cost of Ownership (including gas and maintenance), it’s not too surprising that 400 of Israel’s largest corporate fleet owners have signed up to switch their fleets over to Better Place (the majority of new car sales in Israel are made through fleets). As Agassi puts it

We don’t have a demand issue, we have a rollout issue. The first year we are going to take care to have a carefully controlled rollout.

Getting that rollout right is the major challenge for better place, a it is not evolving an existing product to changing times, but is rather attempting to change entire parts of the world all at once. Today it’s Israel and Denmark, next it will be Australia (which Agassi describes as “two and a half Israels, linked by a freeway). Perhaps someday it will be the San Francisco Bay Area, a market Agassi also compares to Israel. Like everyone else, Better Place needs to build scale in order to bring prices down to the point where unlimited-range, limited-depreciation EVs can compete on pure economics; unlike everyone else, BP can be patient while it rolls out its first networks. After all, it doesn’t need to spend huge amounts researching multiple solutions… it just needs for gas prices to march ever upward and battery prices to keep dropping. And when the next big gas price spike arrives, you can bet that a number of governments with overnight mandates to solve, not “work towards solving” oil dependence, will be calling up Agassi. After all, if you want to “shoot the moon” in the race free private mobility from oil dependence, Better Place seems to be the only option out there.

What gets left out in the hue and cry is that Tesla and Fisker between them represent “only” about a billion dollars worth of DOE loans in a program that was supposed to be able to loan out $25b (the final tally could be closer to $18b). Dwarfing the half-billion-each investments in Fisker, Tesla, and Solyndra are projects that seem a lot less risky in contrast to the startups. Here, in Smyrna, TN, I got to see one of them being built.

This plant, which was still very much under construction when we visited two weeks ago, will be able to build 200,000 battery packs per year when it reaches full capacity. That will make it one of the largest battery manufacturing plant in the US, and will add 1,300 workers to Smyrna’s already Nissan-swollen economy. Perhaps most astonishing in the age of the global supply chain, it will be a remarkably integrated production center: batteries built from raw lithium will be assembled and mounted in Nissan Leafs built at the main manufacturing facility next door, using electric motors built down the road in Decherd, TN. It’s as close to Henry Ford’s ideal of the materials-in, product-out “complete factory” as you’re likely to find in the auto industry, let alone the green-car startups.

And though the Smyrna EV manufacturing capability may be a throwback to the days of vertical integration, the battery assembly plant itself couldn’t be more different than anything ever seen in the auto industry. We weren’t allowed to bring cameras into the plant, but it would have been difficult to photograph anyway. Instead of a huge, open space full of robots and stamping presses, this plant is a huge open space full of gigantic clean rooms. Materials move in one end of its U-shaped assembly flow, where they are assembled into cells. The completed cells are tested at the back in what looks like giant racks of servers, and then they move down the other arm of the U, where they are assembled into packs. But none of this is obvious from any point inside the main structure, as the huge clean rooms where assembly work is done obstruct any view of the complete process.

For now there’s not much to see at the Smyrna battery plant. Equipment is only just being installed amid the ongoing construction, and because the manufacture of cells is so unlike traditional automaking processes, it’s difficult to picture what these rooms-inside-of-rooms will look like when production gets rolling. Only the giant HVAC ducts which keep the clean rooms relentlessly ventilated speak to the kind of white-glove environment that will eventually take root in this plant. Some b-roll footage from the Leaf’s pilot plant in Oppama fills in a few blanks.

It doesn’t take a good imagination to understand what the Department of Energy invested in at Smyrna. Though EVs are, in the sweep of the industry, a relatively risky segment, Nissan already has a plant pumping out Leafs in Japan, and the resources to manage a ramp-up in volume. When Smyrna joins a Sunderland (UK) plant in production, Nissan could muster a quarter-million electric cars each year… and likely has left room to grow. There’s no awkward transitions in the business plan from high-price, low volume to low price, high volume, no question of the company’s manufacturing ability. The car was developed in-house, by a company that is backing it at a scale aimed at crushing the start-ups. If the US government wants to lay the foundations for an EV manufacturing base in the US, it’s hard to imagine a better project to stimulate.

Whether the government should be involved in developing any specific kind of economy is, as always, a matter for philosophical debate. Practically speaking, however, neither the Solyndra scandal nor the possible future collapses of Tesla and Fisker will have much bearing on real the value of the DOE’s ATVM program. Especially if political patronage did indeed play a role in Fisker, Tesla and Solyndra’s funding, they will simply prove that government programs are vulnerable to waste and corruption. No surprise there, nor any problems unique to the “green economy.”

If, on the other hand, events in a certain turbulent region of the world (combined with demand pressure from China and India) send gas prices soaring again, Smyrna could end up justifying the entire loan program.If the market turns to EVs in an energy crisis scenario, the Leaf will be the only EV with the combination of (relatively) low price, adequate performance and most importantly production scale to meet a spike in demand. In a scenario in which EVs are suddenly in high demand, what good are Tesla and Fisker with their expensive low-volume luxury cars?

Like any other investment or gamble, you always have to balance risk and reward. Not only does Nissan’s project offer the least risk, as it has the resources to absorb losses, but it also offers the most clear reward of any other EV bet. Certainly the government should have stayed away from Tesla and Fisker, but it’s difficult to say that we won’t one day be glad to be hosting the epicenter of EV manufacturing for the leading pioneer in EV manufacturing.

Disclosure: Nissan bought myself, Bertel and Steve Lang lunch at a “Meat and Three” on the day we visited the Smyrna facility. Don’t know what a “Meat and Three” is? I didn’t either…

The Detroit News reports that the White House has ordered a review of the Department of Energy’s various loan programs in the wake of the Solyndra scandal, noting

White House Chief of Staff William Daley ordered an independent analysis on the state of the Department of Energy’s loan portfolio — including loans to solar, nuclear and auto companies.

“The president is committed to investing in clean energy because he understands that the jobs developing and manufacturing these technologies will either be created here or in other countries,” Daley said.

One of those programs is the so-called “Advanced Technology Vehicle Manufacturing” loan program, which was nearly used to fund the Detroit bailout and has since come under fire from various quarters. Twice already the Government Accountability Office has questioned the ATVM loan program for its lax oversight, weak goals, lack of technical support, inconsistency in awarding loans and the undetermined impact of funded vehicles. And those internal issues could help explain why the Center For Public Integrity has accused the ATVM program of operating a patronage scheme, alleging that major Obama donor and Tesla board member Steve Westly personally benefitted from loans made to the company. And on the Fisker side of things, backer John Doerr of the VC firm KleinerPerkins is another major Obama donor, suggesting a pattern of politically-motivated loan awards to well-connected EV firms that carry high risks. With government intervention in the auto industry still a hot-button issue in the wake of the bailout, this scandal has huge implications for the legitimacy of America’s emerging “industrial policy.”

Meanwhile the real victim here could be Chrysler, which desperately needs to develop vehicles with higher fuel efficiency and yet has not received any loans that it applied for in the pre-bailout period. Not only could this put Chrysler’s finances under pressure, but it also shows a distinct lack of focus or strategy in the White House’s industrial policy. The bailout era was rife with justifications of the rescue of GM and Chrysler on the basis that the firms would build a new generation of green vehicles. And yet GM has withdrawn from the loan program, and Chrysler is being strung along… while both (but Chrysler in particular) struggle to bring up their average fuel economy which are two of the lowest in the industry. Having rescued these two firms, why would the government choose to send available loans to firms like Tesla and Fisker, which are aiming for the luxury segments and thus have less chance of creating significant impacts on both jobs and the US’s status as a green economy leader? The answer may prove to be found in the relationships between Fisker and Tesla’s well-connected backers.

The fact that Fisker is building its first car in Finland has dominated the political outrage over the ATVM loan program, but the real issue is the opportunity cost. If there is proof that Fisker and Tesla received loans because of political donations made by their backers, it will have diverted money from more effective opportunities, proving that government intervention in the economy is fundamentally fraught with inefficiency. Though Republicans and others have purely political motivations for trying to give the Obama Administration grief ahead of an election, there is a real principle at stake here. If the government is going to play a role in guiding industry towards more sustainable strategies, it needs to take the utmost care to optimize that aid in terms of both market and jobs impacts. The nature of the auto industry is such that start-ups face incredible challenges, and as luxury manufacturers, Tesla and Fisker will neither sell many cars nor employ many Americans. The resources, experience and infrastructure already in place at major manufacturers make them the logical place to invest “green” loans… especially because the bailout did not, in fact, prepare them especially well to compete in the green car space.

Ultimately, governments need to face a fundamental choice:  either allow the market to drive innovation at the risk of losing jobs to other countries, or intervene with programs like this one on a purely utilitarian basis. There is some evidence that government incentives for future technology development can help lumbering auto firms prepare for unexpected energy shocks in ways that the market might not always be able to do, with its relatively short-term incentives. But if there’s not a utilitarian strategy underpinning these government interventions, the effort will inevitably fall victim to political patronage, and all of the inefficiency (not to mention blowback against all forms of government intervention in the economy) that comes with it. By giving hefty loans to two unproven but well-connected startups, the Obama Administration has run the risk of fostering a backlash against all forms of green  incentives… and the result could be merciless market pressure on lagging firms like Chrysler should another oil price spike come. In that scenario, Chrysler could find itself in serious trouble again, and be forced back to Washington for its third bailout… further driving the inefficiencies of the apparently politically-motivated loans to Fisker and Tesla.

The reality is that when consumers actual expectations for range, charge time, and purchase price (in every country around the world included in this study) are compared to the actual market offerings available today, no more than 2 to 4 percent of the population in any country would have their expectations met today based on a data analysis of all 13,000 individual responses to the survey.

That assessment is well in line with other studies we’ve seen, most of which estimate global EV demand at somewhere between one and five percent of the market. But because potential EV demand has a lot of moving parts, from government regulations to the state of EV technology, there’s more to the study than that conclusion alone…

One of the most unexpected lessons from the Deloitte study: you can’t rely on self-identified “early adopters” to drive the market by acting differently than “typical” consumers.

Regardless of whether they thought of themselves as potential first movers, might be willing to consider an electric vehicle, or even those that are not likely to consider an electric vehicle, their expectations for range, charge time and purchase price are extremely similar – and consistently and significantly different from what automobile manufacturers can offer today

Though the appeal of the EV’s environmental benefits vary globally, that appeal never outweighs three factors: range, price and charge time. In the conclusion, the study authors note that their work

suggests that while common consumer expectations have helped the automotive industry globalize, it also means that when it comes to alternative power train technology such as EVs, the globalized consumer will be less willing to deviate from their wellestablished expectations. What’s more, with the rapid development of new markets for automobiles in Asia and the rest of the developing world, millions of new consumers are entering the market with the same set of well-established expectations. This helps explain why the survey found that consumer expectations regarding electric vehicles were so out of line with what can be offered by manufacturers today.

The counterpoint to this argument was laid out by Shai Agassi of Project Better Place, in a recent speech given at the APEC 2011 conference, in which he argued that this influx of new drivers would place enough strain on global oil production that it makes an EV boom not only necessary but inevitable. But then, the Deloitte study doesn’t look into the kinds of services offered by Better Place, which include both battery-swapping (thus eliminating “range anxiety,” as well as an cost benefit that stems from its “end-to-end” business model, which decouples battery costs from the upfront expense of an EV. The Deloitte study implicitly leaves room for Agassi’s alternate scenario when it notes

The current collection of hybrids is better equipped to meld consumer expectations with environmental consciousness and government calls for cleaner forms of personal transportation. While manufactured costs of these dual powertrain hybrids will continue to be a significant challenge, it is expected hybrids will be much more readily adopted by consumers than pure EVs. Ultimately which technology enjoys the most success will depend on ever changing consumer expectations and preferences coupled with effective government policies… Government policy is more so than any other aspect that will likely determine the adoption rate of EVs over the next decade and beyond.

But there’s even more evidence that a Better Place-style infrastructure solution is what the EV market needs, as the study notes

It is clear from the survey that consumers’ expectations for EVs are much higher than anything manufacturers can deliver today. But consumers are also notorious for being fickle and changing their mind; and doing so fairly quickly. Electric utility infrastructure can play a significant role in electric vehicle adoption. Plentiful electric power generated through stable, dependable, clean and cost-efficient sources (and delivered over smart grids with acceptable economics for consumers), coupled with easily accessible and economical charge stations can make consumer concerns about range and charge time dramatically less – even if EV technology does not demonstrate any significant improvements over the next decade. Higher oil prices (anywhere from a 40 to 70 percent increase) would also likely lessen the concerns consumers have today about electric vehicle range, charge time, and price.

This is Agassi’s scenario: higher oil prices coupled with a smart infrastructure supported by government policies. After all, it seems unlikely that the “wait for a technological fix” scenario will deliver the desired improvements in range, cost, and charge time, as the Deloitte study notes that expecting huge declines in battery prices (which affect all of these factors) is not realistic.

But to break out of their small test markets in Israel and Denmark, Better Place needs partners to emerge from the global automakers (currently only Renault is partnered with BP). And, argues Deloitte, the automakers hold the keys to the EV’s success.

Though the tipping points may vary slightly from country to country, the study found that across the globe consumers will be less likely to consider purchasing an electric vehicle as the fuel efficiency of ICEs improves. As a result automotive manufacturers will need to carefully plan their investments to maximize sales of fuel efficient technologies consumers are willing to purchase.

Another way of putting this: with plenty of efficiency improvements to be found in the Internal Combustion Engine, automakers will continue to emphasize those technologies, in effect relegating the EV to the niche role that this study sees for it. An “end-to-end” EV servicing/infrastructure firm like Better Place might be able to significantly broaden the global appeal of EVs, but why take on a partner when you can keep trickling out ICE technology that keeps EVs from being a necessity? Agassi acknowledges this challenge by arguing that he’s asking automakers to take a gamble not unlike that made by Jeff Bezos and Amazon.com with its Kindle e-reader. Amazon had to kill off its traditional book selling business in order to take its book (and content more generally) business to a new level. And, as this study shows, the car business has plenty of incentive to not take that leap… yet. And until automakers actually try to make EVs capable of overcoming the range, cost and charge-time concerns that consumers globally share, we can expect assessments of global EV demand to continue to be as pessimistic as this one.

TTAC’s Twitter followers already know that I’m at the 2011 APEC Transport/Energy Ministerial Meeting in San Francisco, rubbing elbows with key decision-makers from the world of energy and transportation across the Asia-Pacific region. Earlier today I had the opportunity to sit down with Better Place CEO Shai Agassi, the intense, formidable CEO of Project Better Place. I’ll be writing about that conversation shortly, but many of the major points are covered in the speech Agassi gave shortly afterwards to assembled ministers, media and businesspeople. The speech boils down Better Place’s hugely ambitious plan to tackle one of the most complex challenges the world faces: transportation’s dependence on oil. If you’re looking for an Al Gore-style “green” speech, keep looking. Agassi tackles the problem from an economic and technological approach, and he makes a case that is well worth about 17 minutes of your time.

If you’re not familiar with Better Place, you can read some of TTAC’s coverage of the battery-swapping, network-managing, mileage-leasing project at our Project Better Place tag here (much of it on-the-ground reporting from Tal Bronfer, who has been following its rollout in the Israeli market). A comparison of battery swap to other EV business models can be found here, and a study of EV grid management issues can be found here.

Today’s announcement of a memorandum of understanding between Ford and Toyota, uniting the two firms’ pickup truck hybrid drivetrain efforts, took quite a few industry-watchers by surprise this morning. As the industry leader in hybrid technology, Toyota has limited past hybrid cooperation to licensing its drivetrain wholesale to Nissan and a patent-sharing agreement with Ford. Moreover, the last big alliance aimed at developing hybrid technology for full-sized pickups, the Two-Mode V8 hybrids developed jointly by GM, Chrysler, Mercedes and BMW, have been a huge flop on the market, with the German partners walking away from the technology after using it in only a single application each (X5/X6, and ML Hybrid). Though Toyota and Ford have worked together to prevent a messy patent war over hybrid technology, there was little to suggest that they would take the cooperation any further, let alone join forces to hybridize full-size pickups. But if you’re looking to the marketplace to explain the Ford-Toyota tie-up, you’re looking in the wrong place: this is all about the freshly-announced CAFE standard and its generous credit system.

Of course, that’s not how the move is being pitched… at least on the surface. But in his announcement of the deal, Toyota Executive VP Takeshi Uchiyamada makes it clear that the hybrid and telematics alliance is entirely focused on the US market, saying:

Our collaboration with Ford is a move to make hybrid technology more widely available in sport-utility vehicles and in trucks. Those kinds of models are indispensable to American customers. And providing them with our hybrid technology will help conserve energy and reduce output of greenhouse gas here in the United States. That was our thinking in considering the collaboration.

How does Uchiyamada-san know how “indispensable” full-sized pickups are to Americans? The issue of full-sized trucks has dominated the debate over 2017-2025 CAFE standards, with the industry and its allies intervening to lower truck standards and increase the credit loopholes that make it easier to keep pickups relatively thirsty. This had two effects: first, the lowering of truck standards confirmed that large pickups would be worth investing in over the long term, and second, one loophole in specific provides huge incentives to hybridize full-sized trucks.

I covered the rough outlines of this credit loophole in my write up of the proposed rule, but to refresh your memory, here’s what the rule itself [PDF] says about its hybrid pickup credit

The agencies intend to solicit information on technologies that offer significant increases in fuel efficiency and reduction in greenhouse gas emissions. We intend to propose a credit for manufacturers that employ significant quantities of hybridization on full size pickup trucks, by including a per-vehicle credit available for mild and strong hybrid electric vehicles (HEVs). This provides the opportunity to begin to transform the most challenging category of vehicles in terms of the penetration of advanced technologies, allowing additional opportunities to successfully achieve the higher levels of truck stringencies in MY 2022-2025.

In other words, not only did the government reduce the required rate of efficiency improvement for trucks to nearly half what it is for cars, they also went a step further by giving credits for specific (i.e. hybrid) technology. Absent these credits, it’s highly likely that truck-dependent manufacturers would have looked to diesel power as a way to cheaply provide high-torque, high-efficiency truck powerplants, but with the feds placing their finger on the scale in favor of hybrids, Ford has no choice but to invest in the technology. And as the only Detroit-based (and therefore heavily truck-dependent) automaker to not have access to the Two-Mode technology, Ford had to move fast to find a partner. Though Chrysler and GM’s Two-Modes may not have been successful so far, they at least provide the building blocks for future development.

Besides, as we read more about the hybrid pickup credits, it’s clear that even if the 2017+ hybrid pickups aren’t super-efficient, the credits make them incredibly valuable.

The agencies intend that access to this credit is conditioned on a minimum penetration of the technology in a manufacturer’s full size pickup truck fleet, with defined criteria for a full size pickup truck (e.g., minimum bed size and minimum towing capability). The agencies intend to propose that mild HEV pickup trucks are eligible for a 10 g/mi12 credit during 2017-2021 if the technology is used on a minimum percentage of a company’s full size pickups, beginning with at least 30% of a company’s full size pickup production in 2017 and ramping up to at least 80% in 2021. Strong HEV pickup trucks would be eligible for a 20g/mi credit during 2017-2025 if the technology is used on at least 10% of the company’s full size pickups.

The agencies will propose specific definitions of mild and strong HEV pickup trucks, but expect to include stop/start, regenerative braking, minimum motor power, minimum battery voltage value and minimum energy storage capacity, or similar types of objective metrics. The agencies expect that a “mild” HEV will include moderate hybridization and not just start/stop, and that a “strong” HEV will include launch assist.

Let’s assume for the moment that the Ford-Toyota pickup drivetrain, which each company will integrate into future vehicles independently of one another, meets the government’s requirement for “strong” hybrids. If you look at the changes in maximum truck C02 targets from 2017-2025, they increase by the following amounts:

2017-2018: 5.5g/mile
2018-2019: 3.1g/mile
2019-2020: 1.9g/mile
2020-2021: 1.9g/mile
2021-2022: 14g/mile
2022-2023: 15.2g/mile
2023-2024: 14.6g/mile
2024-2025: 13.9g/mile

But under this credit system, if ten percent or more of your truck fleet have “strong hybrid” drivetrains, each truck earns a 20g/mile credit which can be applied to under-complying vehicles, “banked” for future under-compliance or “carried-back” for past under-compliance. In theory, this also means that a 2017 model-year pickup that exactly met the maximum CO2 target for that year would add 14.5g/mile to the automaker’s fleetwide efficiency rating in 2018, without improving its efficiency at all. In 2019, it would add 11.4g/mile in credits without improving efficiency, by 2020 the credit would shrink to 9.5 and in 2021 it would still be adding 7.6g/mile in credits despite not improving since 2017. If, for example, Ford had decided it could meet CAFE in that window with diesel technology alone, it would only receive additional credits if it “significantly” overcomplied with the standard, year-by-year. To wit:

The agencies also intend to propose a performance based incentive credit for full size pickup trucks which achieve a significant reduction below the applicable target. This credit could also be on the order of 10-20 gm/mile vehicle. The same vehicle would not receive credit under both the HEV and the performance based approaches.

Without a hybrid pickup drivetrain to build off of the way GM and Chrysler do, Ford has two choices for its truck strategy in 2017 and beyond: either keep costs as low as possible and hope it can undercomply with improved gas and diesel engines and improved aerodynamic efficiency and/or weight loss, or find a partner for hybrid technology and receive significant credits tied only to its use of hybrid technology rather than its actual efficiency. If that’s not a no-brainer, I don’t know what is.

But what does Toyota get out of the deal? Though it’s the clear leader in hybrid technology, its drivetrains have all been been based on transverse engines and front-wheel drive. Toyota’s expertise in full-sized, American-market trucks pales in comparison to Fords, and at this point it could even be said that Ford has the head-start on hybrid pickups, having begun joint development (with CCEFP and Folsom Technologies) on a hydraulic hybrid F-150. Autopacific analyst Dave Sullivan has another take, writing at vehiclevoice.com that

Based on the press conference today, it pretty much sounds like Toyota has a RWD hybrid system in development but they need Ford’s sales volume to make it work from a cost perspective.

Whether Toyota or Ford started development first almost doesn’t matter (the press release says “both companies have been working independently on their own future-generation rear-wheel drive hybrid systems”). For Ford, a hybrid pickup drivetrain is must-have technology, due to the CAFE loopholes. For Toyota, which is less dependent on full-sizers, the need isn’t quite as dire (as CAFE offers plenty of credit opportunities for plug-in cars), but Sullivan is absolutely right that having Ford as a partner will lower costs dramatically. All in all, the deal seems to be a win-win… if only because of the way future CAFE standards were written.

I am sitting in a parking garage in a throng of torpid auto-journalists, nearly all of whom are wearing the same glazed expression of terminal information overload. On-screen, molecules of fuel and air are doing a complicated little computer-animated dance, as narrated by Susumi Niinai, program manager at Mazda’s powertrain development division. His English, while Japanese-accented, is better than, y’know, mine, but the concepts he’s explaining approach the limit of comprehensibility to the lay-person. Mind you, it’s a pretty nice parking garage.

Some of you, like me, may have been hearing all the rumblings about Mazda’s new SKYACTIV technologies and been wondering whether it’s going to turn out to be a series of technological breakthroughs or, alternatively, a load of complete cobblers thought up by some Zoom-Zoom marketing guru.

Good news everyone! It’s the former. Bad news everyone! I have to try to explain it to you. And I borderline don’t understand it myself. Here goes…

First, let’s set aside Niinai-san’s well-illustrated presentation on the SKYACTIV engine series for a moment, and talk in generalities. As was repeatedly hammered into our heads throughout the day, Mazda is a small company with limited resources.

What’s more, they’re a small company in trouble. How much trouble? Well, previous posts have outlined current flagging sales and enough profit drops to alarm Mazda fans. This is not good. To be frank, if Saab goes the way of the 9-2x Dodo a few orthodontists may be mildly upset, but for the rest of us it’s a big ol, “Meh.” Mazda on the ropes though? For the enthusiast driver, that’s bad.

So how does a beleaguered company without the resources of a Toyota or Nissan take on the pressures of ever-increasing efficiency standards? More than that, how do you pull off competitive MPGs while still maintaining the apparently-conflicting mandate of maximizing driver involvement as a priority? Two choices: cut corners, or clip the apex.

Make no mistake, Mazda isn’t interested in broadening appeal by blurring their focus. I heard the concept of jinba-ittai repeated so many times during the various presentations I was on the point of climbing on a horse and shooting someone in the face with an arrow.

Additionally, partnerships don’t seem to be high on the priority list. While there is some sort of upcoming agreement with Toyota on the hybrid powertrain front, Mazda seems to have little enthusiasm for a percentage ownership by a larger company that might allow for an increased R&D budget. When asked if anything similar to the previous Ford arrangement might be sought going forward, Mazda’s gurus said something to the effect of, “the future is unpredictable, but we don’t expect so.” They were scrupulously polite, but one might as well been asking them if they were hoping a disfiguring skin disease might re-appear.

Without the bankroll, Mazda’s got to box clever. It’s all very well to identify brand values, and quite frankly, it’s heartening to hear a group of enthusiastic engineers reaffirm that the Japanese Lotus still puts “fun-to-drive” at the top of their to-do list, but how do to so on a shoestring? First, streamline.

“Monotsukuri Innovation” is Mazda’s way of bundling architecture together to reduce costs. The cutaway SKYACTIV platform on display clearly showed a transmission tunnel capable of supporting an AWD variant, but the chassis was intended for next-gen Mazda3 and Mazda6 cars. With minimal changes needed to build the CX-7 and upcoming CX-5 off the same platform, weight-savings and rigidity developments should echo throughout the entire Mazda range.

Much hay has been made of Mazda’s borderline-impossible weight target for the next MX-5. With a total weight reduction of just 100kg, the SKYACTIV body and chassis don’t seem as revolutionary – until you notice that no exotic materials are involved: the savings are realized purely though better design and a moderate (20%) increase in the use of high-tensile steel.

By removing curves and kinks from the underbody, Mazda’s prototypes boast increased safety ratings with less material used. However, evidence of budget limitations can be seen in the ring-structure connecting the upper and lower body. Rather than a full stamped piece requiring a very large and expensive piece of machinery, a section of the structure is attached using structural adhesive.

The importance of an 8% weight-loss is easily dismissed, until you drive a Fiesta and a Mazda2 back-to-back. Of the two, the Mazda has the dynamic edge, and despite meagre power output remains a joy to drive. Best of all, the optimist could choose to see Mazda’s weight goals as marking the point at which safety-driven model bloat hit its apogee and we began moving towards a lighter future where 160hp four-bangers were more than merely adequate.

More than that, the SKYACTIV-chassis’s focus on driving dynamics has resulted in further improvements to handing with a quickened steering rack combined and increased positive caster. The difference in the steering is readily evident; not heavy but much more direct.

However, the realist will note that weight-loss and chassis improvements aren’t enough. Only a minor fuel-savings will be realized by the SKYACTIV chassis and body. The major difference will come from drivetrain improvements.

Don’t look for anything radical in the transmission department. With great pragmatism, Mazda has noted and rejected the cost of developing a dual-clutch gearbox, spurned the non-involving fuel-savings of a continuously terrible – er – variable transmission and gone instead for refinements of the good old auto and manual transmissions.

The changes to the manual are clever, but slight. Minor adjustments to throw-length and some weight-savings realized by trickery such as a shared input gear for first and reverse show a general improvement, but Mazda’s stick-shifts are generally quite good anyway.

It’s with the automatic tranny that Mazda’s pulled a fast one. One need only look at the mixed reviews of Ford’s six-speed dual-clutch or check the recall list on the VAG DSG to see the pitfalls of pouring money into a completely new tech. Mazda has taken what seems to be the easy route here, re-jigging the venerable automatic gearbox with a more direct feel that’ll keep the enthusiast happy.

That’s perhaps an oversimplification, but with a greater lock-up range and a modular unit containing calibrated hydraulic controls, the new 6-speed auto feels much more in tune to what your right foot is doing, particularly on tip-in.

So we have bundled development and a focus on honing simpler technologies rather than chasing pie-in-the-sky tech. Time to get back to Niinai-san and the SKYACTIV engine suite, where both ideas combine for some real-world fuel savings.

SKYACTIV-G and -D engines have, respectively, both the highest compression ratio for a production gasoline engine and the lowest compression ratio for a diesel engine. For both, the concept is the same: hybrid vehicles are all well and good, but people keep buying cars equipped with nothing more than a trusty old internal combustion engine. Even with a market shift more towards electric and hybrid drivetrains, the bulk of the vehicles on the road are still going to be ICE-equipped.

Thus, improving the combustion cycle in both diesel and gasoline applications is going to affect passenger car sales right now, especially as Mazda doesn’t appear to intend a premium charge for their SKYACTIV technology. Rather, next year’s Mazda3 will bow with a SKYACTIV-G engine and the improved transmissions as the standard equipment on mid-range models starting sometime in October.

The availability of SKYACTIV-D remains nebulous, although it could appear in some Mazda products as soon as next year. This twin-turbocharged diesel boasts improved torque from a combustion cycle that ignites much closer to top dead centre, giving a longer power-stroke. Multi-hole injectors allow for a more homogenous fuel-air mixture and the low compression ratio allows for more precise timing control.

Why doesn’t everyone run their diesel engines this way? Among other issues not outlined, Mazda’s engineers needed to overcome cold-start problems with variable valve-lift. As much as I hate the phrase, it’s a paradigm shift: the low compression means thinner con-rods and a lighter rotating assembly that revs higher; this is a diesel that redlines at (and pulls to) 5200rpm.

However, it’s the SKYACTIV-G that you’re more likely to get a chance to drive in the near future. Want some good news on the efficiency front? How does 13:1 compression and a 4-2-1 header strike you?

That’s right, moving in a completely different direction than other manufacturers, Mazda has put together a hi-po four-banger that gains 15% torque across the rev range while still getting better fuel economy. It’s a sprightly little engine and noticeably more potent at low revs.

How do they get away with a compression ratio higher than a 458 Italia in a four-cylinder that runs on regular gas? Control the burn. That header is designed to maintain consistent temperature levels in the combustion chamber, and the SKYACTIV-G features special piston cavities which allow for rapid and even flame-front propagation. Those multi-hole direct injectors are at work here again, although there’s a limit to the tech. Overseas versions will be running 14:1 compression, but North American fuel requirements dictated a detune.

The next-gen Mazda3 will only be partially SKYACTIV, lacking the chassis and body upgrades that will first be fully available in the CX-5 crossover (which you’ll be glad to note will be available with manual transmission). With this partial first wave of improvements, Mazda is reporting attaining 40mpg on the highway.

Revolutionary? The numbers don’t seem so. But it’s competitive, and the comprehensive focus that Mazda is bringing to its entire lineup shows a different strategy than that behind a low-volume halo car like the Nissan Leaf.

Let’s face it, people are going to continue to buy Mazda products based on the way they drive. If Mazda can reduce consumption to the point at which a enthusiast looking for an engaging drive doesn’t end up paying a penalty at the pump, they’ll have a success story on their hands.

NHTSA currently intends to propose standards that would be projected to require, on an average industry fleet wide basis, 40.9 mpg in model year 2021, and 49.6 mpg in model year 2025.  For passenger cars, the annual increase in stringency between model years 2017 to 2021 is expected to average 4.1 percent, and to average 4.3 percent between model years 2017 and 2025. Like EPA, in recognition of the utility requirements of full-size pick-up trucks and the unique challenges to improving fuel economy compared to other light-duty trucks and passenger cars, NHTSA intends to propose a lower annual rate of improvement for light-duty trucks in the early years of the program. For light-duty trucks, the proposed overall annual rate of fuel economy improvement in model years 2017 through 2021 would be 2.9 percent per year.  NHTSA expects to change the slopes of the fuel economy footprint curves for light-duty trucks from those in the 2012-2016 rule, which would effectively make the annual rate of improvement for smaller light-duty trucks in model years 2017 through 2021 higher than 2.9 percent, and the annual rate of improvement for larger light-duty trucks over the same time period lower than 2.9 percent.  For model years 2022 through 2025, NHTSA expects to propose conditional standards with an overall annual rate of fuel economy improvement for light-duty trucks of 4.7 percent per year

We had heard that trucks would improve their efficiency at a rate of 3.5% rather than 2.9% for the 2017-2021, and a 2022-2025 growth rate of 5% rather than 4.7%. But then, cars were supposed to improve by 5% in the 2017-2025 period, so both truck and car standards seem likely to end up lower than what the president’s report seemed to promise. But that’s not the only bad news for anyone hoping for tough fuel efficiency standards (or, good news for truck-dependent automakers)… with the release of this notice, we have an initial sense of the loopholes that will be included, and they appear to be of the hefty variety.

The first of the “key program elements” is the off-cycle credit program, which aims to

promote the early market penetration of tailpipe CO2/fuel consumption reducing technologies that are not appropriately accounted for in the current test procedure

This is typically thought to include improvements in C02 output from systems whose energy consumption or C02 output is not measured on the EPA test. According to the document

EPA and NHTSA intend to develop a minimum credit value on a subset of technologies for which we have sufficient data.  We expect this list to include at least six defined technologies, if not more.9 The total number of technologies will be dependent on the available data. In order to make use of the pre-defined credit list of off-cycle technologies, a manufacturer must utilize the technology on a minimum percentage of the company’s vehicles.  EPA and NHTSA will continue to assess the appropriate level and will propose a level in the NPRM.  The specific percentage values may vary by off-cycle technology, and will consider the applicability of the technology across vehicle type.  Under the planned proposal, the total gram/mile credit from the predefined list for any given model year would not exceed a 10 gram/mile10 impact on the company’s combined fleet average. This limit would only apply to the total for technologies where the company chooses to use the agency provided credit values. Automakers can apply for additional credits beyond the minimum credit value of listed technologies if they have sufficient supporting data.

We will, of course, have to see what technologies make it onto the EPA list, and what technologies the OEMs apply for credits with, but in general this provision makes sense. Certainly when compared to the other credit programs, it seems to be the most consistent with the stated goal of reducing fleetwide emissions by all possible means.

The second “key feature” is one of the biggest, and most objectionable of the bunch: the EV/plug-in “super credit.”

To facilitate market penetration of the most advanced vehicle technologies as rapidly as possible, EPA intends to propose an incentive multiplier for all electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), and fuel cell vehicles (FCVs) sold in MYs 2017 through 2021.  This multiplier approach means that each EV/PHEV/FCV would count as more than one vehicle in the manufacturer’s compliance calculation.  EPA intends to propose that EVs and FCVs start with a multiplier value of 2.0 in MY 2017, phasing down to a value of 1.5 in MY 2021.  PHEVs would start at a multiplier value of 1.6 in MY 2017 and phase down to a value of 1.3 in MY 2021. 11 These multipliers would be proposed for incorporation in EPA’s GHG program.

As an additional incentive for EVs, PHEVs and FCVs, EPA intends to propose allowing a value of 0 g/mile for the tailpipe compliance value for EVs, PHEVs (electricity usage) and FCVs for MY 2017-2021, with no limit on the quantity of vehicles eligible for 0 g/mi tailpipe emissions accounting.  For MY 2022-2025, 0 g/mi will only be allowed up to a per-company cumulative sales cap based on significant penetration of these advanced vehicles in the marketplace.  EPA intends to propose an appropriate cap in the NPRM.

Regulators argue that the credit system is designed to incentivize “game changing” technology, its major result will likely be less admirable. As I argued in an earlier piece which anticipated the resurrection of the “super credit,” this loophole will encourage automakers to build the overly expensive, advanced technology “green cars” that they themselves argue consumers aren’t interested in buying, because the credits will allow them to build more profitable non-compliant pickups by offsetting their C02 output. The net result: more expensive passenger cars (which the OEMs can blame on the government regulation) and business-as-usual on the incredibly profitable  truck side of the equation. The combination of an artificial zero-C02-per-mile emission rating for EVs (in what universe is grid power carbon-neutral?) and a “multiplier” super credit was left out of the 2012-2016 standard because

EPA has concluded that the combination of the zero grams/mile and multiplier credits would be excessive.

Why? As the National Resources Defense Council argued, the credits would

undermine the emissions benefits of the program and will have the unintended consequence of slowing the development of conventional cleaner vehicle emission reduction technologies into the fleet

And because these credits are likely to be bankable, giving automakers the ability to “carry forward” or “carry back” their benefits to future or past model-years, the wiggle room is even greater. But loophole madness is just getting started…

Next up: “Incentives for “Game Changing” Technologies Performance for Full-Size Pickup Truck including Hybridization.” As if generous over-compliance credits for cars being used to offset under-compliance for pickups weren’t enough, there’s this:

The agencies intend to solicit information on technologies that offer significant increases in fuel efficiency and reduction in greenhouse gas emissions.  We intend to propose a credit for manufacturers that employ significant quantities of hybridization on full size pickup trucks, by including a per-vehicle credit available for mild and strong hybrid electric vehicles (HEVs).  This provides the opportunity to begin to transform the most challenging category of vehicles in terms of the penetration of advanced technologies, allowing additional opportunities to successfully achieve the higher levels of truck stringencies in MY 2022-2025.

The agencies intend that access to this credit is conditioned on a minimum penetration of the technology in a manufacturer’s full size pickup truck fleet, with defined criteria for a full size pickup truck (e.g., minimum bed size and minimum towing capability).  The agencies intend to propose that mild HEV pickup trucks are eligible for a 10 g/mi12 credit during 2017-2021 if the technology is used on a minimum percentage of a company’s full size pickups, beginning with at least 30% of a company’s full size pickup production in 2017 and ramping up to at least 80% in 2021.  Strong HEV pickup trucks would be eligible for a 20g/mi credit during 2017-2025 if the technology is used on at least 10% of the company’s full size pickups.

The agencies will propose specific definitions of mild and strong HEV pickup trucks, but expect to include stop/start, regenerative braking, minimum motor power, minimum battery voltage value and minimum energy storage capacity, or similar types of objective metrics.  The agencies expect that a “mild” HEV will include moderate hybridization and not just start/stop, and that a “strong” HEV will include launch assist. The agencies also intend to propose a performance based incentive credit for full size pickup trucks which achieve a significant reduction below the applicable target.  This credit could also be on the order of 10-20 gm/mile vehicle.  The same vehicle would not receive credit under both the HEV and the performance based approaches.

Now, even with the reduced improvement rate and “super credits,” there might have been some incentive for automakers to invest in smaller, more efficient pickups of the kind that have been woefully underinvested-in in recent decades. But with this provision, the message is clear: rather than incentivizing downsizing, or even offering this credit to all trucks and letting the chips fall where they may, the government explicitly wants to keep full-sized trucks on the forefront by encouraging their hybridization (despite likely market trends in the opposite direction). And apparently it never occurred to regulators that creating a higher truck standard might have led to the hybridization of more pickups anyway… but sometimes loopholes create the need for more loopholes.

Then we get to the treatment of CNG, PHEV and Flex-fuel vehicles.

EPA intends that CO2 credits for plug-in hybrid electric vehicles (PHEVs) and bi-fuel compressed natural gas (CNG) vehicles will be based on the recognition that, once a consumer has paid several thousand dollars to be able to use a fuel that is considerably cheaper than gasoline, it is very likely that the consumer will seek to use the cheaper fuel as much as possible.  Accordingly, for CO2 emissions compliance, EPA expects to use the Society of Automotive Engineers “utility factor” methodology (based on vehicle range on the alternative fuel and typical daily travel mileage) to determine the assumed percentage of operation on alternative fuel and percentage of operation on CNG for both PHEVs and bi-fuel CNG vehicles, along with the CO2 emissions test values on the alternative fuel and gasoline. EPA does not expect to extend this method to flexible fueled vehicles (FFVs) using E-85 and gasoline, since there is not a significant cost differential between an FFV and conventional gasoline vehicle and historically consumers have only fueled these vehicles with E85 a very small percentage of the time.  Therefore, treatment of E85 FFVs will continue as the MY2016 program, based on actual usage of E85 which represents a real-world reduction attributed to alternative fuels.

In the NHTSA program for MYs 2017-2019, NHTSA expects that the fuel economy of dual fuel vehicles will be determined in the same manner as specified in the MY 2012-2016 rule, and as defined by EISA. Beginning in MY 2020, EISA does not specify how to measure the fuel economy of dual fuel vehicles, and it is expected NHTSA will propose to use the EPA “utility factor” methodology for PHEV and CNG vehicles to determine how to proportion the fuel economy when operating on gasoline or diesel fuel and the fuel economy when operating on the alternative fuel. For FFVs, NHTSA expects to propose to use the same methodology as EPA to determine how to proportion the fuel economy, which would be based on actual usage of E85.  NHTSA expects to continue to use Petroleum Equivalency Factors and the incentive multipliers that are used in the MY 2012-2016 rule, however with no cap on the amount of fuel economy increase allowed.

The first half of this sounds reasonable, but when we turn to the flex-fuel credits, my anti-ethanol anger becomes to much to contain. Because ethanol offers no real environmental benefits, has numerous social and environmental costs and sucks billions of dollars in subsidies each year, all credits for flex-fuel vehicles should be cut. But even if that’s not possible, the methodology used to estimate FFV C02 output is not great. According to 2012-2016 rules

EPA will base MY 2012–2015 credits on the assumption that the vehicles would operate 50% of the time on the alternative fuel and 50% of the time on conventional fuel, resulting in CO2 emissions that are based on an arithmetic average of alternative fuel and conventional fuel CO2 emissions… the CO2 emissions value for the vehicle is calculated to be significantly lower than it actually would be otherwise, even if the vehicle were assumed to operate on the alternative fuel at all times. This represents a ‘‘credit’’ being provided to FFVs.

EPA is requiring for MY 2016 and later that manufacturers will need to reliably estimate the extent to which the alternative fuel is actually being used by vehicles in order to count the alternative fuel use in the vehicle’s CO2 emissions level determination… the default is to assume FFVs operate on 100% gasoline, and the emissions value for the FFV vehicle will be based on the vehicle’s tested value on gasoline. However, if a manufacturer can demonstrate that a portion of its FFVs are using an alternative fuel in use, then the FFV emissions compliance value can be calculated based on the vehicle’s tested value using the alternative fuel, prorated based on the percentage of the fleet using the alternative fuel in the field.

The most complex part of this approach is to establish what data are needed for a manufacturer to accurately demonstrate use of the alternative fuel, where the manufacturer intends for its performance to be calculated based on some use of alternative fuels.

In essence, the EPA will either do its own calculations on vehicle miles traveled per year for FFVs, and calculate E85 usage per VMT based on overall E85 sales. This process would have to take place every year. Alternatively, manufacturers could present their own data from demonstration studies to make an argument about what the C02 reduction actually is. In any case, the FFV system is a serious crapshoot, and though the 2016-2025 methodology may be a bit more accurate (if far more complicated), it still amounts to a credit because it doesn’t include “upstream” GHG emissions on a lifecycle basis. If the aim of CAFE is to reduce C02 output, this qualifies as yet another counter-productive loophole.

The final loophole is the most obvious: police and emergency response vehicles are exempt from CAFE. While this is very understandable in many respects, it certainly adds to the impression that government refuses to hold itself to the same standard as it holds its citizens. No surprises there, really.

Meanwhile, the mid-term review might seem like a loophole, and it’s certainly raised fears among environmental groups, but I see it simply as a safeguard. Nobody knows what the market will be like come 2025, so a review to make sure assumptions are on track makes sense for 2017. After all,

Where EPA decides that the standards are not appropriate, EPA will initiate a rulemaking to adopt  standards that are appropriate under section 202(a), which could result in standards that are either less or more stringent [emphasis added]

So, what does this all mean? Again, these details will all be hammered out before a final rule is made official in September, but it’s obvious that the 2017-2025 standard will not only be easier on trucks than cars, but it also offers huge loopholes with which automakers can offset emissions for non-compliant but high-profit trucks. Though it’s a tough standard compared to what the industry has been used to, it’s also got loopholes (like the combination of 0g/mile EV rating and “multiplier credits”) that were considered before and rejected as too lenient. The proof of the pudding though, will be in the eating. If these credits allow automakers to plan for truck sales levels that disappear under the force of rising gas prices, it could be a disaster on par with the very first round of CAFE legislation. On the other hand, if truck-heavy manufacturers continue to make huge profits due to the loopholes in this proposal, the mid-term review could be a far more feisty battle. And, if nothing else, the layers of loopholes on top of already-complex calculations prove how much more efficient it would be to simply tax gas and let the market sort the details out. Sadly though, that’s simply not an option.

Like Batman in The Dark Knight, CAFE isn’t the policy we need, but it’s the policy we deserve.

Research into environmentally sensitive ways of running a car, AKA “green patents” have been in the news lately and it’s been good news for GM’s image. The Detroit automakers in general are not seen as technology leaders, particularly in terms of alternative energy. Bob Lutz saw the Chevy Volt as a way of changing that perception, taking away some green luster from Toyota. Since there is usually considerable time between a patent’s filing and its granting, patents granted in the last 2 or 3 years are a good reflection of what a company has been doing for the past 4 or 5 years, and there’s evidence that Lutz’s strategy was not just a PR job but also a reflection of a very large amount of research and development at the automaker. Cleantech Group, of the Heslin Rothenberg Farley & Mesiti intellectual property law firm, publishes the Clean Energy Patent Growth Index. The CEPGI tracks the granting of U.S. patents for solar, wind, hybrid/electric vehicles, fuel cells, hydroelectric, tidal/wave, geothermal, biomass/biofuels and other clean renewable energy. The law firm publishes the CEPGI quarterly and then tabulates the annual results.

Their year in review for 2010 showed that including all of those various energy and transportation technologies, one company, General Motors, was granted more patents than any other single entity. That’s quite impressive in light of the fact that GM probably doesn’t do much research and development in geothermal, hydroelectric, solar or wind power. I mean what are the chances that GM does research on tidal and wave energy? So GM’s patents must be have been granted in three areas, biofuels, fuel cells and hybrid/electric vehicles. With the launch of the Chevy Volt one might think that the main focus of GM’s research would be in hybrids and EVs, and indeed in 2010 GM was granted more patents in those fields than any other company, beating out Toyota, Ford, Nissan and Tesla. The actual number of patents in those fields though, are relatively small compared to the hottest field in clean energy, fuel cells.

Almost a thousand fuel cell patents were granted in the United States last year, and GM also led in that technology as well. That should not be surprising since a recent ranking by JP Patent Publication on fuel cell patents granted in the US over the past 30 years put General Motors in the top spot, ahead of Honda and the US Dept. of Energy. Now that ranking is a weighted ranking, judging both quantity and quality of patents, but it does demonstrate that GM’s commitment to fuel cell research (if not necessarily production) is not a recent thing. You shouldn’t think that GM has only been doing this kind of research at the post bailout behest of the Obama administration or as greenwashing. Though there has been a sharp uptick in the patents granted in 2009 and 2010, the same time that Mr. Obama has been in office, again, there is a lag between filing and granting so not all of that increase can be attributed to either the president’s policies or a desire to curry favor with his administration. Say what you will about GM, and TTAC and the Best and the Brightest have said plenty, you can’t deny that GM has probably done as much as any manufacturer in terms of basic research into fuel cell cars and probably over a longer time.

Actually, GM built an fuel cell powered electric vehicle, the Electrovan, in 1966. Its development was not without incident. Apparently one of the high pressure hydrogen tanks used exploded while one of the tests vehicles was being driven at the Warren Tech Center. The tank landed a quarter of a mile away. When they finished the show car, it worked, had a range of 120 miles, not bad for a first effort, and it was driven, carefully, for a short distance, maybe even shorter than that tank flew and then retired for the show circuit. It was never meant to be a production vehicle. Actually it was meant to be a Corvair, joining the Electrovair, but the large amount of tubing, the size of the hydrogen tank, and the size of the fuel cell itself fills most of the van’s passenger and cargo space. It would never have fit in a Corvair. The Electrovan is now part of the GM Heritage Center collection.

GM Electrovan fuel cell powered EV from 1966. Photo courtesy of Cars In Depth

Reading the tea leaves, or rather looking at the CEPGI graphs, you can learn something about the car industry. Honda is often described as having lost its mojo. GM’s #1 ranking in 2010 pushed Honda down to second place. It was also was the first time in years that Honda, a traditional leader in fuel cell research, was not in first place in that technology, falling the third place. Samsung was in second place. Even with that tumble, and with JP Patent Publication’s weighted top ranking for GM, Honda still holds the most number of fuel cell patents of any company.

It’s not quite deja vu, but how GM and Honda are perceived in terms of fuel cells versus what the reality is reminds me of how people remember Chrysler’s turbine car but are less familiar with GM’s decades’ long work on turbines. As an interesting coincidence, the Electrovan now sits maybe 200 feet from the three turbine powered Firebird cars from GM’s 1950s era Motorama shows.

If Honda is losing its technological mojo, what of Chrysler, the company that long staked its reputation on its engineering excellence? Chrysler, as an independent entity does not seem to appear anywhere among the leaders in the GEPGI, though it does show up as part of Daimler-Chrysler. Chrysler’s current parent Fiat appears nowhere, but fast rising Hyundai, like Samsung a Korean company, does appear.

The CEPGI study is fascinating and I’ve only barely scratched the surface here. Though automotive companies dominate the overall listings, as mentioned, car companies’ patents are filed in a fraction of the listed categories. The rest of the patents considered by the CEPGI are from a larger assortment of companies so you can get a good idea about who is doing what in the field of alternative and clean energy by looking through the Cleantech Group’s report.

Dare to suggest that a strong CAFE standard won’t ruin any automaker, and you’ll be overwhelmed by deafening cries of “what about the market,” “think of consumer choice,” and “don’t you tell me what to drive.” Now, I’ve made it very clear that I’m not a huge CAFE fan, but the fact of the matter is that since nobody is leading a charge for a gas tax (least of all the industry that says it would be a good thing) it’s the only option on the table. Which leaves just one question: why regulate fuel economy at all? There are all kinds of arguments against regulating fuel economy, but most stem from a desire to “let the market do its thing.” That’s an argument I’m highly sympathetic towards, but it doesn’t necessarily require that the government but out and let the era of cheap, thirsty trucks roll on unabated. What maybe, just maybe, if the market actually wants more fuel economy? Well guess what campers… according to research by IHS Global Insight [via Automotive News [sub], the market does want more fuel economy.

The major trend is visible enough in the graph above to prove the point: 8 cylinder engines have allen to a mere 18 percent of the market, while four-cylinder engines now make up the plurality of engine choices, at 43%. But if you’re looking at retail buyers only, there’s even more evidence that private consumers are more interested in fuel economy:

So far this year, more than half the vehicles sold to retail consumers had four cylinders, up sharply from a third in 2006, says J.D. Power and Associates.

So the whole line that “Americans like big, inefficient cars and trucks and therefore governmental regulation of fuel economy hurts consumers as well as the (primarily “domestic”) automakers who sell most of these vehicles” turns out to be bunk (incidentally, small and mid-sized vehicles account for 44 percent of sales this year vs. 36 percent in 2005). The market is objectively running away from big, thirsty vehicles with haste. Meanwhile, the two factors that are causing this shift have an interesting story to tell about the government’s role in the market. According to AN’s report:

Two factors are driving the shift. Buyers beset by high fuel prices are downsizing vehicles or opting for the smaller of two engine choices. And manufacturers are shrinking vehicles and engines to meet tougher 2016 federal fuel economy rules.

This is crucial: were this simply a question of high gas prices, we could sit back and argue that the government need not get involved. If automakers were truly responsive to their customers, the market would effectively provide the vehicles that consumers demand in the face of high gas prices. But as AN points out, governmental regulations actually play a huge role in making the market work. After all, automakers have no intrinsic incentive to offer highly-efficient vehicles: they typically cost more to build than, say, a Body-On-Frame truck,  and command lower prices. And because the traditional mode of American consumption is to “buy as little fuel economy as you can afford” (to paraphrase Bob Lutz), automakers have every incentive to improve fuel economy slowly. After all, Americans will happily buy an inefficient vehicle if they can afford it, which in turn yields greater profits to the manufacturer. And because the product is moving, the manufacturers have the luxury of arguing that they are just “giving the market what it wants.”

But without high-quality, fuel-efficient alternatives available on the same lot, claiming that the market is functioning properly is highly misleading. For consumers to actually signal their (and therefore, the market’s) true preference, they need to have real choices. But, as was discussed in the previous paragraph, automakers have little incentive to offer a true choice. Which is where CAFE comes in: by forcing to offer something that the OEMs insist the market doesn’t really want (an incidentally earns them less profit), the government guarantees the choice which allows the market to actually signal its preferences. And, as the forthcoming 2016 standards have forced automakers to introduce new generations of high-quality small and fuel-efficient cars, we’re seeing the market slowly swing away from the guzzlers we previously assumed it “demanded” and towards the smaller engines and greater fuel economy.

This sends two important messages: first, that CAFE helps the market function properly and second, that CAFE shouldn’t be feared. Though manufacturers and their allies paint frightening pictures of CAFE leading to a market divorced from consumer demand, if anything the lesson seems to be that demand for fuel efficiency could well outstrip CAFE’s requirement to provide it. With continued instability in the Middle East, it seems likely that another shock in gas prices could occur before the 2025 standard goes into place (if scarcity driven by huge increases in developing-world consumption doesn’t steadily raise the price first). And with a trend towards fuel efficient engines already well underway, it’s highly likely that the market will demand as much or more fuel economy than CAFE mandates at some point in the next 15 years.

If you asked an auto industry lobbyist, say, a month ago, what the big fights were over in CAFE negotiations, he probably wouldn’t have said “the number.” In the parlance of the Potomac valley, that means everyone at the table knows that at some point they’re all going to join hands and sing kumbaya over one highly symbolic number. Not surprisingly, the numbers that everyone in DC has been looking at fall right in the middle of these four scenarios… not coincidentally the tipping point where hybrids swing from a quarter to nearly half the market. But are these WSJ [sub] charts even accurate? John Krafcik, CEO of Hyundai Motor America and the industry’s CAFE contrarian implies that it’s not for everyone, telling Automotive News [sub] that

Honestly, our focus isn’t on hybrid. Our focus is on optimizing internal combustion and getting as many fuel-efficient vehicles out there, across the lineup. That’s the way you do it. If you look at the math, if you look at how CAFE math works, volume trumps everything.

But then Krafcik oversees a brand that doesn’t just sell lots of high-efficiency cars, it sells very few pickups… resulting in a sales-weighted fleet fuel economy 35.7 MPG in the first half of this year (as calculated by Hyundai). Did we mention that the 2016 passenger car standard is 37.8 MPG, at which time it figures its non-hybrid Elantra will get 50 MPG combined on the CAFE test? And nobody can look at Hyundai’s six-month sales performance (up 26%) and argue that Americans don’t want to buy fuel-efficient cars. In short, Hyundai is proving that automakers who can make money selling appealing, fuel-efficient cars need not binge on hybrids Even, according to the EPA’s final rule on standards through 2016, for manufacturers trying to sell as many pickups as possible.

GM had apparently opposed the round of emissions standards through 2016, and the EPA’s final rule [PDF] makes an example of The General, noting

GM recommended that the agencies relax stringency specifically for large pickups, such as the Silverado… The agencies disagree with the premise of the comment that the standard is too stringent under the applicable statutory provisions because some existing large trucks are not already meeting a later model year standard. Our analysis shows that the standards are not too stringent for manufacturers selling these vehicles. The agencies’ analyses demonstrate a means by which manufacturers could apply cost-effective technologies in order to achieve the standards, and we have provided adequate lead time for the technology to be applied. More important, the agencies’ analysis demonstrate that the fleetwide emission standards for MY 2016 are technically feasible, for example by implementing technologies such as engine downsizing, turbocharging, direct injection, improving accessories and tire rolling resistance, etc.

First, GM’s argument incorrectly suggests that every individual vehicle model must achieve its fuel economy and emissions targets. CAFE standards and new GHG emissions standards apply to fleetwide average performance, not model-specific performance, even though average required levels are based on average model-specific targets, and the agencies’ analysis demonstrates that GM and other manufacturers of large trucks can cost-effectively comply with the new standards.

Second, GM implies that every manufacturer must be challenged equally with respect to fuel economy and emissions. Although NHTSA and EPA maintain that attribute-based CAFE and GHG emissions standards can more evenly balance compliance challenges, attribute-based standards are not intended to and cannot make these challenges equal, and while the agencies are mindful of the potential impacts of the standards on the relative competitiveness of different vehicle manufacturers, there is nothing in EPCA or the CAA81requiring that these challenges be equal.

We have also already addressed and rejected GM’s suggestion of shifting the ‘‘cut off’’ point for light trucks from 66 square feet to 72 square feet, thereby “dropping the floor’’ of the target function for light trucks. As discussed in the preceding section, this is so as not to forego the rules’ energy and burdensome for light trucks as compared to passenger cars. Based on the agencies’ market forecast, NHTSA’s analysis indicates that incremental technology outlays could, on average, be comparable for passenger cars and light trucks under the final CAFE standards, and further indicates that the ratio of total benefits to total costs could be

So CAFE is set up to be achievable with fuel-efficient non-hybrids and to be achievable with pickup trucks… so why does the WSJ and the auto lobby insist (using EPA data) that hybrids and plug-ins will take over the market depending on where “the number” ends up? Not because of market reaction to “the number,” but because CAFE includes special incentives for things like flex-fuel vehicles and (wait for it) hybrids and plug-ins. How does it do it? By counting EVs, FCVs and PHEVs (when running on grid power) as creating zero grams of C02 per mile driven, even though the EPA acknowledges

The zero grams/mile compliance value for EVs (and for PHEVs when operated on grid electricity, as well as for FCVs which involve similar upstream GHG issues with respect to hydrogen production) is an incentive that operates like a credit because, while it accurately accounts for tailpipe GHG emissions, it does not reflect the increase in upstream GHG emissions associated with the electricity used by EVs compared to the upstream GHG emissions associated with the gasoline or diesel fuel used by conventional vehicles.EPA explained in the proposal that the potential for large future emissions benefits from these technologies provides a strong reason for providing incentives at this time to promote their commercialization in the 2012–2016 model years. At the same time, EPA acknowledged that the zero grams/mile compliance value did not account for increased upstream GHG emissions.

Combine that incentive with another new feature:

the new program enables manufacturers to transfer credits between the two averaging sets, passenger cars and trucks, within a manufacturer. For example, credits accrued by over-compliance with a manufacturer’s car fleet average standard may be used to offset debits accrued due to that manufacturer’s not meeting the truck fleet average standard in a given year. EPA believes that such cross-category use of credits by a manufacturer provides important additional flexibility in the transition to emissions control technology without affecting overall emission reductions.standards.

And you’ve got a formula for CAFE compliance success: over-comply on cars by going big on expensive hybrid technology and you can swap the credits over to your truck fleet. Then you get to keep trucks cheap ‘n thirsty while complaining that the government’s awful regulations forced you to jack up prices on cars by “mandating” hybrid technology (or the even better-incentivized “zero emission” EV/FCV technology). And as gas prices get more expensive, the car buyers will have little choice but to suck it up and fork over for the hordes of “necessary” hybrids… or at least they would if Hyundai weren’t stepping off of the regulatory primrose path to ruin, and showing that another way is possible. In a lot of ways it’s not unlike the first-ever round of CAFE, in which Detroit overcompensated for its land yacht indulgences with disastrous results, and had its lunch eaten by the Japanese in the decades following. Let’s hope that Hyundai isn’t the only firm that’s learned from that history.

Electric vehicles present all kinds of challenges to the traditional ways of understanding cars. From design to differentiation, from range to refueling, EVs simply act different than the internal combustion-powered cars we’ve been refining for centuries now. And yet, through consumer incentives and subsidized charging stations, governments seem to be barreling headlong towards the goal of simply replacing our gas cars with electric ones, as if the two were fundamentally interchangeable. Sadly this is not the case, and a study by Project Better Place and PJM Interconnection [PDF] illustrates in stark terms just how costly an unplanned, uncoordinated rush to electric cars can be.

PJM and Better Place open their study with a question that some might find slightly absurd: what would happen if a major metropolitan area suddenly had a million EVs? The question is only absurd from a pure market perspective, as global EV sales volume projections are generally low enough to keep the possibility of a single million-EV metropolis squarely in the realm of science fiction. From a policy perspective, however, the study offers profound insights into issues that the governments who are currently promoting EVs absolutely must consider. Without an understanding of the unintended consequences of a rush to EVs, governments risk spiraling costs, misplaced investments, and market failures.

To understand the potential effects of a million-EV metropolis, PJM and Better place have created a complex computer model which

considered a distribution of 1 million EVs in the Washington-Baltimore Metropolitan Area and modeled the impact of charging the EV batteries in three scenarios: unmanaged charging, consumer-price-incentivized charging, and managed charging via a Central Network Operator (CNO).

With a million EVs in one metropolitan area, a huge percentage of grid energy would be diverted towards transportation that was once powered by gasoline, and these three scenarios represent different approaches to managing the grid impact. The first, or “unmanaged” scenario is essentially the status quo, a market-driven pricing system in which cars are simply powered off of a standard electrical grid using home chargers and the public fast chargers that some cities are already installing (called Battery Quick Chargers or BQCs). The “Time Of Use” (TOU) scenario used a two-tier pricing scenario, modeled on the pilot EV tariff developed by Southern California Edison, which uses advanced home meters to distribute energy for (theoretically) lower grid impacts and electricity prices (as well as public BQCs). The “Central Network Operator” (CNO) scenario models a single EV services provider responsible for all charging and infrastructure, using Better Place’s in-house network models and experiences. In this scenario, the BQCs are replaced by BSSs, or Battery Swap Stations, another unique Better Place offering.

Without going into too much complexity in describing the simulation (check out the PDF for more), it starts with a transportation model which maps EV distribution, trips and charging behavior. That model is then run through each of the three different scenarios, and the results of each is then sent through PJM’s grid market model and assessed for impacts on grid load and energy prices (assuming no fundamental changes in generation and transmission techniques). The results are dramatic, and graphically illustrate the problem with a vehicle-centric approach to EV stimulus.

As the very first chart in this post shows (also shown here in grey), the unmanaged scenario causes huge peaks and valleys in grid load, as commuters follow regular schedules and charge their vehicles at roughly the same times, charging them until full as soon as they are plugged in. The red line in that chart tracks “Locational Marginal Prices” (LMPs), which are at their highest when the grid faces its highest draws. This results in $786.3m in wholesale energy increases per year, a number that the TOU scenario (shown above) actually makes worse by 4%. Where TOU does help is in the annual energy costs aggregated to EV owners (thanks to fixed prices), but it is only shown to help by a mere 3.7%.

If you replace the haphazard system of home-charging and public BQCs with Better Place’s battery swap stations (BSSs) and network management system, the peaks and valleys in the grid draw are dramatically leveled out compared to the unmanaged and TOU scenarios. And though localized marginal prices are higher at times than in the TOU scenario, on aggregate they offer 22% savings compared to the unmanaged scenario. That’s over $35m annually (in one city) that’s not coming out of consumer’s pockets. More importantly, wholesale energy prices enjoy a whopping 45% savings compared to the unmanaged scenario for a staggering $350m in annual savings. Now imagine those results multiplied across every American metropolis with a million vehicles, and the impacts of not committing to a central network operator are impossible to ignore on a national policymaking level.

In essence, only a single central network operator can manage the chaos of individual transportation without restricting mobility or causing regular stress on the grid. I personally tend to favor bottom-up, market driven solutions, and at first glance putting a single operator in charge of managing the distribution of energy for private transportation does not seem to be that. But when you go through the model it becomes clear that this single central switchboard and distribution system is actually necessary for efficient market function, allowing for constant response to localized marginal prices and constant mitigation of naturally clustered usage patterns. In light of this reality, the study’s policy implications are less shocking:

This joint study firmly concludes that the increases in wholesale energy cost due to the additional load of 1 million EVs in the Washington-Baltimore Metropolitan Area can be reduced by hundreds of millions of dollars per year if the charging is managed by a CNO responding to real-time LMPs.  These savings are without considering the value from various ancillary services and of large-scale dispatchable load for increasing the penetration of renewables, economic dispatch efficiency, and heat-rates for environmental considerations.  Existing mechanisms do not necessarily allow CNOs to capture any of this value, which could be used for infrastructure deployment.  Based on these conclusions, we emphasize how critically important both the presence of real-time LMPs and of CNOs are to reducing the impacts to the electric power system.  Therefore, we recommend that incentives be developed for advancing the power system such that PRD incorporates LMPs and for EV incentives to reach beyond the consumer to CNOs so that intelligent charging networks can be quickly constructed.

By simply giving consumers credits to buy EVs, the government is setting up the same consumers to overpay massively for their electricity, grids for overstress and utilities for waste and inefficiency. Rather than encouraging these negative outcomes, perhaps governments should consider investing in Better Place’s holistic network management approach. The upfront costs of a Better Place-style CNO are indeed large, but the alternative is well-over $350m in annual increased wholesale energy costs (in one city alone)… waste without end. Throughout history economists have found so-called “natural monopolies,” in which markets are unable to provide a service as efficiently as a single actor. With the problem of EV grid management, we seem to have found another. And because the battery-swap model also fixes the major micro-level problems with EVs, namely lack of range and battery depreciation costs, Better Place is looking more and more like a no-brainer to me all the time.

TTAC has long seen stop-start systems (which turn off the engine at idle) as one of the many common-sense technologies that will continue to improve internal combustion engine efficiency at a relatively low cost. Outside of these digital pages, though, the systems have taken longer to gain awareness in the United States, resulting in the lagging adoption rate pictured in the chart above. Up to this point, we’ve assumed that this can largely be blamed on the EPA test’s unwillingness to acknowledge the urban-driving advantages of stop-start systems, pointing to Mazda’s protests on the matter as evidence that government intransigence was keeping the technology out of the market. But recently Mazda has announced that all of its vehicles will get stop-start as standard by 2015, and Ford has said that it will begin offering the technology on “some” four-cylinder models for the North American 2012 model-year… and the rest of Detroit isn’t far behind. So what’s the deal? The EPA hasn’t changed its test… why are stop-start systems finally starting to trickle over?

Thanks to new research obtained by TTAC from the cleantech investment fund Pacific Crest, we now have a better understanding of stop-start technology, and why we’re actually glad it’s taking so long for the systems to get here.

Not having looked into the technology in any appreciable depth, Pacific Crest’s research was eye-opening. It turns out that the first generation of systems actually used variations of lead-acid battery technology known as “absorbed gas mat” (AGM) and “enhanced flooded batteries” rather than the newer NiMh or Li-ion chemistries. Though these technologies clearly offer advantages over standard lead-acid batteries (see comparison from Johnson Controls, above), they are still far from perfect. Pacific Crest’s research notes:

Gen1 AGM and enhanced flood batteries perform poorly, leaving future market share in doubt. The start-stop battery cranks the engine 10x more than a traditional battery, and the lead-acid chemistry is simply unsuited for this workload. Current AGM and EFBs degrade rapidly, with AGM batteries losing half of the charge acceptance within two weeks after first use (i.e., it loses half of its fuel-efficiency gains). They are not good at holding steady voltage during a stopping event (e.g., car stereos/windshield wipers may not work when the car engine turns off).

Yes, you just read that right: the current generation of stop-start systems lose half of their benefits after two weeks. Which means they’re great for juicing up scores on Europe’s urban-efficiency test, but they are as good as useless for the vast majority of the life of the vehicle (we already knew they were less-effective in cold weather). In an industry that typically validates equipment for hundreds of thousands of miles of useable life, this is nothing short of shocking. Especially when you jump ahead and find out the OEM response to these concerns

Ultracapacitor prices need to decline by approximately 50% to gain significant Gen2 share. Overwhelmingly, OEMs are interested in satisfying the European legislation at the lowest cost. With few exceptions, cost is the first, second and only consideration. The poor performance of the AGM battery is something these OEMs are willing to live with as they assume consumers (and regulators) will not notice or care about the fuel-efficiency losses soon after purchase. Representatives from Ford, BMW and Porsche all dismissed ultracapacitors solely on cost, even while recognizing the greater performance. The good news for ultracapacitors is that a few OEMs are interested in offering consumers the better performance. But in order to gain real market share, the module price needs to fall significantly.

That’s right, the OEMs can “live with it.” Because they literally don’t have to live with it: consumers do. How this issue has not erupted into a semi-serious scandal in Europe is beyond us. After all, if this is accurate and verifiable, it means manufacturers are building cars that may not actually comply with emissions standards in the real world for most of their lives. Whether consumers will “live with this” is one question… whether governments will is a very different proposition. But, as the paragraph above implies, manufacturers aren’t likely to abandon advanced lead-acid designs for some time. Luckily, though, the next generation of AGM batteries should be much improved… and they had better be!

By 2013, start-stop batteries need to get much better. The next-generation battery, expected to be introduced initially in 2013 models, is expected to do much more than current models and stretch lead-acid battery technology further. OEMs are demanding significant technology advancements to meet customer demands and higher fuel efficiency standards. The Gen2 battery not only will do start-stops, but also basic regenerative braking, start-stop during deceleration and electric boost during acceleration. The battery will, therefore, need to be able to handle more cranking events, and more charge. Also, the battery will need to operate a partial state of charge (i.e., normally hold 70% to 80% charge) in order to absorb energy from braking events.

Generally speaking, batteries need a 4x improvement in charge acceptance and a 3x increase in cycle life to meet OEM demands for 2013. Lead-acid batteries, ultrabatteries and ultracapacitors are all vying for share in the Gen2 start-stop market. No OEM is committed to a single future technology, although most of the OEM testing is focused on improving AGM batteries. Most OEMs (e.g., BMW) are waiting to see the final specs on Gen2 AGM batteries before turning their attention to alternatives such as ultracapacitors. If lead-acid manufacturers can produce an improved version at the current price point, AGM will continue to dominate the start-stop market, in our view.

Pacific Crest goes on to argue that ultracapacitors (which are good for over a million cycles and don’t lose capacity like lead-acid) need to see something like a 50% price reduction to compete for attention from price-sensitive OEMs, and points out that a lack of Chinese players in the ultracapacitor space is part of the problem. Though ultracapacitors sound sexy, if the next-generation of AGM batteries improve to the point where stop-start systems are offering full benefits for longer than two freaking weeks, then we say “bring ‘em on.” Meanwhile, every auto media outlet with stop-start-equipped long-term loaners (and possibly government emissions-control agencies) should be running regular tests to verify or disprove these troubling claims. A two-week lifespan for full-function on any automotive system is nothing short of misleading.

General Motors CEO Dan Akerson set off something of a firestorm a few weeks ago, when he said, in response to a question about forthcoming CAFE increases:

You know what I’d rather have them do — this will make my Republican friends puke — as gas is going to go down here now, we ought to just slap a 50-cent or a dollar tax on a gallon of gas.

Predictably, populists and economic alarmists of all stripes took great umbrage at Akerson’s candor, questioning his leadership of GM as well as his perspective on the shaky US economy. But Akerson is not alone in his support of some form of gas-tax increase. Bob Lutz and  Tom Friedman (an odd couple right there, if ever there was one) agree with him. Edmunds CEO Jeremy Anwyl defended Akerson and even suggested a $2/gallon tax earlier this year. Bill Ford and  AutoNation’s Mike Jackson are of the same mind as now-retired Republican Senator George Voinovich on the issue. And yet, inside the Beltway, the subject tends to draw a chuckle and a roll of the eyes. Everyone wants it, but nobody wants it.

Since the term “oil addiction” has been used to death, let’s look to an (arguably) less demeaning metaphor: vegetables. Your mother probably didn’t force you to take an honest personal inventory when she made you eat some dreaded brussel sprout or another (which is why the addiction metaphor seems better), but she would have had you not been slave to infantile instinct. So now, with our fully developed faculties, let’s consider what happens if you don’t eat your vegetables.

In the most basic sense, not increasing the gas tax is bad for America’s physical body. Our roads, which circulate the lifeblood of commerce (OK, enough with the metaphor), are literally crumbling. Again, a phrase we may have become desensitized to, but literally true. Car and Driver has a good look at the problem of America’s infrastructure woes and their link to the gas tax, the Highway Trust Fund.

The HTF is a rare beast in the political world. Usually, federal tax money goes into the general fund, where legislators first pass an authorization bill, giving guidelines about how the money can be spent, then a separate appropriations bill actually putting the money into things like buying fighter jets or paying the National Institutes of Health’s electric bill. The HTF’s authorization guarantees that all federal gas-tax revenue will only be put there. Whenever a new transportation spending bill is passed, called a reauthorization, there are slight tweaks to the HTF and how it is spent, but in general it is considered sacrosanct.

Once in the HTF, interstate money is divided according to complex formulas that take into account things such as lane-miles of road, the number of  licensed drivers, ­priority programs for things like bridge replacements, and equity provisions to ensure that every state gets a minimum (currently guaranteed at 92 percent) of their contribution back. State transportation departments, which plan, build, and maintain the interstates, decide what they want to do and then pay for it; the federal share for interstate projects is 90 percent, 80 percent if no high-occupancy lanes are built.

Now, the HTF is running out of money….To match the rate of inflation and have the same value that the 18.4-cent tax did in 1993, the gas tax  would have to be increased to 28 cents per gallon.

Safe public roads are a government outlay that all but the most extreme “Atlas Shrugged”-thumpers can get behind, especially in the wake of a rush-hour bridge collapse like the 2007 Minneapolis I-35 bridge collapse. And yet the tax that pays for our interstates hasn’t even kept up with inflation. Increasing the price of gas may hurt Americans’ mobility in the short term, but not having an interstate system is the more dire long-term alternative.

Another downside to undertaxed gasoline, which explains the broad industry support for a gas tax hike, is that America’s cheap gas makes life hell for automotive product planners. Though this might actually be good for TTAC, as it would keep us well-stocked with stories of inventory issues and mis-timed products, we’re not that selfish. Recent history teaches us that the rate of increase or decrease in the price of gas, rather than the price itself, drives the market to the extremes of high and low fuel efficiency (as evidenced by he fact that last month’s hybrid sales fell despite gas prices hitting their 2008 price levels). Industry planners would rather see the price of gasoline taxed to a state to create sustainably steady price increases, eliminating some of the speculative swings in pricing, than to plan for lower efficiency and higher profits only to be caught flat-footed by a price shock. Also, bringing US gas prices into line with the rest of the world will help US market-dependent manufacturers develop truly global products. Finally, a gas tax increase would eliminate the need for the complex, loophole-ridden CAFE regime, which industry lobbyists say “only about six people in the US actually understand.” Lutz explains:

You either continue with inexpensive motor fuels and have to find other ways to incentivize the customer to buy hybrids and electric vehicles, such as the government credits. Or the other alternative is a gradual increase in the federal fuel tax of 25 cents a year, which in my estimation would have the benefit of giving automobile companies a planning base, and giving families that own vehicles a planning base. Every time gas prices go back down, everybody starts buying big stuff again. Gas prices go up a buck, the big stuff is unsellable and everyone wants small cars. Go figure. It’s like the collective memory is about three weeks long. We can’t run a business that way.

And then there’s the issue of “externalities,” or the unborn costs of cheap gasoline. One commonly-cited “hidden cost” of cheap gasoline is the US’s huge overseas military presence. Though the link between America’s military adventures and our low price of gas isn’t always obvious, our intervention in Libya shows how expensive interventions are often undertaken out of fear of a gas price shock. Since the cost of military action isn’t built into the price of gas, this amounts to a hidden cost. Furthermore, the military’s intensive use of gasoline has a multiplying effect on those costs, forcing Pentagon planners to seek ever-greater efficiency simply to maintain existing overseas deployments.

Another there are plenty of other externalities to cheap gasoline. As Akerson points out, CAFE puts the burden of efficiency on auto manufacturers, potentially costing manufacturing jobs, at a time when the oil industry has been immensely profitable. Furthermore, as the video above shows, pollution is another hidden cost of cheap gas. Like military interventions, the cost of health problems caused by pollution is largely born by taxpayers… another “hidden cost” that some estimates place at over a trillion dollars per year.

But the final externality is one that should stop the populist resistance to a gas tax in its tracks: if we don’t pay for our gas with more money, we will do so with our privacy. Going back to  the Highway Trust Fund, we find that the only alternative to an increase in the tax itself is the “Vehicle Miles Traveled” tax, a scheme that would require the government to track every single vehicle in the United States and tax it based on the miles traveled. Though in many ways a more fair system than a gas tax alone (as it apportions costs based on use of the infrastructure, without filtering it through the efficiency level of each individual car, the VMT tax scheme is an Orwellian nightmare waiting to happen. Though privacy is not at the height of its popularity at the moment, those who oppose any increase in the gas tax would do well to consider the implications of this alternative (Who does the data belong to? Will law enforcement get access? Will others be able to track you by piggy-backing onto the system?). Especially since no other alternative is even being seriously considered.

Ultimately, the tragic truth is that there may be no way to prevent this final “alternative” to the gas tax for the simple reason that, as efficiency improves towards zero gasoline use vehicles, gas tax revenue will eventually fall away to nothing. But that horizon could be pushed out twenty years if we recognize that not even indexing the gas tax to inflation is unsustainable and if we create a long term “glidepath” of predictably-increasing gas taxes. In this scenario, our highways could be maintained, some of the externalities of gasoline use could be mitigated, and the auto industry would have the predictability to plan products that use the remaining gasoline as efficiently as possible. Moreover, the US would not be taking on any special burden in the global picture, but would simply be joining the rest of the world in paying a more realistic price for our gasoline.

Any one of these arguments could be quibbled with, but at the end of the day, opposition to any increase in the gas tax can only be justified on the fear of short-term consequences that pale in comparison to the longer-term alternatives. Like the auto bailout, sacrificing long-term principles based on short-term fears betrays a lack of faith in America’s ability to innovate its way out of challenges. What’s the principle at stake here? Market function, for one thing, which is fundamentally perverted by willfully hidden externalities. How about the historically unprecedented mobility offered by our interstate system, not to mention the ability to enjoy that mobility without government surveillance? Global equity in an increasingly multipolar world, and environmental justice are other fine principles, if you’re into that kind of thing. Oh, and did we mention America’s swamped fiscal situation that is the backdrop to all of this?

Sadly, the reason a gas tax increase hasn’t happened isn’t because people don’t understand these issues. This isn’t a problem that can be solved by op-eds like this one. Taking on this issue will require a fundamental shift in how the gas tax and gas prices more generally are seen inside the beltway, and based on President Obama’s recent decision to release strategic oil reserves, that leadership is as AWOL as ever. And with an election looming, we’re more likely to see a gas tax holiday (as we did during the last presidential election) than any proposal for an increase in gas taxes. So, what’s the solution? Instead of just verbally supporting a gas tax increase, corporate leaders like Akerson who claim the policy is in their best interests need to stop throwing up their hands at the political challenge and start putting their money where their mouth is. The ideas behind a gas tax increase are so strong, even a moderately well-funded political action committee would at least be able to embarrass a few of the craven politicians who oppose this common-sense policy. You have to start somewhere…