The Truth About Cars » subsidies The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Sat, 26 Jul 2014 14:51:02 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » subsidies Nissan Loses Money On Every Leaf Replacement Battery Sold Fri, 25 Jul 2014 11:00:08 +0000 2011_Nissan_Leaf_SL_--_10-28-2011

In June, Nissan announced that Leaf owners could obtain a replacement battery pack for $5,500 upon trading in the old unit. While a boon to said owners, the automaker is losing blood on the deal every time a pack is sold.

Green Car Reports interviewed Nissan vice president of global communications Jeff Kuhlman, who explained that the low price for the new pack was the result of his employer subsidizing the price, though he declined to state how much Nissan spends per replacement. Thus, no profit is being made at this time off of the exchange.

However, Nissan isn’t yet hurting on this “customer-first” initiative. According to Kuhlman, no one has taken the automaker up on its Leaf battery replacement program.

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Volkswagen May Announce Location Of New SUV Production Next Week Fri, 09 May 2014 13:00:12 +0000 Volkswagen CrossBlue Concept SUV

Volkswagen appears ready to announce where its upcoming mid-size SUV — based upon the CrossBlue concept from the 2013 Detroit Auto Show — will be assembled.

Automotive News reports the decision could come as soon as next week at the earliest, though execs either don’t know or cannot say for sure, citing the automaker’s board’s tendency to keep things close to its Teutonic heart. Two locations up for nomination include Mexico and the beleaguered-by-politics plant in Chattanooga, Tenn. Either way, the new SUV will be produced and sold for the U.S. and Canadian markets.

The only roadblock for production in the U.S. is whether or not a $300 million packaged offered by the Tennessee Department of Economic and Community Development — pulled off the table in January of this year ahead of a then-impending United Auto Workers election at the Chattanooga facility — will actually be offered. Department PR chief Clint Brewer stated in an email that his department has attempted to contact VW, but nothing more has come of it thus far.

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Tennessee Lawmakers Threatening To Kill Subsidies If UAW Wins VW Plant Tue, 11 Feb 2014 16:40:30 +0000 092112_WEB_a_VW_Sign_t618

Should the United Auto Workers win the upcoming election to represent workers at Volkswagen’s Chatanooga, Tenn. plant, the automaker may find itself shunned by state lawmakers as far as further subsidies are concerned.

Volkswagen is seeking a new site this year to build their CrossBlue-based mid-size SUV in 2016, wooing both powers that be in Tennessee and Mexico for subsidies. However, Republicans in the Tennessee state legislature are threatening to back down on $580 million in state and local incentives the government offered to the automaker in 2008.

Tennessee House Majority Leader Gerald McCormick and state senator Bo Watson both said VW would have “a very tough time” attracting anymore tax dollars from the coffers should the UAW win representation, and while they were happy to have the automaker in their backyard, it didn’t mean they were ever given a “green light” to force unionization into the plant. They also criticized VW for giving union supporters an unfair advantage against anti-unionization lobbyists, a charge the automaker denied in a statement supporting the workers’ right to be approached by union supporters and opponents prior to the upcoming election.

Furthermore, VW also stated they would have recognized the UAW through a card check in lieu of an election, but insisted on the workers voting for representation to reflect the automaker’s belief that “democracy is an American ideal,” according to vice president of human resources Sebastian Patta.

Meanwhile, a spokesman for Governor Bill Haslam warned that the legislature would play a huge role in approving incentives to help fund the project — being too large for the state’s FastTrack incentive program as it is — and that the impact of UAW representation would affect the state’s ability to recruit other companies to the state.

Longtime UAW critic United States Senator Bob Corker originally remained mum on the upcoming vote, but after the union’s regional director Gary Casteel offered his praise of Corker’s statement by prompting other politicians to do the same in respect of the upcoming vote, the former mayor of Chattanooga felt the union was attempting to stifle other voices from commenting on the issue before stating that he would “return home [to] ensure [his] position was clear”: that the UAW would make VW “the laughingstock” of the automotive industry. Casteel fired back, calling Sen. Corker a flip-flopper prone to being swayed by special interests before restating his belief that UAW representation at the plant would improve the quality of life for both workers in the VW plant and everyone in Chattanooga.

Other critics weighed in on the election, such as the group called Southern Momentum, who quoted a factory worker leading the anti-unionization coalition at the plant as saying, “A vote for the UAW is a vote against the expansion of the plant, plain and simple.”

The election will take place from Wednesday to Friday of this week under supervision by the National Labor Relations Board. Around 1,500 workers will be eligible to vote during the three-day period.

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Editorial: Canada’s Auto Industry Is Hooked On Subsidies, And It Won’t End Well Tue, 11 Feb 2014 13:00:08 +0000 windsor

Just a few short years after the Canadian and Ontario government bailed out General Motors and Chrysler, a familiar scenario is playing out along Highway 401. Chrysler is reported to be negotiating with both the Ontario and Canadian federal government regarding subsidies for their Windsor assembly plant that builds the Dodge Caravan and Chrysler Town & Country minivans.

While auto makers like Ford and Toyota have received government money recently, the size and scope of the subsidies are said to be unprecedented. And according to reports, Chrysler is threatening to leave if they don’t get what they want. According to the Financial Post, Chrysler is looking for a total of $460 million (compared to the $71 million and $34 million received by Ford and Toyota respectively), which would represent about 20 percent of the planned $2.3 billion investment. Chrysler is said to be seeking funding for R&D work on the new vans, as well as money to revamp Windsor to a new flexible assembly plant that can build sedans, minivans and crossovers. Reports from the Windsor Star quote Ontario government officials as stating that they are in “serious negotiations” with Chrysler. When reached by TTAC Chrysler Canada refused to comment.

While the minivan market is shrinking in America, Windsor is still running flat-out, with three shifts running and both nameplates ranking among the top sellers in the segment. Chrysler is slated to transition one nameplate to a crossover while keeping the other as a traditional minivan. But Chrysler and CEO Sergio Marchionne have flip-flopped on this decision so many times that it’s tough to keep track of what was said last. As early as the end of January, Marchionne made comments that hinted at a secure future for Windsor at a launch sometime between 2015 and 2016 model years.

But the recent developments, as well as the expiration of Chrysler’s contract with Unifor (formerly the Canadian Auto Workers) could prove to create an opportunity for Chrysler to make a hasty exist from Windsor. The hardball talk is backed up by the very real fact that Chrysler has the capacity in other plants that could enable a move for their minivans. Mexico is one option, with production of the Fiat 500 moving to Poland and the Dodge Journey said to be leaving Mexico for Sterling Heights, Michigan. Either plant could be a candidate for minivan production, assuming the new vans ride on the CUSW architecture used for the Dart, Chrysler 200 and Jeep Cherokee.

Both levels of government are captivated by a desire to keep Canada’s auto industry intact, even at great expense to the taxpayer, and Chrysler head Sergio Marchionne is likely banking on this. With elections looming in the next couple of years, Marchionne and his team know that the threat of moving production to the United States or Mexico is potent enough to get the governments to acquiesce to his demands. With roughly 4,700 jobs at Windsor, Chrysler is the town’s biggest employee, and crucial electoral districts are up for grabs as well.

The wrong decision could have political consequences in tightly contested elections at both the provincial and federal levels. The negotiations with Chrysler are occurring against a gloomy backdrop for the Canadian auto industry. Production levels have been on the decline, as a strong Canadian dollar, lower labor costs and generous incentives from other jurisdictions have made Canada an unpopular choice for new assembly plants. The lion’s share of new investment has gone to the United States and especially Mexico, which has seen a boom in auto assembly plants from Japanese and European auto makers.

While a recent slump in the Canadian dollar will help Canada’s overall export picture, it’s this author’s opinion that Canada’s auto industry will eventually meet the same fate as Australia’s. The Canadian auto market is roughly the same size as Australia, and though it does not have such a competitive and fragmented selection of brands, it does share Australia’s proximity to low-cost assembly locations that have reciprocal free-trade agreements. The Minivan may stay in Windsor, given the costs associated with moving production, and Marchionne’s prediliction for blusters. But it’s this author’s opinion that when the Vitality Commitment between General Motors and the Canadian government ends in 2016, the Oshawa assembly plants will close, ending a century-long tradition of auto assembly in that town.

The move will devastate an already vulnerable municipality, but every vehicle built in Oshawa is already built at another, lower-cost assembly plant, and GM CEO Dan Akerson made up his mind long ago, calling Canada “the most expensive place to build a car“. Like Windsor, the timing of the Oshawa closure could easily coincide with the expiration of the current CAW/Unifor labor agreement, allowing for a clean break.

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Toyota Shuttering Australian Factory By 2017, Local Industry Dead Mon, 10 Feb 2014 15:58:31 +0000 Toyota Landcruiser 70 Troop Carrier Workmate

Toyota announced Monday that as of 2017, the automaker will no longer manufacture any of their vehicles in Australia, driving in the final nail to the coffin containing the nation’s local automotive industry following similar announcements by Holden and Ford.

Toyota Australia head Max Yasuda and Toyota Motor Corporation head Akio Toyoda made the announcement at the automaker’s factory in Altona — a suburb of Melbourne — before an audience comprised of various media and the factory’s 4,200 employees. Yasuda claimed numerous factors in the decision, citing high costs of manufacturing, low economies of scale, increased competitiveness surrounding current and future free trade agreements, and the “unfavourable” Australian dollar as among the many reasons for the closures.

“We did everything that we could to transform our business, but the reality is that there are too many factors beyond our control that make it unviable to build cars in Australia,” Yasuda said. “Although the company has made profits in the past, our manufacturing operations have continued to be loss making despite our best efforts.”

The Australian Manufacturing Workers Union warned that Toyota’s complete exit from the nation’s manufacturing base would devastate not only those directly affected, but up and down the supply chain, as well. AMWU vehicle secretary Dave Smith added that the final result would be “a potential recession all along the south-eastern seaboard.” The Australian Council of Trade Unions also warned that the pullout would ultimately cost 50,000 jobs and erase $18.76 billion from the local economy.

On the government side, Industry Minister Ian Macfarlane said he was disappointed in the decision, and felt that the government would have been able to help had there been enough time to put a plan in place to keep Toyota manufacturing in Australia. Victoria Premier Denis Napthine concurred with Macfarlane’s sentiment and desire to have been able to work through the issue, and would be seeking a commitment from Australia’s coalition government — currently led by Prime Minister Tony Abbott — for a comprehensive adjustment package similar to the one made to Holden employees late last year.

On the subject of government subsidies, Abbott said his government had wanted Toyota to soldier onward, going as far to hold private talks with Yasuda as recently as hours before the announcement of the manufacturing pullout — contradicting what Abbott said in an earlier press conference regarding knowledge of the announcement — though as with Holden prior to its decision, paying the automaker any extra taxpayer dollars was ruled out.

Abbott said that while nothing could be said or done to “limit the devastation that so many people will feel” from the fallout of Toyota’s decision, he wanted everyone to remember that “while some businesses close, other businesses open, while some jobs end, other jobs start,” and that there would be “better days in the future.”

Opposition Leader Bill Shorten, proclaiming the Toyota closure an “unmitigated disaster,” offered this statement on the matter:

The car industry has died under the Abbott government — it’s a disgrace.

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GM’s Ellesmere Port Decision Could Collide With EU Anti-Subsidy Rule Mon, 21 May 2012 14:56:09 +0000

A day before GM officially announced that the Astra production will be moved to Ellesmere Port, a move that is widely believed to seal the fate of Opel’s Bochum plant, we said that the decision won’t go down well in Germany, and that it will be very tough working with a doomed workforce. The workforce is already getting restive.

Opel’s works council chief Schäfer-Klug says he has evidence that the Ellesmere Port decision was bought with subsidies. According to EU law, subsidies are illegal, except under clearly defined circumstances. You may remember that it was the anti-subsidy rule that torpedoed GM’s plan back in 2009 to sell Opel jobs to the highest bidding country.

According to Automobilwoche [sub], members of the European Parliament already asked the European Commission to look into the matter, and that the Commission usually does not reject such a request.

UK business secretary Vince Cable denies that subsidies have been pledged. Opel also denies that subsidies were promised, but said that there are “a number of existing mechanisms in the UK for the support of the industry.”

One man’s subsidy is the other man’s support mechanism. We probably have not heard the last of this.

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Ontario Cutting Electric Vehicle Subsidies, $43 Million In Savings Expected Wed, 28 Mar 2012 18:14:21 +0000

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.

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Honda To Enter China With EV Wed, 12 Oct 2011 18:58:35 +0000

While U.S. Senators are wringing their hands and pounding their chests about EV know-how allegedly escaping to China, makers from other countries are doing business. The most recent EV entry is Honda. Honda will build an EV in China and sell it in China in 2012 “in limited quantities,” its R&D chief Toshihiro Mibe told TTAC in Chengdu. The electric vehicle will undergo tests this year. When ready, the EV will be launched under the Honda brand. When asked, Honda spokesperson Natsuna Asanuma was convinced that the Honda EV will qualify for Chinese subsidies.

Mibe dismissed know-how issues: “An EV is much simpler than a regular car. The only difference is the battery and the electric motor.”

Although the model was not named, it most likely is the electric Fit that has been shown by Honda.

The announcement follows an announcement by Nissan that it will export its Leaf to China with an eye on future local production if warranted by initial sales.

This flies in the face of allegations that China will insist on “Chinese” EVs when they dole out their (yet to be announced) subsidies. Senator Stabenow had her information from the New York Times. Multiple sources told TTAC that this story was false. We deserve better fact checking, if only by our elected officials.

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European Competition Authorities: Is Electric Car Aid OK? Thu, 14 Jul 2011 23:11:40 +0000

The European Commission’s competition authority has a problem:

The Commission had to launch a formal investigation into aid for a large investment project by BMW for the manufacturing of electric cars. The formal investigation will allow the Commission to gain an insight into the emerging market of electric cars, a market for which it has not examined regional investment aid before.

A subsidy is a subsidy is a subsidy, right? Apparently not…

The commission continues:

Germany plans to grant €46 million towards an investment project of €368 million at the company’s plant in Leipzig, in Saxony. The project concerns the manufacture of two models of electric passenger cars: the ‘i3′ Mega City Vehicle model, a purely battery driven electric car for urban use, and the ‘i8′ sport model, a hybrid car with a combustion engine in addition to electric propulsion. The car bodies of both models will be made of carbon fibre reinforced plastic.

The Commission acknowledges the importance of the project from the environmental and energy policy point of view, but has to assess its compliance with the said EU provisions for large investment projects. As this is the first notification of regional investment aid to electric cars and on the basis of the available data, the Commission could not immediately decide whether the electric cars planned by BMW can be defined as new products, whether the electric car market creates a separate product market or is part of the all passenger car market without distinction of the propulsion mode, whether the segmentation used in the combustion engine car market could apply to electric cars, whether the relevant geographic market is global or EEA wide etc. It therefore invites interested third parties to submit their observations.

Well, it will be nice to finally understand these electric vehicles, won’t it? Because there’s really no consensus yet on just how tiny the EV market will be in 10 years, let alone how overserved it may already be. Seriously though, considering Denmark’s generous tax breaks for EVs (including a free parking spot in pricy Copenhagen!) were just approved by the same competition commission, the BMW aid should be fine. EVs are apparently different. Sadly, the EC doesn’t actually let us see the document accompanying that approval (always be updating, guys!), so I can’t confirm my suspicion that the involvement of Better Place’s battery-swap scheme might have had something to do with it (what can I say, I’m bullish on “unlimited range” EVs).

When it comes to “regular cars,” though, the EC is a lot less ambiguous. In the same press release, the EC provides some interesting contrast

Finally, in another German regional aid case, the Commission also started a probe into a grant of € 83.7 million towards a €700 million investment project of Volkswagen Sachsen GmbH, a subsidiary of the Volkswagen group. The project aims at a fundamental change in the production process of cars in the small and medium sized segments at the plant in Zwickau, in the Chemnitz region (Saxony).

Here too, the applicable Regional Aid Guidelines require the Commission to look further into the project to check the incentive effect and the positive and negative effects of the aid. Volkswagen market share in the relevant product and geographic market (normally the EEA) exceeds 25% even before the investment and the new capacity created exceeds 5% of a market that is undergoing falling or at the best stagnant demand.

The Commission has doubts whether Germany’s suggestions for the definition of the relevant market (either a combined segment ranging between the segments A0 to B in the EEA, or a geographic market that is larger than the EEA) can be accepted. In case the market definitions cannot be established, the Commission will evaluate the aid’s incentive effect as well as its positive and negative effects on competition.

Much less money on the line, but the market data is there. Of course, US regulators used models that said our market would be back to 16m units per year within a few short years when they made the decision to bail out GM and Chrysler… but why invite those kinds of comparisons? Especially when the contrast in the EC’s treatment of EVs and “regular cars” is provocative enough.


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Senate Votes To Repeal Ethanol Tax Credits Fri, 17 Jun 2011 15:32:51 +0000

Cracks continued to in the ethanol industry’s once-impregnable political vanguard, as the San Francisco Chronicle reports that the Senate has voted to roll back the Volumetric Ethanol Excise Tax Credit (VEETC) as well as import tariffs on foreign-produced ethanol. This rollback of multi-billion-dollar ethanol credits failed earlier in the week, when the Detroit News reports automakers came out in opposition of a bill that would have required that 95% of all cars built in the US be capable of running 85% ethanol by 2017. The Senate did fail to pass a repeal of a government ethanol blending mandate that underpins the VEETC, however, and funding is moving forward for ethanol blending pumps. Still, the Senate’s repeal of VEETC alone means taxpayers could save over $5b per year on subsidies, and as one expert puts it

“Looks like we’re going to be relying on the biofuels mandates to make sure blenders use biofuels, rather than bribing them to use it with $6 billion,” [Bruce Babcock, professor of economics and the director of the Center for Agricultural and Rural Development at Iowa State University] said.

In fact, Babcock thinks killing the subsidy could help ethanol because it would come out from the stigma of being a subsidized industry. And removing the subsidy may strengthen support for the mandate, and the tariff on imports.

Over to you, House of Representatives…

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Quote Of The Day: The Beginning Of The End Of Ethanol Edition Tue, 24 May 2011 23:47:58 +0000

Over the course of TTAC’s coverage of US ethanol subsidies, I’ve often wondered why nobody made a political issue out of slaying an ever-growing waste of tax dollars ($6b this year on the “blender’s credit” alone). And with the political rhetoric about America’s debt prices rising, I’ve been wondering with more and more regularity when someone will finally take the ethanol fight to the American people, who are already voting against ethanol with their pocketbooks. But just last December, Al Gore explained why not even he, an environmentalist standard-bearer, could oppose the corn juice he knew was bad policy, saying

It is not a good policy to have these massive subsidies for first generation ethanol. First generation ethanol I think was a mistake. The energy conversion ratios are at best very small… One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for president.

The Iowa primary is a key early contest in the Presidential election, and because Iowans grow and refine a huge amount of corn ethanol, campaigning against ethanol subsidies in Iowa is a non-starter. At least that’s what the conventional wisdom was before today, when, with nearly nine months to go before the primary, the impossible just happened.

Republican governor of Minnesota Tim Pawlenty announced his candidacy for the 2012 presidential election today in Des Moines, Iowa with a speech that emphasized the need for truth in American politics. And he put an exclamation point on that theme by standing in front of Iowan farmers and saying (among many other things):

I’m here today to tell Iowans the truth, too.

America is facing a crushing debt crisis the likes of which we’ve never seen before. We need to cut spending, and we need to cut it.big time. The hard truth is that there are no longer any sacred programs.

The truth about federal energy subsidies, including federal subsidies for ethanol, is that they have to be phased out. We need to do it gradually. We need to do it fairly. But we need to do it.

Did a Republican presidential candidate just take the position Al Gore said he should have (for environmental reasons) but didn’t have the guts to? Have we entered Bizarro World? Not exactly, as the Washington Examiner points out

Pawlenty added caveats — that it would have to be phased out and not immediately, and by saying, “I’m not some out-of-touch politician. I served two terms as Governor of an ag state. I fully understand and respect the critical role farming plays in our economy and our society. I’ve strongly supported ethanol in various ways over the years, and I still believe in the promise of renewable fuels – both for our economy and our national security.”

But he added that, “even in Minnesota, when faced with fiscal challenges, we reduced ethanol subsidies. That’s where we are now in Washington, but on a much, much larger scale.”

So, nobody said politics was going to be all inspiring all the time. Still, regardless of political predilections, anyone who has followed the ethanol mess should be able to agree that Pawlenty’s anti-ethanol rhetoric in pre-primary Iowa were good for the debate. Now that it’s been done, hopefully more candidates will break free of the fear that kept Gore captive and just do the right thing already.

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DOE: The Cheap, Effective, Unsubdsidized Electric Car Is Coming Sun, 22 May 2011 15:37:49 +0000

Though The Department of Energy has offered only the flimsiest of evidence for the practicability of President Obama’s electric vehicle goals, Energy Secretary Steven Chu is out writing checks about the future of EVs that the industry may not be able to cash. Speaking at the installation of the 500th ChargePointAmerica charging station in Southern California, Chu explained his vision for the future to the LA Times.

“Because of increased demand, we’ve got to think of all the other things we can do in transportation. The best is efficiency,” Chu said.

Batteries are the “heart” of electric vehicles, he said, adding that the Department of Energy is funding research that will drop the cost of electric-vehicle batteries 50% in the next three or four years and double or triple their energy density within six years so “you can go from Los Angeles to Las Vegas on a single charge,” he said. “These are magical distances. To buy a car that will cost $20,000 to $25,000 without a subsidy where you can go 350 miles is our goal.”

So, a 300+ mile car costing less than $25k without a subsidy, within the the 2017 time frame. Which essentially means that within six years, the Nissan Leaf would have to triple its range and lose the equivalent of the government subsidy’s $7,500 in costs. That’s not a wholly unreasonable goal, but what’s not clear is how it will be reached. After all, the Leaf is already behind on the government’s volume predictions, and starting next year the Volt will be too. A tripling of range in one long product cycle (or two short ones) seems as optimistic as the government’s EV volume projections, which imagine 120k Volts being produced next year, as well as 5,000 of the nonexistant Fisker “Nina” PHEV. Chu’s vision is commendable, but at this point the DOE’s credibility is more than a little strained when it comes to the future of EVs.

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GAO: Government Ethanol Rules Actually Increase Gasoline Use Thu, 05 May 2011 17:07:16 +0000

A massive study by the Government Accountability Office into “Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue” has turned up an interesting finding. It seems that the government’s desire to buy more “alternative fuel vehicles” (AFVs) may actually increase the amount of gasoline used by government fleets. Why? Because agencies largely buy E85 ethanol-powered vehicles to fulfill their AFV requirements, and there aren’t enough E85 pumps to actually fuel the fleet, forcing agencies to obtain waivers to buy regular gasoline. Hit the jump for the report’s full findings on this, the latest unintended consequence of America’s ongoing ethanol-subsidy boondoggle.

The GAO report finds to basic contradictions in the government’s AFV-boosting fleet strategy, to wit:

  • Increase the use of alternative fuels vs. the unavailability of alternative fuels.Agencies are required to increase alternative fuel use, although most alternative fuels are not yet widely available. Thus, agencies have been purchasing primarily flex-fueled AFVs, those that can operate on E85—a blend of up to 85 percent ethanol and petroleum—or petroleum. However, since E85 was only available at 1 percent of U.S. fueling stations in 2009, agencies are requesting waivers from the requirement to use alternative fuels. According to DOE, in 2010, approximately 55 percent of flex-fueled AFVs received a waiver. Further, some fleet operators indicated they use petroleum without a waiver when alternative fuels are available because it is either more convenient, less expensive, or both.
  • Acquire AFVs vs. reduce petroleum consumption. Agencies are required to purchase AFVs, but this requirement may, in some cases, undermine the requirement to reduce petroleum consumption. Virtually every agency has succeeded in acquiring more AFVs, but there have been only modest reductions in petroleum use and modest increases in alternative fuel use, due to the lack of available alternative fuels. As previously stated, the lack of available alternative fuels results in agencies using petroleum to fuel AFVs. In areas where alternative fuels are not available, purchasing more fuel efficient non-AFVs could reduce petroleum consumption more than purchasing AFVs.

Meanwhile, until we hear of specific plans to fix these fundamental issues, expect the waste and non-fulfillment of gasoline use reduction goals to continue, as President Obama recently pledged that every new government fleet vehicle purchase would be an AFV by  2015. E85 is widely considered to be the most common type of government AFV purchase, as they are relatively cheap and more robust for certain government tasks than hybrids and plug-ins. And, as Automotive News [sub] reports, the baseline ain’t great either:

In 2009, Obama’s first year in office, the U.S. government increased gasoline use in vehicles 3 percent from the previous year even as he boosted hybrid purchases to about 10 percent of the federal fleet from 1 percent in 2008, according to data from GSA and the U.S. Energy Information Administration.

Overall government energy use fell about nine-tenths of 1 percent in 2009, the data showed. Figures for 2010 are scheduled to come out later this year.

And if the government is struggling to actually reduce its gasoline use with E85 vehicles, imagine how the rest of the US is doing. After all,

Vehicles that can run on E85 accounted for 37,590 of the 43,750 alternative-fuel fleet vehicles sold last year, according to the Energy Information Administration

Meanwhile, on the other end of the ethanol subsidy complex, the US Comptroller General used his testimony [PDF] to identify domestic ethanol subsidies as an “Opportunity to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue” saying

Congress supported domestic ethanol production through a $5.4 billion tax credit program in 2010 and through a renewable fuel standard that applies to transportation fuels used in the United States. The ethanol tax credit and the renewable fuel standard can be duplicative in stimulating domestic production and use of ethanol, and can result in substantial loss of revenue to the Treasury. The ethanol tax credit was recently extended at 45 cents per gallon through December 31, 2011. The tax credit will cost $5.7 billion in forgone revenues in 2011. Because the fuel standard allows increasing annual amounts of conventional biofuels through 2015, which ensures a market for a conventional corn starch ethanol industry that is already mature, Congress may wish to consider whether revisions to the ethanol tax credit are needed, such as reducing, modifying, or phasing out the tax credit.

Instead, it seems the government is heading in the opposite direction, sinking yet more money into ethanol infrastructure. AN [sub] reports:

A U.S. Agriculture Department program that started in the last two weeks is pushing for 10,000 pumps in the next five years, he said. The U.S. has about 162,000 fueling stations, according to the association.

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Trade War Watch 16: US Doesn’t Understand China’s EV Policy, Rattles Saber Anyway Sun, 01 May 2011 22:12:37 +0000

George Orwell’s warning, that “the first victim of war is the truth,” apparently applies equally to trade wars. On Friday, Senators Carl Levin and Debbie Stabenow (both D-MI) wrote the United States Trade Representative to express their concern over “reported draft regulations” of China’s New Energy Vehicle plan, noting

We are concerned that these draft regulations continue China’s long history of breaking international trade rules.

Given that the ongoing low-level trade war between the US and China, this was a predictable bit of saber-rattling. But if Levin and Stabenow’s political motivations are easy to understand, the logic that leads them to believe China’s New Energy Vehicle plan is a violation of international trade rules is not. Meanwhile, neither the Senators nor the USTR appear not to have heard about another, more serious possible trade issue arising from China’s headlong dash towards electric vehicles. Sounds like a job for The Truth About Cars…

The Stabenow/Levin letter is long on button-pushing and short on facts, telling the USTR that

In its latest National Trade Estimate (NTE), your office highlighted a new Chinese trade barrier that is designed to prevent U.S. automakers from accessing the Chinese market. According to the NTE, China is in the process of drafting new regulations as part of its New Energy Vehicles (NEV) plan, which seeks to advance hybrid and battery electric vehicle production in China.

So, what does the 2011 NTE say about China’s automotive trade barriers? Precisely two paragraphs, as it turns out, only one of which deals directly with this alleged new barrier to EV business. Still, the entire passage is relevant to the dispute, so we have reproduced it below:

In May 2004, China issued a new automobile industrial policy, the Policy on Development of the Automotive Industry, and subsequently it issued implementing regulations that unfairly discriminated against imported automotive parts and discouraged automobile manufacturers in China from using imported automotive parts in the assembly of vehicles. In 2006, the United States, the EU and Canada initiated dispute settlement proceedings against China at the WTO. The WTO ultimately ruled in favor of the United States. In September 2009, China repealed the challenged measures.

Various U.S. industries are concerned about Chinese policies that may discriminate against foreign products. For example, the U.S. automotive industry is concerned that foreign-invested producers of New Energy Vehicles (NEVs) and NEV parts in China may begin to face discrimination. China is developing new regulations as part of its NEV plan, which encompasses hybrid and battery electric vehicles. Current drafts reportedly specify that automakers that intend to manufacture electric vehicles in China must demonstrate a “mastery” level of proficiency in key parts such as electric vehicle batteries, motors or control systems before receiving a license to produce and sell electric vehicles. In addition, according to reports on current drafts, the Chinese entity that manufacturers the vehicle, either a domestic manufacturer or joint venture operation, must demonstrate clear ownership of intellectual property rights to the technologies that enable the “mastery.” U.S. industry is concerned that China may implement these proposed requirements by requiring that production of key NEV parts take place in China. These proposed requirements also give rise to concerns that foreign manufacturers of NEVs and NEV parts will be compelled to contribute their intellectual property to their Chinese joint venture operations in order to fully participate in the NEV market.

This is the complete basis for the Stabenow/Levin letter, which in turn has already led to several highly misleading media reports. And no wonder: not only is the USTR’s analysis shockingly vague, but its sourcing also leaves much to be desired, referencing only “reports” of “current drafts” of China’s NEV plan. Moreover, its conclusions serve far better as a way to ratchet up anti-China rhetoric than as a way to reflect the reality of China’s proposed EV development plan.

Because the paragraphs quoted from the NTE above contain no direct reference to which “reports” of “current drafts” of the NEV it is concerned with, TTAC has had to dig around quite a bit for those “reports.” An initial survey of media reports uncovers stories like this one, from ChinaAutoReview, which cites First Financial Daily (a paper affiliated with several Chinese Communist party organizations) and quotes a multinational auto parts executive as saying

This policy may force a large group of foreign-invested companies in China to adjust their stake

But this is not the whole story, as the FFD has its (pro-party) biases and CAR (owned by China Business Update) has separate pro-Western business biases. The paper’s “About Us” section notes

Our clients include Fortune 500 OEMs and suppliers, investment banks, accounting firms, consulting firms, government agencies and trade associations. With our extensive networks in China and the world, we make sure that our clients get the best possible services available to help them tap into the Chinese automobile and components market.

Still, if all the sources on the matter agreed with CAR/FFD’s findings, we might agree that this draft legislation is troubling. However, a little more research turns up a month-old report from the law firm of Vinson & Elkins [PDF here] which both clarifies the proposed laws and (not coincidentally) provides a less worrying interpretation of it. The report notes

In 2010, the MIIT circulated two drafts of the New Energy Auto Industry Development Plan among the major automobile manufacturers in the PRC for comment. The plan seeks to meet the State Council’s Energy Savings and Emission Reduction requirements, as well as the State Council’s strategy for Strategic Development of New Industry. If promulgated, the plan will govern foreign investments in the electric vehicle industry. While the official version of this new plan has not been issued yet, comparison of the two released drafts yields an interesting change of language regarding equity participation under the New Energy Auto Industry Development Plan.

As provided in the first draft, the Chinese party to a joint venture must hold at least 51 percent of the shares, regardless of whether the joint venture is for the production of automobiles or for only the production of critical auto components. However, such language was deleted in the second draft issued on 9 September 2010, such that the 2007 Investment Catalogue becomes controlling for investments in the electric vehicle industry. Under the 2007 Investment Catalogue, only automobile final assembly requires the Chinese partner to hold a majority ownership interest, as noted above. The production of automotive parts is therefore not subject to a restriction on foreign majority ownership (although certain investments require either an equity joint venture or a cooperative joint venture of which the Chinese partner must own at least a non- controlling interest, as also noted). Moreover, pending the implementation of the New Energy Auto Industry Development Plan, the 2007 Investment Catalogue currently remains controlling over foreign investment in this area.

Here we find that an initial draft of the NEV plan did require that non-final-assembly producers of key NEV components be majority owned by a Chinese partner, but we also learn that this draft has since been superseded by language that maintains the law as it currently exists. In other words, the concerns of the USTR and Senators Stabenow and Levin were recognized and alleviated by the Chinese as early as September of last year. Somehow, the US concerns managed to be both premature (appearing before final approval of the plan) and woefully out-of-date (criticizing a draft that has since been superseded by language which does not change the basic realities of investing in China’s EV industry).

The Vinson &  Elkins report goes on to explain, in some detail, the finer points of China’s NEV investment policy, including the issue of “mastery” which so concerned both the USTR and Senators Stabenow and Levin. There are, it turns out, three categories of EV business qualifications: the “starting,” “developing,” and “mature” phases (one assumes this final category refers to the “mastery” requirement criticized by the American saber-rattlers). It is important to note that none of these phases require any technology transfers beyond requiring that products “not violate any third-party intellectual property rights.” Even if the earlier draft NEV plan were to pass, and manufacturers of key EV components were forced to create joint ventures, they would simply operate as all Chinese (and, it should be noted, Indian) joint ventures do: through the licensing of technology from the foreign partner. In fact, many Western “automotive experts” do not realize that much of the profit earned by foreign automakers with Chinese JVs comes from technology licensing rather than profits on sales, which are notoriously difficult to repatriate.

In short, through just a little research we’ve learned that the draft proposal which so frightened the USTR and Senators Stabenow and Levin has since been superseded by a version which does not appear to make the changes that drew such an angry response. Furthermore, the details provided in the V&E report indicate that, even if the initial draft were passed, it would not fundamentally change the rules of doing business in China, or coerce foreign firms to “sign over” technology or build components in China in an anticompetitive manner.

Of course, if that initial draft were passed, it could require suppliers to take on Chinese partners where they might not have otherwise. And though it seems that draft will not be approved, it’s worth understanding why that might be a natural development from the current JV system. One of the key issues in the shift from ICE vehicles to battery-powered vehicles is a concentration of value into the battery and associated systems. The since-rejected measure makes sense for any joint-venture-based market, as it prevents the final assembly partnership from being relegated to the smallest possible slice of the value chain. But since no new coercive technology transfer is called for in any of the drafts of the NEV plan, foreign partners will be able to replace any profit  they might have accrued by building the batteries as a wholly foreign-owned enterprise (WFOE) and selling them at a profit to the joint venture by licensing their battery technology to the joint venture instead.

Meanwhile, the USTR and its friends in the US Senate could learn a thing or two from the companies who are actually facing these possible (but again, unlikely) changes in Chinese policy. A Reuters piece filed from the Shanghai Auto Show quotes executives from several foreign supplier companies who are active in the NEV “key components” manufacturing business, and their response to the “proposed drafts” was the exact opposite of the American saber-rattlers. An analyst expresses concern at the proposal, but Robin Choi, director of commercial business development for the Asia-Pacific division of Johnson Controls is more pragmatic, telling Reuters

We are kind of surprised that they limited it at 50 percent. It’s a little bit of a concern for us. To be honest, we don’t know what the result will be, but we are continuing the dialogue with the government. It’s not official yet. If it is, we might have to follow the rules.

Hans-Peter Kunze, Valeo’s senior executive vice president of sales and business development adds

It’s still a draft and how many drafts have we seen in our lives?

Perhaps Herr Kunze has already read the V&E report? Finally Wolfgang Dangel, president of Schaeffler’s Asia-Pacific division strikes the note that seems to define the response of the suppliers who would be affected by any change to these laws, saying

We just have to be alert to watch very carefully about what will happen. No matter what the final outcome will be, we can contribute one way or the other. At the end of the day, we are still confident as we have enough technology and expertise on our hands.

Unless the Chinese government were actively eyeing ways to directly coerce that technology out of the hands of these suppliers, a perception that the USTR and Senators Stabenow and Levin are clearly anxious to fuel despite a total lack of evidence for it, these firms will be just fine. Sure they might have to set up JVs (again, this seems unlikely given the revisions noted in the V&E report) but as long as they can license their technology, they still have their major source of Chinese profits.

By now it should be fairly clear that the USTR and its allies in the US Senate are in a tizzy about something that might not happen, and wouldn’t bother the industry it directly affects much even if it did happen. I’m no WTO expert, but the idea that there are US-based producers of batteries and other key EV systems who are desperate to export them to China for CKD assembly rather than licensing technology for low-cost Chinese production isn’t wildly credible. After all, there’s only one “knock-down”-style EV currently in production… and that’s the CODA EV, which is “assembled” in the US by a US company, out of batteries and a sedan which are both built in China. Imagine that business model working in the opposite direction… not easy, is it?

And while US Senators and trade officials fret over a phantom menace, another real issue is emerging from China’s rush to push EV production and consumption that has completely escaped their notice. As Bertel has documented in considerable depth, a combination of municipal and Central Government subsidies will give Chinese consumers over $18,000 for every EV purchased… and according to rumors we’re hearing out of China (which we will, of course, confirm as soon as humanly possible), those credits are available only to buyers of Chinese-made vehicles made by Chinese brands. If true, this subsidy would certainly constitute an anti-competitive policy (imagine how the White House might have structured Cash-for-Clunkers, or how Japan might have structured its own efficiency-oriented subsidies).

Moreover, if Beijing’s decision to exempt EVs from its registration lottery and traffic restrictions similarly applies only to EVs made in China by Chinese brands, these two policies would create a powerful barrier to what is likely to become the first major Chinese EV market (which happens to be about the size of the Australian market). And since subsidies will be spreading to cities across China, the even more powerful registration lottery and traffic restrictions could too, potentially banning even joint ventures from China’s EV market. This, not an unlikely and ineffectual policy shift on the supplier side, is what America’s trade representatives and concerned Senators should be looking at. After all, if it’s enough to make Bertel Schmitt an EV believer…










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Obama EV Credit-To-Rebate Plan Draws Opposition… From Democrats Fri, 22 Apr 2011 17:21:24 +0000

President Obama’s goal of putting one million plug-in vehicles on the road by 2015 has faced serious challenges from day one, with several studies pointing out that the goal probably isn’t achievable without more government action.But up till now, President Obama has forwarded only one actual policy change aimed at achieving his goal, namely turning an existing $7,500 federal plug-in tax credit into a rebate, redeemable at the point of purchase (an idea first forwarded by Michigan Democrat Debbie Stabenow). This plan should help drive a Cash-for-Clunker-style EV buying frenzy, as the rebate would not be dependent on the buyer’s tax burden. But Automotive News [sub] reports that Senate Finance Committee Chairman Max Baucus (D-MT)

is very concerned [about the credit-to-rebate scheme] from an effectiveness standpoint.

Baucus doesn’t make a regular habit of opposing the President, but apparently his concerns about the Obama/Stabenow credit-to-rebate plan are serious enough for him to put politics aside.

The AN report is based on information from one of the Senate Finance Committee’s lawyers, Ryan Abraham, who works with Baucus on the tax policy panel. According to Abraham, the basic problem is one of complexity, and the Finance Committee’s desire to simplify the tax code.

Abraham said a tax credit is clear-cut and provides a defined incentive for consumers to purchase EVs.

However, if dealers were to give customers a $7,500 rebate at the point of purchase, Baucus is worried that the incentive could become muddled because dealers also have the discretion to lower the price of the car, Abraham said.

Dealers might mix the rebate with a price reduction, confusing the customer as to how much of each he received, the Senate aide said.

Both the consumer and the dealer could conceivably claim a credit on their tax returns, he said. The IRS would have to address this potential complication

Though the White House hasn’t released details of its credit-to-rebate policy, the fact that it appears to use a dealer reimbursement system like Cash-For-Clunkers, the waste, complexity and confusion that occurred in that program should be instructive. And because this common-sense opposition comes from within President Obama’s own party, it’s hard to see it being rammed through. Which means the President is about to find himself out of policies to support his widely-criticized EV goal.

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New Ethanol Bill Faces Automaker Resistance Thu, 07 Apr 2011 22:15:17 +0000

How things change in a few years! Just a few short orbits of the sun ago, automakers like GM were some of the biggest boosters of ethanol subsidies. Now, the Detroit News reports

The Alliance of Automobile Manufacturers – the trade association representing General Motors Co., Ford Motor Co., Chrysler Group LLC, Toyota Motor Corp. and eight others – opposes a bill sponsored by Sen. Tom Harkin, D-Iowa, that would require 90 percent of all vehicles to run on E85 – a blend of 85 percent ethanol – by the 2016 model year.

Shane Karr, vice president for government affairs, said the mandate “would cost consumers more than $2 billion per year” for flex fuel vehicles if automakers passed on the full cost “even though consumers will have little or no access to alternative fuels. Therefore, such a mandate is essentially a tax with little consumer benefit.”

In the face of this new opposition, the Renewable Fuels Association has even taken to employing the rhetoric of market economics to justify market-manipulating ethanol subsidies. And it doesn’t seem to be convincing anyone. If anything, Harkin’s bill may just hasten the death of existing subsidies, which are under pressure as both Democrats and Republicans seek to trim the federal budget.

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DOE Loan Program Patronage Comes Under Attack Thu, 31 Mar 2011 15:46:54 +0000

It’s been a bad week for the Department of Energy’s Advanced Technology Vehicle Manufacturing Loan program. First, the GAO slammed the program for weak oversight and a lack of performance metrics and professional expertise, and now the Center for Public Integrity and ABC News are unwinding a web of patronage that appears to be taking advantage of the program’s many shortcomings.

The investigation centers around Steve Westly, a fundraiser who “bundled” half a million dollars in donations to the Obama campaign, only to be given a spot on the DOE’s Energy Advisory Committee. From there, the CPI report alleges, Westly was instrumental in acquiring ATVM access for Tesla, a company that Westly sat on the board of from March 2007 until December 2009. Loans were given to Tesla when Westly was still serving on the board, and his firm, The Westly Group, has made millions on the sale of Tesla stock since the firm’s IPO. And it seems that most of the DOE loan recipients have some kind of connection to one Obama fundraiser or another, like John Doerr, who backs Fisker, another ATVM loan recipient. Meanwhile, smaller firms allege that their requests for loans were simply ignored, and with the GAO knocking the program for treating applicants “inconsistently,” it seems that some kind of favoritism is afoot. But then, isn’t that how Washington works?

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Edmunds Comes Out Against EV Tax Credits Tue, 22 Feb 2011 23:14:09 +0000
Though it appears that it may take even more government stimulus to achieve President Obama’s goal of putting one million electric vehicles on the road by 2015, online auto juggernaut Edmunds has come out against existing EV tax credits in a commentary by CEO Jeremy Anwyl. Anwyl’s argument is rooted in the American Council for an Energy Efficient Economy‘s finding that the tax credit-qualifying Chevy Volt is only the 13th-greenest vehicle on the market while its greenest, the natural gas-powered Honda Civic GX, remains unsubsidized. Anwyl argues

The problem is this:  When the government picks a technology, it crowds out development of other, potentially promising alternatives, like the natural gas engine used in the Honda Civic GX (above). LNG is not a new technology.  I had friends who converted their vehicle to natural gas back in the Seventies.  But how much are we hearing about it today? Or what about hydrogen fuel cells?  A few years back, they were the stars of the major auto shows.  Were any fuel-cell vehicles on display at the recent Detroit auto show? No. Every automaker was busy touting EVs.

A second problem is that there is a Cash for Clunkers-like aspect to these tax credits.  Consumers buying Leafs and Volts right now are not that price sensitive. They are EV enthusiasts, early technology adopters. In other words, we are forking over deficit-funded dough to stimulate sales of vehicles that would be sold anyway. (Or in some cases, not sold.) Sure, at some point EVs are still too expensive to go mainstream. But is this the government’s (i.e. taxpayers’) problem?

Anwyl admits that he thinks EVs are “cool,” but his second argument is especially damning. Already, the proposed 2012 budget would make EV tax credits available as a discount at the point of purchase, a move likely to enhance the “Cash-for-Clunker-like aspect” considerably. But then, the President hasn’t promised the nation a million natural gas cars, has he?

Nor does Anwyl address the minor issue of the Nissan Leaf’s apparent tie with the Civic GX for “greenest car,” leading one to wonder whether the ACEEE’s list contains other, non-green pure-electric vehicles. Or how EV “greenness” can even be calculated on a non-local basis. But even if we take for granted that the ACEEE’s ability to rank vehicles “based on official emissions and fuel-economy tests, and other specifications reported by auto manufacturers” is solid, and that natural gas vehicles and plug-in vehicles are equally “green,” EVs do have the potential to become “greener” as “greener” electricity sources (including, say, natural gas) replace dirtier ones.

Still, natural gas cars are a viable option in many areas, and they highlight the real issue with federal EV credits: they don’t recognize the importance of locality any more than the ACEEE appears to. Here on the banks of the dam-draped  Columbia, the electric car makes a far more compelling “green” case for itself than the natural gas car; in Oklahoma, Wyoming or Texas, the calculation might be quite different. Killing all green car subsidies seems unlikely in the face of the President’s pledge, but this seems like a good time to at least rethink them.  And since Anwyl offer much beyond the vague implication that plug-in tax credits should be cut, here’s another, possibly more politically-viable suggestion: instead of a national, dealer-level plug-in subsidy, simply make “green car” subsidy funds available to states, with the mandate that incentives could go towards the most locally-effective options. This model offers both better-targeted stimulus, and more competition between technologies… which, in theory, makes everyone happy. Right?

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Could GE’s EV Mega-Buy Be Bad For Consumers? Thu, 11 Nov 2010 19:35:25 +0000

The Auto Prophet brings up a point that completely escaped our discussion of General Electric’s EV mega-buy:

By gobbling up EVs, GE certainly helps to jump-start the industry, but they also gobble up future tax credits that consumers would have gotten, unless GE opts to forego the EV tax credit. Which would be bad business.

Yup, GE’s huge EV buy will be good for GE… but it won’t be so great for the 25,000 Americans whose tax credit will slurped up in the process. After all, the credit expires after a manufacturer sells 200k qualifying vehicles, so every credit GE uses brings GM and Nissan that much closer to the day they have to ask consumers to pay full price for their pricey EVs. No wonder GM is already pushing for an extension of the credit past 200k units.

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Carlos Ghosn Sees His Shadow, Requires Two More Years Of EV Subsidies Wed, 27 Oct 2010 16:03:11 +0000

No automaker has more to gain –and lose– in the early-adopter EV game than Renault-Nissan, and CEO Carlos Ghosn knows how the game is played. Nissan is investing $4b to rollout electric cars in the US, Japan and select Western European markets at the end of this year, but despite being committed, Ghosn insists that EVs aren’t ready to stand on their own yet.He tells Automotive News [sub] that

These are mature markets where governments give incentives to consumers. Two years of government support are needed to jump-start these markets and then the products will grow on their own and take off
Nissan has already received $1.4b in retooling loans from the US government, and its Leaf EV will be eligible for $7,500 consumer tax credits for its first 200k sales, for another $1.5b in government support. Nissan also supports the so-called “Roadmap to Electrification” which could end up costing taxpayers as much as $124b more. Carlos is smart: asking for government assistance should always be phrased in terms of years, not dollar amounts… and at least he’s willing to accept that EVs will eventually stand on their own. After all, GM is already pushing for extensions to consumer tax credits, arguing that its second generation of vehicles (which are at least three years out) will need continued support. If the government makes an open-ended commitment to supporting EVs at all costs, how will they ever mature into commercially viable products?
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Japan Says Sayonara To Subsidies, Should Slump Sharply Wed, 08 Sep 2010 08:36:43 +0000

After 13 months of rising car sales, Japan is looking into a deep, dark abyss. A government subsidy program will end any minute. Officially, the program runs through the end of September, but the funds have dried up. As of Monday, around 10.2 billion yen ($122m) were in the kitty. That’s about a day’s worth of subsidies.

According to The Nikkei [sub], Parliamentary Secretary for Economy, Trade and Industry Yosuke Kondo told a Diet committee this morning that the program will end ”around today or tomorrow because there has been about 10 billion yen worth of applications per day from this week.”

Today, the Japanese government still accepted applications, but it is unsure whether the latecomers will get their money. The Japanese market is expected to take a steep nosedive. “Domestic sales for the October-December quarter may fall by about 30 percent,” says Honda Executive Vice President Koichi Kondo.

The Toyota Prius is positioned to become the prime victim of the departing subsidies.  Says The Nikkei [sub]: “Toyota Motor Corp.’s Prius hybrid car has benefited substantially, partly because the automaker redesigned the model around the same time that the subsidy program began. The Prius was the top-selling model in Japan for 15 straight months through August.”

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Japan: Cities Will Pay You To Buy A Car Sat, 21 Aug 2010 12:07:07 +0000

The Japanese auto industry is staring at the calendar like a rabbit at the snake. October 1, the rabbit will be dinner. October 1,  government subsidies for purchases of “environmentally friendly vehicles” (read pretty much any new vehicle that passes Japanese rules) will be no more. According to popular wisdom, come October, the Japanese new car market that had enjoyed double digits growth rates, will go poof and implode.

So what to do in a country where with the exception of flu masks, the Top 10 list of popular products ”was dominated by low-priced retail merchandise and eco-friendly products as consumers pinched pennies and took advantage of government stimulus subsidies” as Reuters put it? Simple: Local subsidies.

Anjo, a city in the Japanese Aichi Prefecture, where many parts suppliers have their plants, wants to soften then blow and will offer their own subsidies after the government well runs dry.

You must be a registered resident or a company with an office in the city to be eligible. The car must be bought from a dealer in the city. The program is basically the same as that of the  central government: $1166 for a regular car,  $583 for a minivehicle. One car per resident, five per company.

The city hopes that the plan will set an example for other communities. And it seems it does, Toyota City and Okazaki City also plan to extend the programs after the expiration of the state’s subsidies, The Nikkei [sub] says.

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Sky To Fall Down In Japan Mon, 09 Aug 2010 17:37:41 +0000

Everybody in the Japanese auto biz (and who’s not in the auto biz in Japan, except my friends who, but that’s for another day), everybody in the Japanese auto biz has their eye on the sky. Why? Because the sky is soon to drop. On September 30, government subsidies for purchases of “environmentally friendly vehicles” (read pretty much any new vehicle that passes Japanese rules) will expire. Everybody expects a mad dash in August and September, and in October: Whammo. Down comes the sky.

This is a real one for the pull-forward theorists. In Japan, you can trade in your clunker (MY 1996 or older) for a $2,800 bounty. But as no self-respecting Nipponese owns a clunker (according to lore, all used cars get shipped to North Korea), the government gives you $1,132  merely for buying a car. All this will end on October 1, and blood will be in the streets. Anybody who possibly could be thinking of buying a car in Japan does that before October 1.

Japanese automakers are busy scaling back their output in anticipation of the big skydrop. Honda will scale back production 10 percent at one of its main Japanese factories from October, says The Nikkei [sub].

Honda thinks monthly domestic vehicle sales will crater by 30-40 percent once the government largesse dries up. Their will most certainly be further production cuts, at Honda and elsewhere. Honda is the only one taking about it so far.

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What’s Wrong With That Video? WTO Edition Sun, 08 Aug 2010 18:51:18 +0000

Doesn’t it bug you when other countries give their carmakers money? Doesn’t it bug you a hell of a lot when other countries give their carmakers money with they express  purpose to increase exports? Shouldn’t those felonious countries be dragged in front of the WTO and shot? Well, there are exceptions.One such exception is Ford.

At his good-will tour to Detroit, President Obama came bearing gifts for Ford. Ford will receive $250m in government financing that will help export more than 200,000 vehicles, the White House announced, and the DetN printed it.

The money doesn’t come from the Whitehouse. It comes as a loan guarantee by the Export-Import Bank of the United States. It will finance $3.1b of export sales for more than 200,000 vehicles to buyers in Canada and Mexico.


Says the DetN: “The bank makes loans to help boost exports, in part to level the playing field when other countries help industries with exports.”

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Nissan Leaf Battery Packs Break The $400/kWh Barrier Wed, 05 May 2010 22:28:27 +0000

AutoblogGreen‘s Sam Abuelsamid earns a tip of the blogger’s hat today for making sense of a fascinating nugget in a Times of London piece on the Nissan Leaf. The revelation by Nissan EV honcho Andy Palmer to the British paper that Leaf battery packs cost £6,000 (about $9k) to produce could have been missed, buried as it was near the bottom of the story. Not only did Abuelsamid catch it, he calculated that the Leaf’s 24 kWh lithium-ion battery costs break down to a staggeringly cheap $375 per kWh. How cheap is that, relatively speaking? Apparently cheap enough to send Li-ion startup A123 Systems’ stock to record lows according to the WSJ [sub]. More price-comparison context and some insight into how Nissan might have beaten those costs down after the jump.

Not convinced that Nissan’s claimed kWh price is really that big of a deal? Consider that just about six months ago, GM claimed that it could get lithium-ion prices down to $500/kWh by the Spring of 2011. In support of this claim, GM’s John Lauckner bragged that:

We’ve already seen significant reductions in the cost of batteries even since the start of the Volt program. At this point, we’re hundreds of dollars below the $1,000 a kwh benchmark

At the time, Ford said the cheapest Li-ion packs it could find were in the $700/kWh range, and these were manufactured exclusively in Asia. Even the hybrid king Toyota scoffed at GM’s prediction, with since-ousted VP Irv Miller laying on the sarcasm with a firehose:

I’ll buy all those batteries that anyone can provide me right now. Our numbers are about three or four times that, so maybe we’re missing something

So how has Nissan been able to drive so much cost out of such a crucial automotive component? For one thing, signs are pointing to a building oversupply of lithium-ion capacity. Earlier this year Deutsche Bank said it was already seeing large-volume bids of about $400/kWh for lithium-ion packs… although for all we know, they were talking about the Leaf. According to a study also published earlier this year by Roland Berger Strategy Consultants,

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

Which means li-ion firms could be preemptively cutting costs in order to line up long-term business. Nissan and its battery partner NEC have had a joint venture to develop lithium-ion packs since 2007, so they may also have simply stolen a march on the competition. Moreover, Nissan’s efforts to build the Leaf and its battery packs have been heavily subsidized my several governments. Nissan has received $1.6b in Department of Energy retooling loans for US Leaf and battery production, while the UK battery assembly plant (which produces at the £6k price point) has received a $30m grant from the British government, and about $300m in financing from the European Investment Bank. If the automotive lithium-ion battery market is in fact headed for oversupply, these incentives will only drive prices down and companies like A123 out of business.

The final piece of this puzzle lies in the Leaf’s battery pack itself. As a pure EV, the Leaf will likely face less battery stress than a hybrid or extended-range EV like the Volt, since the battery won’t be fully discharged as often. Possibly because of this, Nissan has decided not to fit the Leaf with active thermal management, which almost certainly helped keep costs down. On the other hand, if Leafs have problems in the Southern California summer heat, those savings could come back to haunt Nissan.

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