US: September 19, 2008


DETROIT - General Motors Corp's plug-in Chevy Volt and other electric vehicles have generated widespread consumer fervor for cleaner, less fuel-dependent cars, but the high battery cost means it will be years before those cars are affordable to most Americans.


Executives attending the Reuters Autos Summit this week agreed that low-emission electric cars are critical to the future of the US auto market due to sky-high gasoline prices and increased concerns about global warming.

But at roughly US$10,000 each, the light, long-lasting lithium-ion batteries key to powering electric cars will make those vehicles prohibitively expensive until production levels are ramped up to the hundreds of thousands.

"It will be more expensive than people expect," Mike Jackson, chief executive of AutoNation Inc, the largest public auto dealership group, said of the electric cars that will hit the market in the next five years. "It will be more expensive to make than the manufacturers can really afford, meaning initially they're going to have to limit the volumes."

GM's plug-in Chevrolet Volt, slated to hit showrooms in late 2010, is among of the biggest efforts to bring an electric car to the mass market. The Volt is expected to be able to go 40 miles on a single charge before dipping into its gas tank.

But GM said on Tuesday that it will only produce 10,000 Volts in its first year of production, eventually increasing that to about 60,000. GM has not said how much the Volt will cost, but plug-ins are expected to carry a premium of around US$10,000, compared with a premium on hybrid electric cars of between US$3,000 and US$5,000.

The cost of plug-in technology would drop "significantly" if production volume reaches 100,000 cars a year, Prabhakar Patil, chief executive of battery maker Compact Power, said at the Summit. The unit of South Korea's LG Chem Ltd is in the running to supply the Volt's T-shaped battery, which weighs about 400 pounds and is roughly six feet long.

"It typically takes about 20 years for a new technology to become mainstream," Patil said. As an example, he pointed to the growth of hybrid-electric cars, which have been on the market for 12 years and still make up a small segment of US auto sales.


RANGE VS. COST

Because that level of mass-market adoption is so far out, many automakers are being less aggressive than GM in predicting when it will have a plug-in on the market.

Toyota Motor Corp, which is testing a plug-in version of its popular Prius hybrid car, said it has not set a timeline for retail sales and has still not decided how it will balance the cost of the vehicle with the number of miles it will be able to travel on all-electric power before the gas tank kicks in.

"Is it 10 miles, 20 miles? Is it 30 miles? It is going to take us a while to understand that, and that will then decide when we go into full scale production," said Toyota Motor Sales President Jim Lentz.

He added that Toyota was also studying whether mass adoption of plug-in cars would indeed reduce harmful carbon dioxide emissions if the electricity used to power them was produced from dirty sources such as coal-fired plants.

Ford Motor Co CEO Alan Mulally, meanwhile, told the Summit that improving fuel efficiency in traditional combustion engines was still the most affordable near-term solution to reducing gasoline consumption. Lithium-ion batteries, he added, require much more study and investment before Ford will be able to transform its small plug-in test in Southern California into a mass market product.

"There's a lot of issues associated with scaling up these batteries," Mulally said. "You need them smaller and lighter-weight so you can put people and your luggage in your car in addition to the battery."

Ford and the other Big Three US automakers are hoping to secure US$25 billion in low-cost government loans that will help them invest in new technologies like lithium-ion batteries. That comes as the Detroit automakers are trying to reduce their dependence on sales of gas-guzzling SUVs and trucks that have lost favor with consumers as pump prices have soared. US auto sales are down 11 percent in the first eight months of this year and are running at a 15-year low.

But regardless of whether those funds materialize or how long it takes to make electric cars affordable to average buyers, the race to mass produce is not one automakers can afford to sit out, said a veteran auto executive.

"There is no alternative," said Jerry York, who advises billionaire Kirk Kerkorian on his investment in Ford. "That investment will have to be a very, very high priority." (For summit blog: http://summitnotebook.reuters.com/) (For more on the Reuters Autos Summit, see [ID:nN15267022] (Editing by Dave Zimmerman)


Story by Nichola Groom


REUTERS NEWS SERVICE