Michigan must continue investing in electric vehicles, batteries
(Editor's note: The author of this story is Charles Griffith, clean vehicles & fuels director of the Ecology Center in Ann Arbor.)
AnnArbor.com Business News Director Nathan Bomey’s Dec. 2 story on Michigan’s advanced battery industry (“A123 Systems layoffs highlight challenges for Michigan's budding battery industry”) was very informative and well-researched.
But it would have been better if it had included some rebuttal of the naysayers at the Mackinac Center for Public Policy who keep repeating their pro-fossil-fuel, keep-the-status-quo message.
Charles Griffith is the clean vehicles & fuels director for the Ecology Center.
Photo courtesy of the Ecology Center
Far more important in the larger picture is that made-in-Michigan electric vehicles are now serious competitors in the advanced vehicle marketplace, and the prospect for employment growth in this sector is one of the brightest spots in our state’s economy.
A123 CEO David Vieau is certainly right that there’s likely to be a shake-out in the battery industry, with some confusion and uncertainty about which firms will emerge as category leaders. But one thing we can say with absolute certainty is that there wouldn't be a U.S.-based advanced battery industry if the federal government and the state of Michigan hadn't made the investment we have.
The electric vehicle industry has already created thousands of advanced auto sector jobs in Michigan and more than $6 billion in investment, according to a 2011 study. General Motors has invested more than $700 million in Michigan at eight manufacturing plants for the production of the Chevrolet Volt, Motor Trend’s Car of the Year for 2011. Ford has invested $1 billon to modernize its Michigan Assembly Plant to build the electric Ford Focus.
Maybe the naysayers would be happy just to import all the advanced batteries we need from China, Japan and Korea. But for the rest of us, now is the time to keep our focus on competing successfully with the other countries around the world that are investing in the next generation of automobile technologies.
Michigan is at a crossroads, and nowhere is this more apparent than in our auto sector, where electric vehicles and advanced batteries are emerging as potential game-changers for the entire industry. Putting our foot on the brake now will only allow others to pass Michigan and leave us behind. Governments around the world are investing in clean energy and Michigan is in a global race to develop technology and manufacturing leadership in this dynamic industry.
Electric cars are one of the key elements to a stronger automobile industry and a key to innovation and leadership in technology and manufacturing in the 21st century. Michigan has unique advantages, and can clearly be a leader, as long as we maintain the momentum our entrepreneurs and highly skilled workforce have built up over the last five years.
Michigan needs to get back to creating Michigan jobs, and the electric vehicle sector gives us the opportunity to put people back to work. Building on our successes will help us expand Michigan’s advanced battery and electric vehicle industry, creating thousands of more jobs, reducing our dependence on foreign oil, and saving consumers money at the pump.
Comments
Dave
Mon, Dec 12, 2011 : 8:10 p.m.
I haven't seen one person actually talk about the real issue as to why EVs and PHEVs are failing...it's the price of fuel. Gas is so cheap that people don't feel the need to look for more expensive, battery cars. I was just in the UK and gas was about $9-$10 a gallon. At that price people evaluate all options. The market will dictate what people buy and that is driven by the price of fuel. The reason we are seeing EVs and PHEVs is because the automakers are forced to invest in these money losing ventures by the government to meet CAFE standards.
Terry
Mon, Dec 12, 2011 : 12:48 p.m.
Can we please move past this "electric car' phase! Once the public realizes, I read an article that Ann Arbor is one of the "smartest" cities in America so it shouldn't take too long, these cars are a huge financial burden. It is proven liquid fuel namely gasoline is by far the cheapest form of power for vehicles. Let's not forget the incredible strain a mass surge of electric vehicles would put on an already outdated power grid. For all the GREEN people out there who think electric is so clean and pure, keep in mind the means by which this electricity is generated. The design for electric vehicles has been around for decades by nearly every automaker, but has wisely been shelved. It wasn't cost effective back then and it still is not cost effective now. This isn't new technology, this is a product which is a proven failure.
Peter Baker
Mon, Dec 12, 2011 : 5:20 p.m.
"It is proven liquid fuel namely gasoline is by far the cheapest form of power for vehicles." For now.
Stephen Landes
Mon, Dec 12, 2011 : 4:25 p.m.
Terry -- you're going to confuse the residents of the smartest city in America by including peripheral issues. Electricity magically comes out of that thing in the wall and it is clean and CO2/ash/mercury/SOX-free! It is just too confusing to mention coal (miner deaths, black lung) or, great heavens, nuclear power!
Daniel Soebbing
Mon, Dec 12, 2011 : 4:11 p.m.
I agree that powering a car on the existing electrical grid, especially given the fossil fuel heavy power production that we have in this state, is not going to make our car fleet any cleaner. I also agree that liquid fuels have a higher energy density than batteries. But a plug in hybrid like the volt could be very efficient even if you never plug it in and just run it on gas. I don't understand why it doesn't get better gas mileage, actually, given the fuel economy of other hybrids on the market. I imagine one could reprogram the software that controls the motors to make it accelerate more conservatively to get this car to easily outperform a prius.
Kai Petainen
Sun, Dec 11, 2011 : 6:11 p.m.
the CEO of A123 was on CNBC last week. you can see it here <a href="http://video.cnbc.com/gallery/?video=3000061332" rel='nofollow'>http://video.cnbc.com/gallery/?video=3000061332</a> (there is a transcript there as well)
Kai Petainen
Sun, Dec 11, 2011 : 5:28 p.m.
"But it would have been better...." that sounds like a slam at his well thought out article. "But, this particular opinion would have been better... ", had it noted that A123 has: <a href="http://finance.yahoo.com/q/ks?s=AONE+Key+Statistics" rel='nofollow'>http://finance.yahoo.com/q/ks?s=AONE+Key+Statistics</a> A PE of N/A enterprise value / EBITDA of -1.41 profit margin -153% short % of float 26.5% return on equity -55% <a href="http://finance.yahoo.com/q/ae?s=AONE+Analyst+Estimates" rel='nofollow'>http://finance.yahoo.com/q/ae?s=AONE+Analyst+Estimates</a> positive sales growth but negative earnings (if you grow, but you don't make a profit, is that good?) <a href="http://finance.yahoo.com/q/it?s=AONE+Insider+Transactions" rel='nofollow'>http://finance.yahoo.com/q/it?s=AONE+Insider+Transactions</a> insider selling. most recent, dec. 1st, 2011. Riley @ $2.35 / share % Change in Institutional Shares Held -30.95%
Stephen Landes
Mon, Dec 12, 2011 : 4:18 p.m.
Can you say "Solyndra"?
Ross
Sun, Dec 11, 2011 : 5:23 p.m.
Thanks for the opinion piece, Charles. I completely agree. Standing on the sidelines while the rest fo the World pushes battery tech to new levels is only going to mean American consumers (who have no jobs because we refuse to invest in ANYTHING) pay more for these vehicles when fossil fuel prices eventually rise as we all know they will. Don't let these conservative blog-monger comments get to you. Ignorance has no limits on the internet.
Daniel Soebbing
Mon, Dec 12, 2011 : 12:52 a.m.
Doesn't matter what the cost of electricity does. It could go up several hundred percent and it would still be cheaper to power your car off the grid than it is to power it with gas. Of course, most of the electricity in this state comes from fossil fuels anyway. And that isn't going to change anytime soon.
average joe
Sun, Dec 11, 2011 : 9:48 p.m.
"....fossil fuel prices eventually rise as we all know they will." Are you saying the price of electricity fall then?
Kai Petainen
Sun, Dec 11, 2011 : 5:19 p.m.
as i live in michigan, i wish nothing but the best for this company and hope that it does well. but if i could make a request to management -- stop the insider selling, buy some shares and announce a share buyback. a great way to build confidence in a company... doesn't always come from pro-company/pseudo-marketing/political material... ... confidence can also be built when the insiders buy shares in their own company.
snoopdog
Sun, Dec 11, 2011 : 4:21 p.m.
Chevrolet has built 13,158 thus far in 2011. They have sold just over 5,200 of them. They are selling very poorly for many reasons. On the other hand, Chevrolet has built 269,477 Cruze's, Ford has built 205,192 Focus's , Toyota has built 189,225 Corolla's and the list goes on . The market is not ready for these vehicles, they are too costly and will remain a toy of high income earners or those wanting to make a statement, a pretty dumb one most of us would say ! Good Day
clownfish
Sun, Dec 11, 2011 : 3:54 p.m.
Sept 14, 2011 --Johnson Controls Inc. said Wednesday that it will spend $100 million to build a vehicle battery factory in China that will supply start-stop batteries to global and local automakers in Asia.- The Business Journal. If we are going to compete globally, should we not compete equally with governments that are funding their industries? China is putting large amounts of money into government owned companies and into research of new technology. It looks to me like private firms are doing battery business in/with China, why let those jobs be created there?
mw
Tue, Dec 13, 2011 : 2:39 a.m.
"If we are going to compete globally, should we not compete equally with governments that are funding their industries?" If you're old enough, you'll remember this was EXACTLY what everybody was saying about Japan and it's industrial planning in the 1980s. What happened to Japan since then? The answer is -- two, now going on three 'lost' decades of stagnation. One of Japan Inc's big bets in the 1980s was on supercomputers. Somehow that turned out not to be the 'killer industry' of the future. In general, governments are really bad at picking 'industries of the future'.
stunhsif
Sun, Dec 11, 2011 : 3:54 p.m.
Let's use the KISS ( keep it simple stupid) methodology for a moment. A brand new nicely equipped Chevy Cruze Eco can average 30 mpg combined city/hwy at less than 20 grand out the door. A brand new nicely equipped Chevy Volt can achieve 33 combined city/hwy mpg at a cost of 34 grand out the door after the $7500 tax deduction. At a cost savings of $14,000, you could buy 4000 gallons of gasoline at $3.50 per gallon. You would have to drive the Chevy Volt 1.3 million miles to break even on the cost savings and we all know that would never happen. The Chevy Volt is very sweet, it is also very expensive and in the real world, it makes no sense to purchase one at this time. Go Green Go White
Stephen Landes
Mon, Dec 12, 2011 : 4:16 p.m.
When making investment calculations for subsidized vehicles one cannot neglect to include the subsidy! Whatever Federal subsidy is available for these vehicles is paid for by the rest of us who would otherwise use the money for our own purposes. The cost differential between the example vehicles is $21,500 whether it is all paid for by the purchaser or shared by the Federal government. Failure to use the real vehicle cost can lead one to make incorrect decisions.
average joe
Mon, Dec 12, 2011 : 2:24 a.m.
Stunhsif- You are a little generous with your calculations. They're not giving away electricity anywhere yet, & the manufacturers are really not sure of the life span of those battery packs, especially in colder climates. So your 1.3 million payback miles are probably a little low.
stunhsif
Sun, Dec 11, 2011 : 5:29 p.m.
Ross, Betsy Ross ? No, more likely a figment of one's imagination, perhaps a bit of undigested beef ! The Volt in real world testing barely goes more than 30 miles before it's engine has to fire up. We all know that this does not cover 90% of commuters but then again, a lot of us just make up our own facts ! Go Green Go White
Ross
Sun, Dec 11, 2011 : 5:20 p.m.
Not terribly surprised to see this kind of shoddy logic from a Moo-u grad. The volt achieves 33 combined? Uh no. For 90+ % of americans, it has enough range for their daily commute and errand running without using ANY gas. You know, how it has electric batteries and stuff? Fail.
clownfish
Sun, Dec 11, 2011 : 4:04 p.m.
Maybe a comparison between the 1954 Mercedes 300SL, the first fuel injected car, or the 1957 Chevy fuel injection engine, to a 2011 fuel injected engines energy use would be better? It all has to start somewhere.
jcj
Sun, Dec 11, 2011 : 3:42 p.m.
"Michigan must continue investing in electric vehicles, batteries" WRONG! Michigan as a State should NOT be investing in "electric vehicles, batteries". YOU sir are more than welcome to invest in whatever you see fit! But DO NOT ask the taxpayers to invest in something YOU might make a profit on! Nice PR campaign but it won't work. Too many examples of failure.
average joe
Sun, Dec 11, 2011 : 3:12 p.m.
I don't see anywhere in the story that informs us what model electric car Mr. Griffith owns. Seems to me if you feel strongly about something, you should lead by example, & show the public why this is the direction the country should be headed. 'put one's $$ where one's.......'
DonBee
Sun, Dec 11, 2011 : 2:56 p.m.
Fewer than 10,000 Chevy Volts were made and sold in 2011 - this according to Chevy's own statements. Toyota has struggled to make Prius a best seller. The electric car is still not what the American public is looking for. The latest study of buyers says less than 0.6 Percent (yes - 6 out of 1000) want to buy Chevy Volts. If we want electric vehicles to be the desired by the majority of buyers in the market there is a need to create vehicles that will be of interest to the other 99.4 percent of buyers. The reasons cited for not wanting an electric car by people: 1) Cost - the Volt costs a bit more than 2.5 times a similar sized gasoline powered car (A Kia Soul is $16,000 and at $5 a gallon for gas, the difference will get you over 120,000 miles in gasoline). 2) Safety - like it or not the fires in the Volt batteries have spooked people. 3) Range - For many the idea that 40 to 50 miles is the range of the battery and then you are using gas again, is a problem 4) Interior volume - for many families there are not vehicles that let them take the family anywhere in comfort. 5) Understanding the technology - many people indicated they don't understand or trust the electric vehicles If you are going to spend government money, then you need to figure out how to overcome these issues. If you don't all the electric cars will end up doing nothing. A 1 percent share of the market will not sustain as many companies as want to be part of the market.
Daniel Soebbing
Sun, Dec 11, 2011 : 10:17 p.m.
That is entirely true. Sales and profits are different things. But nobody knows whether or not the Prius is profitable. A quick web search turned up a lot of speculation on the topic but there weren't a lot of actual analysts weighing in one way or another. I couldn't find any articles that were discussing any information that was more recent than 2008. All we have is the word of the companies, which is that these vehicles are quite profitable.
braggslaw
Sun, Dec 11, 2011 : 4:41 p.m.
good selling and profitable are entirely different concepts... You must have a return on investment or everything breaks down.
snoopdog
Sun, Dec 11, 2011 : 4:15 p.m.
Sales are right around 5200 vehicles thus far DonBee. Good Day
Daniel Soebbing
Sun, Dec 11, 2011 : 3:24 p.m.
I don't see why you consider it a salient point that Toyota struggled to make the Prius a best seller. Sure, they struggled for a long time, but now it is a very good selling car. It demonstrates that a large segment of the population will accept new technology once it is proven and people know they can trust it.
Diagenes
Sun, Dec 11, 2011 : 2:49 p.m.
NY Time November 28, 2011, GM has sold 5300 Chevy Volts since its introduction in 2010. New car sales in 2011, 10.5 through October. The market is speaking. Lets build and invest in products people want to buy. If the government would let oil companies produce oil in Alaska and other parts of the U.S. we could reduce our dependency on foreign sources. It would generate jobs and tax revenue. Then more people could buy cars , maybe even a Volt.
clownfish
Sun, Dec 11, 2011 : 3:47 p.m.
Oil/gas production and permit approval is at an all time high. Oil reserves in ANWR would result in virtually no change to availability/price. Most of the oil/gas that would be produced in ANWR would be sold to Asia, not in the Us. "The opening of ANWR is projected to have its largest oil price reduction impacts as follows: a reduction in low-sulfur, light crude oil prices of $0.41 per barrel (2006 dollars) in 2026 for the low oil resource case, $0.75 per barrel in 2025 for the mean oil resource case, and $1.44 per barrel in 2027"- Energy Information Administration
Daniel Soebbing
Sun, Dec 11, 2011 : 3:21 p.m.
Untapped oil reserves in Alaska amount to a drop in the bucket. Our dependence on foreign sources would be reduced by a small amount. Opening up ANWR would indeed generate jobs and tax revenue. But it would also damage a fragile ecosystem in a place where there is no infrastructure in place that could clean up potential spills.
Diagenes
Sun, Dec 11, 2011 : 2:50 p.m.
10.5 million cars were sold in the U.S. through October of 2011.
Ron Granger
Sun, Dec 11, 2011 : 2:45 p.m.
Billions of taxpayer dollars have created a small number of jobs and greatly enriched the owners of these businesses. The return on investment for the taxpayers has been terrible. Why didn't you include the "dollars per job" cost metric? Taxpayer money should not fund highly speculative capital intensive businesses. If taxpayers are gifting money into these businesses, they should own a significant portion of the businesses, with an appropriate number of seats on the boards.
mw
Sun, Dec 11, 2011 : 2:44 p.m.
The state of Michigan needs to stop wasting money it can't afford on one more unprofitable, heavily-subsidized, destined to fail industry after another. We had the 'life sciences corridor' and the Michigan film industry and it's now electric car batteries. You may not have noticed, but GM wasn't going to hit its very modest sales targets for Volt this year even before the news came out of them catching fire -- they're not going to come anywhere close to their goal of selling 60,000 next year. This won't be the last round of layoffs in the battery industry. Governments are terrible at picking winning industries, and Michigan can't afford to keep blowing money on one screwup after another.
mw
Tue, Dec 13, 2011 : 2:30 a.m.
"And the film credits did move THOUSANDS of jobs to Michigan and created thousand more here, too." Of *course* they created jobs. You can create jobs in virtually ANY industry if you offer a 40% subsidy like we did for the film industry. But that's obviously not sustainable, and -- completely predictably -- the jobs all vanished as soon as the subsidies were ended. "Car batteries offer a significant source of new employment, too, but if you want to stay closed-minded and oppose progress, well, sucks that we share a state with you." It sucks to share a state with fans of crony capitalism who keep voting for politicians who have no talent, training, or aptitude in being venture capitalists and who keep pouring money we don't have into one doomed-to-fail, crackpot scheme after another. Try being open-minded enough to consider the possibility that economic progress in a free market is NOT effectively promoted by centralized government planning and subsidizing. Economic progress does not come from government
Ross
Sun, Dec 11, 2011 : 5:11 p.m.
Actually, the life sciences initiative was not successful because out Republican state congress would not allow Jenny's proposals to gain any momentum. Michigan was YEARS too late to get a serious effort going on that. And the film credits did move THOUSANDS of jobs to Michigan and created thousand more here, too. Car batteries offer a significant source of new employment, too, but if you want to stay closed-minded and oppose progress, well, sucks that we share a state with you. BTW, the Volt has been cleared of responsibility for the fires.
RTFM
Sun, Dec 11, 2011 : 2:12 p.m.
Absolutely not! A Michigan Tax payer
sh1
Sun, Dec 11, 2011 : 1:43 p.m.
@braggslaw, I think you'd be interested in the documentary Who Killed the Electric Car? It shows how car makers, the oil industry, and the government shut down the development of this technology because it affected them economically, regardless of what consumers wanted. The car was removed from the market; anyone leasing one (you couldn't buy one) had to give it up in the middle of their contract. The cars were all destroyed so they could not be resold.
Daniel Soebbing
Mon, Dec 12, 2011 : 12:48 a.m.
Other companies built electric cars on existing platforms. The Toyota RAV4 looked just like the gasoline version from the outside. I can see why GM did what they did, and what they learned in that experiment contributed in a large way to the current volt, which shares some similarities deep under the skin with the EV1. It's interesting that both Honda and GM built brand new vehicle platforms from the ground up to comply with California's electric rules, and both companies ended up recovering and scrapping their entire fleets. Toyota just built their car on an existing platform and roughly half of the EVs that they built are still on the road today!
braggslaw
Sun, Dec 11, 2011 : 5:22 p.m.
At the time PbSo4 batteries were the only viable option and that meant a large number which meant a large weight. Ni Metal hydride were still running into problems with memory and dendritic issues. The battery size/weight and concomittant electrification issues with DC=DC converters, inverters dictated the vehicle platform.
braggslaw
Sun, Dec 11, 2011 : 5:20 p.m.
Well duh! The batter packy for the EV1 weighed thousands of lbs and needed a different platform. It was T shaped with a central tunnel. No vehicle platform existed that could be used. The two induction motors needed different axles. These issues drove changes to the interior, platform weight balance etc. Maybe you should become an automotive engineer and bring your expertise to these clearly ignorant people. The electrical architecture needed to be redone.
Ross
Sun, Dec 11, 2011 : 5:07 p.m.
Yes, and as that exact movie also questions, why did GM insist on a clean-sheet platform for making an electric vehicle? Of course tooling costs per vehicle were ridiculous, because the quantity made was so low, not because of the inherent "expensive electric technology". Any new clean sheet automobile is extremely expensive to design, validate, test and manufacture from scratch. The difference is that a generic vehicle like a Ford Taurus spreads this fixed cost over more than a MILLION vehicles, not just the 1000 made in this case. If GM had put electric tech into their small cars, like the cavalier, etc, they may have lost a small amount of vehicle range, but the cost per car would have been completely reasonable.
braggslaw
Sun, Dec 11, 2011 : 4:40 p.m.
the total program cost was in the billion dollar range. The only expression of the program was a thousand cars. If you factor in tooling, advertising, supplier development costs etc. the cost was a million dollars. If you want to separate advertising, possibly some of the fixed cost for employees such as insurance etc. and try to calculate only the piece cost you are still in the realm of 100's of thousands of dollars. It take money to tool up an inverter and an electric motor... batter pack etc. When the volume was only a 1000 you take up an enormous bath because the development costs and toolings are spread over too small a volume.
sh1
Sun, Dec 11, 2011 : 3:36 p.m.
I'm not asking about the cost of the program to start up a new kind of car, since that would be comparing apples and oranges. I'm still looking for evidence that the cars cost $1 million to manufacture.
braggslaw
Sun, Dec 11, 2011 : 2:52 p.m.
The raw publicly available numbers ] GM stated the cost of the EV1 program at slightly less than $500 million before marketing and sales costs, and over $1 billion in total; a portion of this cost was defrayed by the Clinton Administration's $1.25 billion Partnership for a New Generation of Vehicles (PNGV) program.[58][59][60] In addition, all manufacturers seeking to produce electric cars for market consumption also benefited from matching government funds committed to the United States Advanced Battery Consortium.
sh1
Sun, Dec 11, 2011 : 2:11 p.m.
I was responding to your comment that no one wants this technology. Aside from that, what is your source for each EV1 costing a million dollars?
braggslaw
Sun, Dec 11, 2011 : 1:57 p.m.
I have seen it.... the director producer did not understand the issue. There were a 1000 EV1's made the program cost a billion dollars. Each EV1 cost a million dollars..... The financials are all that matters. the rest of th story was fantazy. No program can survive with those types of numbers.
Wolf's Bane
Sun, Dec 11, 2011 : 1:42 p.m.
PS. Don't expect the government to provide opportunities to Michigan's labor force; they can barely figure things out stateside!
Wolf's Bane
Sun, Dec 11, 2011 : 1:41 p.m.
I totally disagree, Michigan needs to develop and lead the way when it comes to hydrogen fuel cell technology. The Chinese are already producing battery technology for cars and have, in effect, cornered the world market. To pursue battery technology is like trying to resurrect steam technology; it is futile. As a good friend pointed out, we have a hugely experienced labor force just waiting for the right jobs, yet Michigan's CEOs can't deliver the goods; time to get Michigan to innovate again, not play catch-up to the Chinese
Jim
Mon, Dec 12, 2011 : 6:47 p.m.
Hydrogen is a cruel hoax. It is simply another way to take a free, uncontrolled fuel (such as electricity or natural gas) and make it into something that can be strictly regulated and controlled, hydrogen. Instead of hydrogen, build plug-in hybrids that run on natural gas (which include bio-methane).
braggslaw
Sun, Dec 11, 2011 : 1:34 p.m.
Of course you are going to take this position, your column is riddled with your own self interest. I say let the markets dictate the product. Every Leaf and Volt that GM or Nissan sells loses thousands of dollars. Those companies are merely investing in a "marketing" ploy which also benefits all the govt. and DOE funded companies surviving on tax payer dollars. I think it is a tragedy that the govt. flushes billions of dollars into companies that will never make a profit to create products that consumers don't want.
Dave
Mon, Dec 12, 2011 : 8:05 p.m.
Actually the LEAF is selling well...it is sold out. Considering it is only available in a few markets and is sold out...it's doing great.
Daniel Soebbing
Sun, Dec 11, 2011 : 10:20 p.m.
If that is a direct quote it sounds like it is from 2008. At lot has changed since then.
Daniel Soebbing
Sun, Dec 11, 2011 : 9:48 p.m.
Do you have a link to that article, braggslaw?
braggslaw
Sun, Dec 11, 2011 : 5:59 p.m.
From the Post: WASHINGTON — Many members of Congress believe they know what the car company of the future should look like. "A business model based on gas — a gas-guzzling past — is unacceptable," Sen. Charles Schumer, D-N.Y., said this month. "We need a business model based on cars of the future, and we already know what that future is: the plug-in hybrid electric car." But the car company Schumer and other lawmakers envision for the future could turn out to be a money-losing operation, not part of a "sustainable U.S. auto industry" that President-elect Barack Obama and most members of Congress say they want to create. That's because car manufacturers still haven't figured out how to produce hybrid and plug-in vehicles cheaply enough to make money on them. After a decade of relative success with its hybrid Prius, Toyota has sold about a million of the cars and is still widely believed by analysts to be losing money on each one sold. General Motors has touted plans for a plug-in hybrid vehicle called the Volt, but the costly battery will prevent it from turning a profit on the vehicle for several years, at least.
braggslaw
Sun, Dec 11, 2011 : 5:57 p.m.
...the wonders of accounting. I assume you are citing the Keizei article. toyota and Honda are claiming 15% profit margins on the Prius which most people know to be almost impossible on a vehicle unless it is a Ferrari and costs six figures.... Toyota's overall profit margin for vehicles is close to 3%, ford is 5%, GM is around 5%, BMW is 10%. "All of which makes some of the claims in an article in Monday's Nihon Keizai newspaper interesting. Without citing sources, the paper reports that the gross profit on the new Honda Insight is 300,000 yen (a little over $3,000) per vehicle—or a gross profit margin of 15%. If that sounds high, in accounting terms, gross profit equals the difference between revenue and the cost of making a product and, therefore, ignores lots of other costs."
dairy6
Sun, Dec 11, 2011 : 4:58 p.m.
From Nikkei reports that Toyota makes $3100 per Prius and made 1 billion profit on 2nd generation Prius.
braggslaw
Sun, Dec 11, 2011 : 4:37 p.m.
ok?
dairy6
Sun, Dec 11, 2011 : 4:17 p.m.
Some of us are on to your talking points and propaganda and as usual they don't stand up to scrutiny.
braggslaw
Sun, Dec 11, 2011 : 3:26 p.m.
The Prius does not make a profit and is dragging Toyota margins down to two to three percent...that combined with the strong yen and natural disaster will threaten Toyota profitibality... There will be a financial reckoning for making cars that cannot generate profit
Daniel Soebbing
Sun, Dec 11, 2011 : 3:15 p.m.
So far the leaf and the volt aren't selling well or turning a profit. But that was true of the prius and the insight when they first hit the market as well. Now hybrids are one of the fastest growing sectors of the car market and they are turning profits for the auto companies. Consumers clearly do want these products, and they use the same kind of advanced batteries that A123 manufactures.
DennisP
Sun, Dec 11, 2011 : 1:30 p.m.
This is a most interesting dilemma and highlights the problem of government backing particular businesses. The best support government can give to an industry is in the form of research, development and reduction of barriers to entry. Picking and investing in this company or that is going to result in wasted tax dollars. That's the role and risk venture capitalists play along with stock analysts, etc. It's not the role of politicians, most of whom aren't even very good at their own job. The one problem we have is China. We need China because it can play a big role in making this technology cheap and ubiquitous. Yet, at the same time, we shouldn't be funding and paying for all the research, all the engineering and technology only to fritter away those efforts in patent infringements and stolen technology. The single biggest thing the USA can do to push forward new energy technologies that will free the world from a dwindling supply of fossil fuels is to get China to acknowledge intellectual property rights and to enforce them in their own court system just as with Japan. Whether by a treaty it respects or by other means, this is essential. We need to be able to trust that China will respect our inventions and we theirs. This is far more important than carbon trading, climate courts, or any of the other proposals floating around Durban today. It would unleash a lot of technological power. Together, their resourcefulness and our inventiveness could help liberate the world from fossil fuels in ways politicians can't even imagine today. Regardless of what you believe about climate change, we need to end this dependency on a foreign resource that is dwindling, destined for depletion and which will hold our industries hostage unless we take these steps now.
Jim
Mon, Dec 12, 2011 : 7:39 p.m.
If you want gov't to "get out of the way", then the easiest way to do this is to have them remove their subsidies to own. Chief among them is the defense resources we provide (for free) to ensure access to the oil supply in the Middle East. There's plenty of other drilling subsidies, etc. that are decades old and that the oil companies no long need either.
Kai Petainen
Sun, Dec 11, 2011 : 6:14 p.m.
the CEO interview on CNBC spoke about China... <a href="http://video.cnbc.com/gallery/?video=3000061332" rel='nofollow'>http://video.cnbc.com/gallery/?video=3000061332</a> "we've demonstrated that if you take technology from a noted university or national lab and you commercialize the technology, we set up a global operation where we have operations frankly in china, we started in china, that we could compete in china. and we've taken a partnership in china. "
Sparty
Sun, Dec 11, 2011 : 12:02 p.m.
Let's not abandon yet another business to China, but invest in it here in America recognizing that it may involve some losses along the way as the technology evolves. If we don't, we will cede every new innovative business to China and be left with old technology and fast food as our economic engine!