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July 05, 2006

Who Killed the Electric Car?

From a Seed Magazine interview with Chris Paine, director of the new documentary, "Who Killed The Electric Car?"

In the end, GM refused to let leasers buy their cars. It seems bizarre that a corporation would refuse ready buyers.
I've never heard of another situation where a car company doesn't let you keep a car at the end of a lease. You buy it—usually, they're begging you to buy it. Here, they said, "You can't have it."

There was also no precedent for General Motors putting its own name on a car. And that's where the film becomes, in my view, sort of a "great American tragedy"—they took their own branded car off to the crusher.

The story here is fascinating. California used to have a zero emissions law with an increasing mandate for clean autos. The car companies, chafing under regulation as always, argued that California couldn't force them to produce what consumers didn't want. And in order to ensure that consumers wouldn't want the electric cars, they destroyed the supply, the on-the-road examples -- anything that could generate demand. Simultaneously, California was offering partial credit for nearly-clean vehicles, which is a violation of federal authority over CAFE standards, and the auto industry, in conjunction with the Bush administration, ramped up for a huge suit. As part of the settlement, California took out the electric cars mandate.

Later on, GM CEO Rick Wagoner identified the destruction of the electric cars divisions as one of his great regrets. Which makes sense. At the time, oil was cheap and plentiful, and there was little obvious reason to pump cash into efficient cars, particularly when the Japanese seemed to own that niche. But now, as oil skyrockets and the gas-guzzling behemoths languish on lots, a decade or so of electric car production and refinement could have put GM in a whole different position, making them a viable, and even leading auto company in the new century. If the answer to Who Killed the Electric Car? is GM, that might also solve the riddle of who's killing the American auto companies.

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GM's anti-alternatives policies can also be found in the wayback machine. Starting in the 1920's, GM (later combined with Firestone Tire, Standard Oil of California, Phillips Petroleum and another company to form National City Lines, which actually purchased streetcar systems in LA, SF, NYC, Philly, Salt Lake, Tulsa, and Baltimore, then cut service and shut down the streetcars-light rail and replaced them with GM buses - all to encourage use of autos by making alternatives unpleasant and inconvenient. More here.

Competition from Japan, Korea and Europe has damped GM's ability to be playground bully on transportation, but it hasn't halted its death-wish policy of ignoring consumer demands and selling only what it wants to - their right, of course. Can't make money on small cars, then push SUVs. SUVs are gas monsters, then give away some gasoline with SUV purchase. It's the GM way.

Posted by: JimPortlandOR | Jul 5, 2006 11:19:31 AM

I think what the film glosses over is that the EV-1 cost a quarter of a million to make each one, and significant enough cost reductions were not in sight. The reason GM destroyed the cars they formally leased is probably because a) protection from liability b) meeting the market demand is not in the supplier's interest when it takes a huge loss to do so (and assuming there's no ancillary revenue, as there is with game consoles).

Posted by: apantomimehorse | Jul 5, 2006 1:39:47 PM

Simultaneously, California was offering partial credit for nearly-clean vehicles, which is a violation of federal authority over CAFE standards, and the auto industry, in conjunction with the Bush administration, ramped up for a huge suit.

I'm not sure why a higher standard violates federal authority to enforce minimum standards. California also has to comply with federal clean air mandates and the biggest contributor is automobile exhaust.

Posted by: Mike | Jul 5, 2006 1:40:05 PM

Mike: Congress has in a some instances forbidden states from enacting higher standards than the federal. Corporate contributions at the Federal level can/have made it possible for the Corps. to ignore those pesky states that are serious about solving problems.

Posted by: JimPortlandOR | Jul 5, 2006 2:01:24 PM

Much as I hate the fact that we had good streetcar systems and tore them up, and foolish though it sounds for GM to have refused to sell the EV-1 to its lessees, neither example says quite what I think Jim and Ezra respectively want them to.

The problem with streetcars wasn't that GM acted in its self-interest. If we grant regulated capitalism exists, the corporation is under a duty to do so as long as that behavior is legal. Local governments, alas, were somewhat shortsighted. From the perspective of the 1940s, allowing GM to buy and tear up urban rail looked like a win-win. This is right around the time we were building our first freeways, and in the moderately long term (through the early '70s, certainly) the automobile and the freeway in fact formed a functioning transit system. Alas, nobody did the math on traffic growth and road capacity, nor did anyone take a lesson from European cities in what makes for a good urban environment.

In other words, it was a classic but understandable failure of government. What '40s politician was going to stand up and tell Californians that freeways were all well and good, but cities needed to buy up the streetcar systems and subsidize them for more than half a century because -- eventually -- they'd be glad they did.

The EV-1 is a similar story. California squeezed it out of GM, but not as a profitable product. GM lost scads of cash on each one, and leased them at heavily subsidized and nevertheless money-losing rates. What the buyers wanted was to get a quarter-million dollar experimental car for the price it might have had if it had ever ramped up to million-annual-unit production. You can't blame GM for not eating that loss. It's not their job to make a few people happy, but it was their duty to mollify the state of California for a while.

Posted by: wcw | Jul 5, 2006 5:32:55 PM

That each EV1 cost GM $250K to make is bullshit (two posters above). See here. $80K, including R&D costs over only 1100 vehicles. Key quote, circa 2003, from GM hack:

Battery-powered cars may never reach that [millions and tens of millions of vehicles] level of appeal because "gasoline is so very inexpensive," he said.

Flash forward just three years, with gas prices up >100%, and what does he say now?

And poor GM: like usual, a good portion of the corporate development costs where also subsidized .

Posted by: kevin | Jul 6, 2006 1:45:49 AM

Congress has in a some instances forbidden states from enacting higher standards than the federal. Corporate contributions at the Federal level can/have made it possible for the Corps. to ignore those pesky states that are serious about solving problems.

Well, this doesn't feed into your "eeeevilll corporations" meme, but the federal government reserved the right to make these decisions.

Texas has done the same thing with gun laws, and for good reason. By reserving gun regulation for the state, it keeps the laws consistent. I suspect that was the reason the feds did the same thing.

Posted by: Fred Jones. | Jul 6, 2006 4:51:45 PM

Apologies for repeating the $250k canard without checking. Mea culpa. However, the point stands: the EV-1 lease is $350, but it should be more like $1200 (depends on your terminal value, rate, and term).

Do you think Toyota would hesitate to deliver an electric car if it thought it could sell one in consumer volume? Capitalism sucks, except when it doesn't, and Toyota would be a nice model of when it doesn't.

Posted by: wcw | Jul 6, 2006 6:05:50 PM

Marriage sucks...when it doesn't
Life sucks....when it doesn't
School sucks.....when it doesn't

Posted by: Fred Jones | Jul 6, 2006 11:28:03 PM

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