EDITION: 10.32 | 02 Aug 2010

In This Edition:

The Volt Premium

Goldilocks Moment

Mr. Al Yousuf's EVs

LEAF It to Nissan

China's Looming Micro Mandate?

RAV4 EV Again, Naturally

Fiat Currency

Premium 2.0 Customers

The Volt Premium
Okay… lots to report on the Volt this week starting with its price: $41,000. That's higher than I would have liked to have seen since it gives GM little maneuvering room on future models and upgrades. It certainly places it out of my reach. And, they have effectively set the bar for all future PHEV models. As a general rule, cars don't drop in price from model year to model year; they usually edge ever upward. With the LEAF priced at $32,850 before any tax credits, Nissan has some pricing leeway; the Volt won't when the credit expires. But that being said, GM is planning to offer a pretty enticing -- and affordable -- lease of $2,500 down and $350 a month for 36 months. Lessees, however, won't be able to claim the $7,500 credit: that will belong to GM or its leasing agent. The really interesting question then is going to be the off-lease resale value of the car, how much will it depreciate?

Next, we learned that the Volt owner's manual states that owners need to use premium grade gasoline in the car in order to get the best fuel economy when in hybrid mode. That's a far cry from the flex-fuel capability GM promised initially for the car.

Items three and four on the list: not only did President Obama visit the Hamtramck assembly plant in Detroit, taking the impromptu opportunity to drive a Volt about 40 feet down the assembly line, the company also used the historic event, to also announce that it is planning to increase Volt production from the initial 30,000 in 2012 to 45,000 in order to meet expected consumer demand. This prompted me to ask in this month's EV World ePoll, "Now that we know its price is $41,000, do you believe the Chevrolet Volt will be a sales success for General Motors?"Click here to vote your view on EV World.

EV World's UK-based motor racing correspondent, Chris Ellis, caught an interesting observation the Volt's electric drive system based on an article in the June 25th issue of the Telegraph, which noted that the Volt's top speed is a good 30 miles slower than comparable Sedans available in Europe.

"General Motors is working on the problem and this autumn plans to unveil a mechanical direct-drive from the engine to the front wheels through the existing twin-clutch planetary gearbox. This would reduce the energy losses of turning petrol power into electricity to drive the car at high speeds, and would also give the Ampera more spritely overtaking performance.

"GM is also considering an "electric-only" button so drivers can save their 40-mile battery range for use in restricted urban areas."

This would explain how GM can claim hybrid fuel economies comparable to the Prius for what we've assumed was a purely series architecture: engine-to-generator-to-battery-to-e-motor. Presumably, this v1.1 upgrade in the Ampera, will also find its way into the Chevy Volt. If you're curious about patents covering the Voltec drive, check out FAQ.org.

Goldilocks Moment
When I gave the keynote speech at the PHEV '09 conference in Montreal last year, I referred to the current relative stability in oil prices as a "Goldilocks moment" when prices in the $75-85 a barrel range were high enough to stimulate development of gasoline alternatives, while encouraging exploration for more resources. Now Forbes has picked up that theme in an article by Tim Ferguson entitled, Disguised Blessing. He writes, "What the experience of the last two years suggests is that oil has found a rough price range that is high enough to argue seriously for efficiency but still conducive to a widening global prosperity."

Perhaps in part because of this, gasoline consumption in the United States is now the lowest it's been since 2004. Certainly, the struggling economy can account for some of that as people drive less, but they also appear to be shifting to more fuel-efficient vehicles.

And lest you think the Sheiks and Mullahs around the Persian Gulf are getting filthy rich at $75 a barrel, they may not, in fact, be making the profit margins they once enjoyed. According to sovereign debt rating agency Fitch, it is now costing the Saudi's $68 a barrel to recover oil from their aging fields. Just two years ago, the same company estimated it at $26 a barrel. If true, the days of $2 a barrel oil from the great Ghawar oil fields appear to be over.

Mr. Al Yousuf's EVs
Which might account for why Eqbal al Yousuf is investing his fortune in a range of electric vehicle ventures including Phoenix Motorcars and ZAP. He became chairman of ZAP, an importer and distributor of custom-made electric vehicles from a three-wheeled, Chinese-made electric low-speed truck, to electric two-wheelers. ZAP's Alias three-wheel electric vehicle is one of nine remaining entries in the Progress Insurance X Prize. Al Yousuf bought Phoenix Motorcars, which is offering an all-wheel-drive, crew cab electric pickup truck, after the company declared Chapter 11 bankruptcy in 2009. He paid $8 million for it.

But even in the fabled Persian Gulf, where customers literally order gold-plated toilet seats, not everyone is ready to plunk down $75,000 for an electric truck, so al Yousuf is hedging his bet by planning to also sell low-priced electric bicycles. The National newspaper in Abu Dhabi quotes him as saying, “When they [consumers] are buying something that is unknown, they try to minimise their risk. And how you minimise your risk is by spending a lot less,” Mr al Yousuf said. “Today, if I tell you to buy a car for $75,000 you would think it’s a lot. But a bicycle you buy at $800, it will not take you a lot of time to think.”

Still, I was told this week that PG Bikes, which builds a custom-made electric bicycle for a cool $80,000 a pop, has accepted orders for three gold-plated Black Trails, ordered by wealthy buyers from the United Arab Emirates. Now there's a smart way to invest.

LEAF It to Nissan
Two bits of news out from Nissan last week. Enterprise Rent-A-Car announced they are planning to place an initial order for 500 LEAF electric cars that they'll rent at selected locations in the United States.

The second bit of news is that the company now will back its battery pack and drive system with a 8-year, 100,000 mile warranty, virtually identical to what GM will be offering on the Chevrolet Volt.

China's Looming Micro Mandate?
It took a bit of hunting, but I found the reference a reader alerted me to last week. Long-time EV World Insider readers may recall that a couple years ago, on the eve of the 2008 Olympic Games in Beijing, I issued a fake April Fool's Day story purportedly reporting that the Central Government had decided to ban the production of internal combustion engines, ordering that all carmakers begin to offer only electric vehicles in order to reduce some of the nation's horrendous air pollution. Of course, it was an obviously preposterous suggestion… or was it?

It turns out that it may not have been all that far-fetched. China's Global Times interviewed General Manager of Chery New Energy Company, Yuan Tao recently. Mr. Yuan revealed that “relevant authorities are now planning to issue a policy on hybrid vehicle technology, requiring new PCVs to be equipped with the BSG hybrid system for fuel efficiency." Presumably, in this context PCVs are "private consumer vehicles" and BSG is the acronym for battery-starter-generator systems, or what might be referred to as micro-hybrids, which automatically turn off and restart the engine when cars come to a stop, such as while in traffic jams.

If such a mandate is issued, it may impact battery supplies and the availability of raw materials that go micro-hybrids, which typically use 42V lead acid-powered electrical systems. However, GM used Ovonics NiMH in their Saturn VUE microhybrid system. I'd guess Chinese OEMs might use lithium instead. Think about the implications of a nation’s building 17 million microhybrids annually. It staggers the imagination.

RAV4 EV Again, Naturally?
When I read a report that Toyota is again planning to resume manufacture of the RAV4 EV, I was skeptical. Certainly, I was aware that Toyota contracted with Tesla to develop some prototypes for testing, but full-scale production? So, I checked with Toyota's John Hanson who confirmed that Toyota was, indeed, considering reintroducing an electric version of the popular RAV4 EV, some 1,400 of which were manufactured in the late 1990s as part of the MoU with the California Air Resources Board. Most of those vehicles were leased to utilities and other fleet customers, but some 300 ended up in consumer hands, most in California. Some of the celebrates owners included Ed Begley, Jr., Alexandra Paul, and Tom Hanks.

Hanson noted, however, that no contracts had been signed at this point to launch series production. Toyota still has wiggle room to back out if they're not happy with what Tesla delivers either technically or financially.

Fiat Currency
Now that Honda has finally bellied up to the bar and ordered a stiff shot of 'juice' as it too begins to develop prototypes of both plug-in hybrid and all-electric vehicles, the last teetotaler in the room appears to be Chrysler, which abandoned its ENVI electric car program as it disappeared into bankruptcy and re-emerged engaged to Italian carmaker, Fiat. Since then, we've been asking: what are its EV plans?

The answer appears that apart from an electric version of the Fiat 500, due to appear in North America around 2012, it has none, or virtually none. There is a 140-vehicle demonstration program with Electrovaya to build some plug-in Dodge Ram pickups, but that's pretty much it.

Instead, the strategy appears to be that Chrysler will rely on Fiat's fuel-efficiency engines and light-weight vehicle platforms to meet its 2016 EPA fuel economy requirements. It's a low-risk approach, for sure, but one that seems to assume continued stable prices for gasoline in North America, which may only be good for another four or five years, depending on whose analysis you believe.

Premium 2.0 Customers
Now that we are just weeks away from the launch of the Volt, the BIG question is, who's going to buy it? According to Rush Limbaugh and others of his ilk, it'll be snooty but guilt-ridden, America-loathing elitist liberals with fat wallets who'll pick the tax pockets of real, hardworking, conservative Americans to buy this "GM lemon" at their expense. Without socialist Obama's $7,500 tax credit (actually the Emergency Economic Stabilization Act of 2008 that contains the $7,500 incentive was signed into law by George W. Bush on October 3, 2008), the Palm Beach pundit darkly prophesies no one would buy this car: it will be a marketing failure of Edsel-like proportions.

Okay, leaving aside the sophistry and inanity of such views, who is likely to be the first to buy or lease the Volt? That's sort of question Houston-based Bain & Company asked themselves. After all…

...figuring out who will buy electric cars now - when there's still a cost disadvantage - is complex. According to Bain's recent market research, potential demand for electric vehicles will come from four distinct customer segments with varying degrees of interest. These are: the eco-friendly "green innovators;" the budget-conscious "cost-shoppers;" the risk-averse "laggards;" and finally the eco-prestige, high-end customers.

Bain refers to the last group as up-market Premium 2.0 buyers. Their research suggests that this group, that was among the first to acquire iPhones and similar trend-setting products, is willing to pay the sizable premium that electric cars will require. And while they tend to drive premium German, Japanese and US automobiles (Rush favors expensive German models -- very expensive German models), they also are willing to consider electric-drive cars, though U.S. brands would be their third choice at the moment. How big is the Premium 2.0 buyer market? Bain estimates around 350,000 worldwide, with half of them living in the United States. Not a large market, to be sure, but an important one. Think of them as the fuse of a revolution in transportation. Concludes, Bain & Company…

While Premium 2.0 customers will lead the charge for electric vehicles, other consumers will soon follow. According to Bain analysis, as usage and volumes increase and technology improves, battery prices could fall by 60 percent by 2020. That would further accelerate consumers towards a new energy future - one that relies less on oil and generates fewer carbon emissions.

I am sure some of the customers will come from Limbaugh's bête noire -- sorry, that's one of the those liberal elitist terms, isn't it? I'd also wager there's a fair share of smart people on the waiting list who like the idea of buying a cutting-edge American-made product that demonstrates the nation's collective resilience and determination to lead the world in innovative automotive technology once again, a technology that heralds the first confident and determined steps towards a more sustainable future for us all; and Rush Limbaugh be damned.

Until next time, stay plugged into EVWorld...

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