New electric car setback

October 24, 2012 • Editorial

The bankruptcy filing last week of A123, the taxpayer-subsidized electric-car battery company, renews attention on President Barack Obama’s massive $5 billion “investment” in the nascent electric car industry.

The president predicted 1 million electric cars on U.S. freeways and roads by 2015. However, once-bullish executives of electric car companies and battery manufacturers concede that their industry will come nowhere close to meeting Obama’s wildly optimistic target.

The troubled battery maker A123 Systems filed for bankruptcy on Oct. 16, dealing a black eye to the Obama administration’s program to jump-start a domestic battery industry and spur development of electric vehicles.

“The business model isn’t [auth] there yet,” said Brett Smith, co-director of manufacturing, engineering and technology at the Michigan-based Center for Automotive Research.

“It isn’t there yet for volume,” he told Bloomberg News. “It isn’t there yet for reaching the mass consumer. And it probably isn’t going to be there for a while.”

A123, based in Massachusetts, won a $249 million federal stimulus grant, more than half of which it used to build a Michigan plant to manufacture next-generation electric car batteries.

President Obama actually made a highly publicized call to the battery plant when it opened in 2010, hailing it as “the birth of an entire new industry in America. Meanwhile, A123 President and CEO David Vieau promised his start-up company would create thousands of jobs.

Two years later, A123 is bankrupt, and the plant the company built with federal stimulus money has been purchased by Wisconsin-based Johnson Controls, which won a $299 million federal stimulus grant of its own, with which it planned to build two plants of its own to manufacture electric car batteries.

Johnson Controls actually built one plant, currently running at half capacity, and has put off plans to build the second. The company said it didn’t know yet what it will do with the two-year-old plant it acquired from A123.

Part of the explanation for A123’s failure (aside from the problems it had with its lithium ion batteries malfunctioning and catching fire) is that one of its major clients, Anaheim start-up Fisker Automotive, fell two years behind its timetable for producing its electric car.

The recipient of a $529 million federal loan, Fisker brought its first model to market in November. The plug-in hybrid electric luxury sports sedan, the Karma, carries a $103,000 sticker price.

The Energy Department projected that, by 2015, Fisker would be selling as many as 115,000 vehicles a year. But at the rate the company is going, it will be lucky to sell even a small fraction of that figure by then.

That’s not to say that the car-buying public will never be weaned from gasoline-powered vehicles in favor of battery-powered. Indeed, we believe there is definitely a market for electric, especially here in environmentally conscious California.

The impediment at the moment to their wider acceptance is that they cost considerably more than traditional gas-fueled vehicles (even taking into account the federal and state subsidies available to EV buyers).

It also takes eight hours or so to fully charge an electric vehicle, whereas it takes mere minutes to fuel a gas vehicle at the service station. And a typical plug-in electric car has a driving range of 100 miles compared with roughly 300 miles for a gas-powered car.

We believe that the electric-car industry will eventually figure things out. We also believe it can, and will, do so with private investment rather than federal and state taxpayer subsidies.

Guest Editorial

The Orange County Register

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