Who killed the electric car?

Zero Emissions Vehicle (ZEV) symposium

September 25-27, 2006, Sacramento, CA – The Zero Emissions Vehicle (ZEV) symposium had all the makings of a world-class fight. In this corner, weighing a lot, are the car companies, Daimler Chrysler, BMW, General Motors, Honda and Toyota all fighting for hydrogen for the future. And in the other corner, weighing in at a lot less, the electric car companies and their cult following.

No one has killed the electric car. The electric car will happen eventually. In our effort to diversify engines and energy, the obvious energies are gasoline, diesel and then electricity. Creating electric engines and diesel engines are still a couple of years away. There are still some hurdles, but with time and technological advances, the electric car will be here. But not at this symposium, the two are still at odds and on symposium day two was the capper.

The day was going along smoothly, methodically, but you could feel the tension mounting. BMW, Daimler Chrysler, Honda, and General Motors had all given their speeches about the efficiency of hydrogen, the lack of emissions and how they all pledged to continue their stride towards the Holy grail.

But Toyota was different; Toyota still has plug-in electric vehicles on the road. Toyota, while working on hydrogen fuel cell vehicles, is heavy into hybrids and the rumor has been swirling that Toyota will unveil a plug-in electric vehicle in the next couple of years. Could it possibly be that Dave Hermance of Toyota would give the PHEV group the news first?

Hermance got up and started out slow, saying how fuel cells offer higher fuel efficiency than any combustion powertrain. He acknowledged that hybridization improves all vehicles, including fuel cell vehicles, as long as the fuel is made in carbon-neutral fashion.

Toyota has 23 fuel cell vehicles in the United States, a total of 60 globally. None of the fuel cell vehicles are manufactured in the United States. Toyota has 3 generations of fuel cell technology, not including concept vehicles. The 60, according to Hermance, are all compressed hydrogen and running. Cold start and durability have been improved but more improvement is needed before the fuel cell vehicles are ready for primetime.

Hermance explained that Toyota makes 30 vehicles per generation. The driving range is too short still, in Toyotas estimation, and there still needs to be an energy storage breakthrough. The durability of the vehicle hasn’t been a focus because the technology keeps changing. And, of course, the cost is still too high and they need a better and less expensive way to store hydrogen.

Hermance’s speech shifted into high gear. Hermance said, “The reality is that auto companies are for-profit businesses. If the economics of technology and fuel don’t make economic sense the probability is they won’t sell and then it really doesn’t help the air quality. The economics do have to work.”

Finally, the subject everyone had waited for, the plug-in electric hybrid (PHEV). Would Toyota announce that they thought the Lithium-Ion battery was good enough for primetime and that they (Toyota) are building a PHEV? The minute Hermance started talking the answer was evident.

“The battery of choice for the first HEV was Nickel Metal Hydride. There has been a significant run-up in the commodity cost of nickel since the last vehicle, because of all the stainless steel being made.”

“We placed over 1200 RAV4 EVs and the obligation to California was 350. Interestingly, there are still have over 800; 64% in operation with fleet users. They would take more because of the credit they get. The EV RAV4 program ended in 2003 because of a lack of viable market”Hermance talked about the history of the RAV4 and how the retail experiments Toyota used the same distribution as they did for the launch model of the Prius. 25 dealerships were selected and they would have made more money on RAV4s than Prius. The RAV4 was marketed with the charger.

The RAV4 was very effective in the multimedia campaign. The customers of the RAV4 and the Prius were internet savvy. Dealers had to buy special tools and get special training for technicians and sales. 2 1/2 million persons attended auto shows and there were ads in print media, radio announcements. PBS, TV spots, spot cable, output media, bus-tails were all utilized. There were lots of hits to the interactive internet. There were letters to advocacy groups. The RAV4 costs $42,000, less $13,000 to purchasers (retail), so around $29,000. The lease was $1,000 down and $329/month, which was the same as Prius.

The amount of money spent on the RAV4, according to Hermance, was $2.6 million dollars – almost $10,000 per car of advertising money. Hermance called that hideous for the RAV4. He then made the point that Toyota spent $6.8 million nationally on the Prius – almost $500 per car for the money spent advertising the Prius.

Hermance broke it down even further, saying that there were 771 million views for the RAV4, while the Prius only got 356 million, 2 times as much presence for RAV4.

Toyota.com, according to Hermance, got 17 million hits during the advertising blitz timeframe. Of those 17 million hits, the Prius got 463,000 hits, while the RAV4 got 800,000 hits. Hermance said that the 2:1 views suggested that the media was effective in getting people to the site to send me more information. The limitations, including driving range, brought the finalized deals down to for every person buying a RAV4, 15 people purchased the Prius.

The mood in the symposium was somber, but Hermance persevered, making sure that the group knew that the RAV4 was the only electric vehicle in the retail market. 50 vehicles sold in the first week, but sales lingered after that.

The bad news became worse for the little plug-in that could have. 2 percent leased their Prius, while 78 percent leased their RAV4. Hermance surmised that awareness was high, sales were low and not increase over time. The pent-up demand was small, and there was no competition in the market at the time. Worse yet, there was no road map to get it to profitability.

Hermance made the final blow, I mean point: the Prius improved air quality more than the RAV4 because of the significant sales of the Prius (HEV) over the RAV4 (EV) and air quality only changes when sales happen.

Hermance ended the speech by saying that hybrids are the core technology for the future. Hybridization increases the efficiency of all prime movers and increases interest in all clean vehicles. Hybrids increase air quality and increase efficiency in fuel cell vehicles as well. Not all buyers value technology in the same way. There is an emotional process and we have to look past absolute fuel savings, emissions.

No mention of plug-in electric vehicles. It is still rumored that Toyota will come out with a plug-in. In a twist of fate, in an 8-minute video with Bob Lutz, Chairman of Product development, General Motors, Lutz says that “GM is planning the only infrastructure that is in place is electricity, so we are very interested in the plug-in electric vehicle.”

Toyota is being mum about a plug-in electric car and General Motors is saying quite frankly that they are not going to keep their technology in the drawer until they think it is financially viable. They say they learned their lesson in the last round with Toyota. Expect the competition to get tougher.