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Tom Friedman's electric car aid acid test

Tom Friedman of the New York Times has been over to see the future in China again -- and guess what? It still works! The latest stroke of genius by Beijing’s enlightened central planners, Friedman reports, is "$15 billion in seed money for the country's leading auto and battery companies to create an electric car industry, starting in 20 pilot cities." A "dream team" of 16 state-owned enterprises will soon be "moving China off oil and into the next industrial growth engine: electric cars." China's own consumers prefer gas-guzzling Buicks, but never mind.

Readers of my previous animadversions on electric cars will not be surprised to learn that I do not share Friedman's boosterism, which is based partly on interviews with two guys, Shai Agassi and Kevin Czinger, who are in the business of selling electric cars. Making the case for a massive U.S. commitment to electrics, Friedman posits "an age of steadily rising oil prices." But this is open to question. Markets, even the rigged petroleum market, are cyclical. Reducing gas consumption in the U.S., whether the result of supply shocks, rising fuel taxes or recession -- the current cause, alas -- has the effect of reducing demand for crude oil, which has the secondary effect of causing the price of oil to drop, which has the tertiary effect of causing the price of gasoline to drop -- which ultimately spurs gas consumption! Perhaps the growth of demand in China and India will put a permanent floor under crude prices, but that's a far cry from saying that oil is bound to plateau at a level that cinches the electric-car business model.

This would be true even if the U.S. raised fuel taxes, as Friedman sensibly suggests, because the price of heavily-taxed fuel also fluctuates with the cost of the oil from which it is refined. In any case, fuel tax increases big enough to equal European prices at the pump are politically impossible in the U.S. and probably should be, since such drastic fuel-tax increases would crash what’s left of our economy.

Only a truly revolutionary electric vehicle -- one that does everything internal-combustion models can do, for the same price or less -- could break the cycle.

On the day when the Chinese build an affordable electric version of the Ford F-150, the best-selling vehicle in America, I will join hands with Wen Jiabao and Tom Friedman, and sing "March of the Volunteers." But the technology in which China is investing, and in which Friedman urges the U.S. to invest public funds as well, doesn't even come close to this, and probably won't for many years, even if heavy subsidies lead to mass-production as Friedman predicts.

For example, Friedman touts the Coda, an all-electric that Czinger's company is building in a joint venture with the Chinese. After tooling around Manhattan with Czinger in a Coda, Friedman pronounced it "a win-win start-up for both countries." Within a year, he promises, there will be 14,000 Codas on the road in California.

Really? Just look at the car. It's a small five-seater with a top speed of 80 miles per hour. It can travel 100 miles on a single overnight charge -- under ideal weather and topographical conditions -- so it's useless to you if you have to go 101 miles in one day, or even if you have to run out to buy your feverish kid some Tylenol in the middle of the night. Yet at $37,400 (after a $7,500 federal tax rebate), this niche item is more expensive than a bigger, badder BMW. As a matter of fact, the Coda is more expensive than two competitors, the Chevy Volt and the Nissan Leaf, both of which are also wildly overpriced in relation to their capabilities. By the way, it’s not very good-looking.

I've been thinking about buying a Honda Civic, which is roughly the size of a Coda. The sticker price of a basic Civic is $21,000 less than a Coda, but, at 29 MPG, the Civic's gas consumption costs $902 more per year than the Coda’s electricity usage (assuming 10,000 miles of driving at $3.00-per-gallon gas and seven-cents-a-kilowatt electricity). In other words, if I got the Coda, I could make up the cost differential in -- 23 years! Why would I do that? Why would anyone?

Small wonder that Honda's chief of research and development, in a moment of candor, announced that his firm "lacks confidence" in the electric-vehicle business. And small wonder that the Coda's latest target market is not California's driving public but the U.S. government, which can always borrow more money from China to buy cars if it doesn't have enough of its own.

Let the Chinese try to square this circle. They've got money to burn. We do not, which is why it would be far more sensible for the U.S. to promote electric-car research as a hedge -- while concentrating on stimulating fuel-efficiency advances in the internal combustion engine, through moderate increases in gas taxes and other conservation incentives. Such a strategy would be less dramatic than China's latest Great Leap Forward, but more practical, more sustainable, and better suited to a society traditionally skeptical of central planning.

By Charles Lane  | September 28, 2010; 4:03 PM ET
Categories:  Lane  | Tags:  Charles Lane  
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Comments

Every car manufacturer is working on some version of the electric car. Flathead is just mad that the government isn't involved.

Posted by: sold2u | September 28, 2010 6:17 PM | Report abuse

This stream-of-consciousness is riddled with folly. Let's just keep it macro: it may be the case that supply shocks will eventually result in lower consumption (and lower prices), but is that really the way to get there? By constricting supply so much that no one can afford gas? Isn't it better to incur costs diversifying our energy sources -- for a hundred different reasons -- than it is to incur those costs when we have a crisis? Which country will be stronger when the price of gas hits $4 per gallon again: the U.S., where nearly everyone is oil-dependent, or Brazil, where every car takes either oil or domestically-produced ethanol?

Posted by: rds16 | September 28, 2010 8:50 PM | Report abuse

If we were to have no changes in the future, this person would be wise. But we do have changes to be ready for.

So this is blather.

Posted by: GaryEMasters | September 29, 2010 6:46 AM | Report abuse

"...since such drastic fuel-tax increases would crash what’s left of our economy."

Well, this is exactly why we should put into place policies that get the country off oil. No single issue should be able to cause the collapse of the country. That is addiction and addiction helps no one but those who sell us the "drug" - in this case oil.


Posted by: kopesky | September 29, 2010 9:40 AM | Report abuse

"Such a strategy would be less dramatic than China's latest Great Leap Forward, but more practical, more sustainable, and better suited to a society traditionally skeptical of central planning."

I assume you do not drive on the interstate freeways. Or Plan to accept social security or medicare? Or take advantage of the protections provided a citizen of the United states? Should we go back in time and take away the civil rights laws that the federal government put into place?

Posted by: kopesky | September 29, 2010 9:53 AM | Report abuse

Flathead's assertion that the government should be more involved in funding research and commercial ventures is flawed because

(a) Funding decisions will be made on a political basis, not on a "who has the better mousetrap" basis and

(b) What makes anyone think a government agency can pick winners better than the army of analysts employed by hedge funds, mutual funds and investment banks? Does the government have some sort of inside information that everyone else doesn't have? Or do we just believe these bureaucrats are better at choosing winners than everyone else? If so, those bureaucrats should leave Washington and join a clean-tech hedge fund. The pay scales for senior analysts on Wall Street pay about 10x GS-15 pay scale.

Posted by: sold2u | September 29, 2010 10:33 AM | Report abuse

...i've wanted to advocate what transitions to electric cars (etc.) have been being confounded by many popular arguments. as with many useful transitions that address complicated "legacy" issues in a large and sophisticated economy, such as that of the USA, already in troubles developing economies strive to avoid in their turn, as the astute learn from such as the experiences of the USA and similar economies, in a sense, the USA's leaders can refer to their followers in development as they seemingly can use "simple" priorities to effect economic development. in brief: the US (and "included") governments (etc.), as in the fairly recent past, and as Mr. Lane has touch upon in this piece, can decide to buy many electric cars (etc.) "for itself"--even if (only maybe, and mostly "symbolically") also along with the enactment of a rather small fuel tax described as a "pay-as-you-go" scheme, and as part of comprehensive plans to "shape" a vigorous market (for "good government and) for electric cars (etc.). in such a way, the "public/private" protocols can--tho of course they might not--be used astutely to expedite priorities/results that nevertheless also can otherwise be promoted, and as variously enabled modest progress is promoted anyway, etc. (little "imagination" is needed to take note of the vast potential for procurement that government has always been--and often apart from any worthwhile reports on wasteful spending that also are still rightly rather daunting, etc.)

Posted by: cdmcl3 | September 29, 2010 10:48 AM | Report abuse

"Let the Chinese try to square this circle. They've got money to burn. We do not, which is why it would be far more sensible for the U.S. to promote electric-car research as a hedge..."

That is exactly the opposite of how this country was built. We were a society of doers. If we had sat around talking about taking away the country from the societies that already existed here, we never would have built the country we all recognize now...

Hmmm, maybe you ARE on to something. Let the next superpower control the world. We won't be in the cross hairs of world criticism.

Posted by: kopesky | September 29, 2010 11:11 AM | Report abuse

The thrust of this article is right on target, particularly "Let the Chinese try to square this circle. They've got money to burn. We do not, which is why it would be far more sensible for the U.S. to promote electric-car research as a hedge..

My one contribution to this discussion would be that any meaningful near term advances will be through hybrid/electric technology...

Posted by: amresin | September 29, 2010 12:13 PM | Report abuse

It looks like the electric car is here to stay. It's been stalled in the water for a long time. Will it fix our economy? Let's hope. Will it end our addiction to foreign oil? Let's hope. I'm surprised the naysayers like the author of the above article aren't more positive. What do we have to lose? And must all new cars be like the Ford F 150? Hey I own one. A 1998. It's a great truck. But times change. Mr. Lane: do you not want times to change? On some level, none of us do. But this is an easy one. EV's are clean and quiet. Eventually they will be cheap. Good luck with the whining.

Posted by: lmoroughan | September 29, 2010 2:40 PM | Report abuse

I've been driving an EV for 8 years and charging it with kWh generated by sunlight falling on my roof. My electric bill is a mere $100 per year for both the house and car. I've driven 86,000 miles since 2002 and spent not a dime for gas.

EVs require virtually zero maintenance and the batteries in my car are still as robust as when new.

I've driven the new EVs (LEAF and Volt) and can assure you that they will sell as fast as Nissan and GM can build them. No guilt driving on domestic energy with no pollution.

Posted by: PaulScott | September 29, 2010 7:23 PM | Report abuse

But if you install solar panels on your home (which we just did, leasing the system for 20 years and cutting our monthly average electric bill from $125 to $50 - including the lease fee and the payment to our utility company to be connected to the grid), you can become a net electricity generator and use the "excess" electricity you're generating to power your Nissan Leaf...which we'll be doing when we take ownership in February. That's a ZERO DOLLARS gasoline bill for my daily commute in the L.A. area, and ZERO pollution. We recommend the strategy to all!

Posted by: marcywrite | September 29, 2010 10:49 PM | Report abuse

But if you install solar panels on your home (which we just did, leasing the system for 20 years and cutting our monthly average electric bill from $125 to $50 - including the lease fee and the payment to our utility company to be connected to the grid), you can become a net electricity generator and use the "excess" electricity you're generating to power your Nissan Leaf...which we'll be doing when we take ownership in February. That's a ZERO DOLLARS gasoline bill for my daily commute in the L.A. area, and ZERO pollution. We recommend the strategy to all!

Posted by: marcywrite | September 29, 2010 10:49 PM | Report abuse

But if you install solar panels on your home (which we just did, leasing the system for 20 years and cutting our monthly average electric bill from $125 to $50 - including the lease fee and the payment to our utility company to be connected to the grid), you can become a net electricity generator and use the "excess" electricity you're generating to power your Nissan Leaf...which we'll be doing when we take ownership in February. That's a ZERO DOLLARS gasoline bill for my daily commute in the L.A. area, and ZERO pollution. We recommend the strategy to all!

Posted by: marcywrite | September 29, 2010 10:50 PM | Report abuse

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