Saturday, November 25, 2006

Who Killed The Electric Car?

I wasn't able to see this movie in the brief time it was in theaters, but I was able to rent the DVD this weekend soon after the video was released. Since I knew Chelsea Sexton well while she worked on the EV1 program at Saturn and was involved in this program perhaps longer than anyone else on the sales and service side at Saturn I was pretty disappointed in the movie.

While I understand (and share) the enthusiasm for electric cars shown by Chelsea and the rest of the cast and crew of the movie, I think they lost a great deal of credibility by not providing a more balanced view of the issues at hand.

Additionally, the movie glossed over the facts that other manufacturers (including Honda, Toyota, Nissan, and Ford) had EVs available in California in the late 1990s, but really portrayed General Motors as the evil-doer among the manufactures. The fact is that GM made the largest effort by far of any of the manufacturers on EVs yet they get no credit at all for the effort. The movie just blames them for the end result of there being no OEM produced EVs for sale in the state.

Here are some facts that were glossed over by the movie makers:

1- GM spent over $1.5 Billion producing and marketing the EV1. With very few exceptions, the consumer marketing was limited to California and Arizona where the cars were available to lease. So, asking someone in Kansas or who didn't live in California between 1996 and 2000 if they were aware of the car is nothing more than a cheap stunt.

Yes, some of the ads portrayed in the film were a bit "dark" and I agree that some of the ads were pretty esoteric, but these were not used very much. The majority of the ads included billboards with a clear photo of the unique shape of the car with the statement "The Electric Car is Here." Newspaper ads also had a much more upbeat image and the PR efforts, the press coverage, the hands-on marketing efforts (in which Chelsea participated) put the cars in the hands of thousands of Californians and Arizonians for test drives during the time it was available.

Do the math: best case, GM was geared up to manufacture 600 or so EV1s per year. If the goal was to sell these cars, the best way to spend the money was to go directly to potential buyers, not to use expensive mass media. GM did both.

2- The state of California was talking out of both sides of their mouths with the mandate.

I was there in Sacramento. On two occasions, bills to open the HOV lanes to EVs with one driver were vetoed by then Gov. Pete Wilson. This law was later passed and now helps thousands of hybrid drivers enjoy these usually empty lanes during rush-hour traffic. This same incentive would have been essentially free to the state to provide to EV buyers during the critical period of the vehicles' birth. It was never passed until years later.

The state promised the manufacturers that they would support the sales under the mandate by purchasing or leasing EVs for use in state fleets. As far as I know, they only leased 8 EV1s and a few dozen S10 electric trucks... Not the hundreds they had promised. Even the state that imposed the mandate wouldn't lease the cars. They argued that they were too flashy for use by their employees.

When the first batch of EV1s were leased in late 1996, the California DMV dragged their heels for months before they issued license plates. They claimed that the cars couldn't be registered because they did not pass the state's tailpipe emissions test. Battery powered electric vehicles like the EV1 don't have tailpipes and they produce no on-board emissions. This resulted in the dealers needing to issue and reissue temporary paper tags to the leasees of the cars. So you had one arm of the state mandating the sale of the cars (as early as 1990) but the other not able to provide them with license plates nearly seven years later.

And then there was the issue of public charging. People who drove these cars realize that the vast majority of the charging took place in the owner's homes and garages but that public charging was a way of assuring the public that they could charge them while out and about if needed. I was at meetings of the CARB and the CA Energy Commission where the bureaucrats said "GM is going to make all the money selling these cars, they should pay for public charging." First, the horizon for profit on EVs was many years away and let's remind the state that they were the ones with the mandate for hundreds of thousands of these things on the road in a very short amount of time. Anyway, GM ended up floating the bill for the vast majority of the public chargers in California and Arizona. I think that around 1999 there were 500 such sites available to drivers in California. Additionally, partnerships with other companies like Costco, the Sacramento Municipal Utilities District, Southern CA Edison, Fry's Electronics, and others I can't remember now, resulted in a lot of the visible chargers. In fact, most Fry's and Costcos in the state set aside prime parking spots and split the bill to install publicly accessible and free 220v inductive and conductive chargers. This made sense, it could take a couple of hours to charge a NiMH EV1 so it made sense to have chargers in places you would want to spend time... or might be anyway. Other chargers were visible at LAX, the Sacramento airport, some parking structures in key areas, etc. But the state had little or nothing to do with most of these. In fact, they often stood in the way because regulations around permits and handicapped parking requirements made many of these installations much more painful than need be.

3- The CA Mandate in itself was part of the problem.

Now, this is greatly based on my opinion, but I base this on facts. GM demonstrated the Impact EV prototype and announced that they would pursue a consumer version before the state created their mandate. In fact, the movie even supports this and shows how the Impact emboldened the CARB regulators to create the mandate.

However, the mandate was so vague, so wrongheaded, and so impossible to meet (in my opinion) that GM and the other manufacturers were forced to both fight the mandate and market the cars at the same time... as portrayed in the movie. This wasn't a grand conspiracy but rather a simple question of them being backed into a corner.

I don't know if GM would have pursued the EV1 with the same gusto if the mandate hadn't been in place but they also could have moved more carefully and the market could have responded in a natural time if it hadn't been there. They may still be selling the cars if the mandate had been more reasonable. I believe that it wasn't the death of the mandate that was the last nail in the coffin of the EV1 but rather the mandate itself that set this course in motion.

The other problem not mentioned at all by the movie is that during this time, several Northeastern states including New York and Massachusetts decided to copy CARB's emissions rules for internal combustion engined cars. They did not omit the EV mandate from these rules. In other words, the mandate effected not just sales in California but also in the cold climates of these other states. The fact is that EVs, at least in the forms available in the late 1990s, would be barely usable in Northeastern winter conditions. Freezing temperatures would reduce the 60-80 mile range of a lead-acid EV1 to a fraction of this distance, perhaps by as much as 60-80%. NiMH batteries weren't that much better in sub-freezing temperatures as far as I know and they had a lot of other problems in hot and humid temperatures (like summers in Massachusetts).

Anyone who has tried to crank their frozen car over on a cold morning in Detroit knows all too well that chemical batteries lose energy in the cold. It's one thing to have to crank your car over... it's another to entirely rely on the batteries to get you to work. The other thing is that EVs lack an internal combustion engine... the source of the heat that warms the passenger compartment on cold days. The EV1 used a tiny heat pump for heating and cooling... this is fine in mild climates like Los Angeles but useless for heat if the ambient temperature is below 45 degrees or so. The S10-electric used a small gas-fired heater for cabin heat... but this wouldn't allow the EV1 to meet the mandate in this form would it? So, killing the mandate in California would also kill it in MA and NY and neither of these states was willing to back down on their own.

In other words, the regulators knew little of the science and consequences they were forcing.

The other issue was that the mandate had things all backwards. It forced the manufacturers to sell x% of their cars as electrics but did nothing to push adoption of the products or create a market. Tax breaks for leasing or buying EVs were complex to get and not very big (the movie capitulates on this point). Other incentives like simple HOV lane access were unavailable. EV leasees had to install a 220v charger in their home in order to use the car but the state and cities did nothing to ease the permitting process or the cost on these users. It could cost thousands just to install the charger and comply with city requirements. In fact, I recall that Southern California Edison worked tirelessly to help the Saturn EV specialists negotiate this process but it was still complex and expensive.

In fact, one of the reasons it was actually fairly difficult to qualify to lease an EV1 (as the movie shows) was not because GM had some dark hidden agenda, but rather they had to take the time to figure out which city, county, and state tax incentives the customer was eligible to receive (so a lease price could be calculated). Additionally, they needed to ensure that they owned or rented a home that could accommodate the charger installation and an estimated cost could be provided to the customer before they signed the contract.

The other thing about the mandate is that it was not really created in the interest of cleaning the air in California. Despite what the movie makers and activists believe, the mandate was likely the least efficient way to clean the air in California. In terms of dollars spent per pound of emissions removed, forcing the sale of EVs in California was a politically easy and high-profile move by the CARB, but was not a wise use of consumer money. Think about it. Big Diesel trucks in California are still unregulated. Unlike a lot of Eastern states, there are no regular safety tests of olders cars in California. Smog checks are easy to get around but full inspections are not (I've owned a lot of older cars... don't ask me how I know about this). Taking one beat up and ill-tuned Chrysler Cordoba off the street and replacing it with a brand new Chevy Cobalt will do more to clean the air than taking someone ready to buy a new BMW and getting them into an electric car instead. Heck, it would have been cheaper for GM to give poor drivers with substandard cars new Cobalts instead of building and marketing the EV1. They sure as heck aren't selling them for a profit anyway. If it costs GM about $8k to build a Cobalt, they could have given away 187,500 of them them to replace old smoky cars for the money they spend on the EV1. That's more Cobalts than they sold all of last year and these look like miracle cars compared to the technology of 1977.

No, CARB's regulators were not thinking rationally when they came up with the mandate. I think they did it for political reasons then backed themselves and GM into opposite corners where neither party could back down.

4- The EV1 wasn't the miracle car it's portrayed to be in the movie.

The movie claims that the cars were maintanance and trouble free miracle-cars. In fact, there were many many problems with the cars in consumer hands. Besides a recall for charging ports catching on fire, battery failures were common along with a rash of other issues. Some owners ended up driving Saturn loaner cars for months while waiting for parts or fixes for their EVs. These were essentially hand-built cars that used bleeding-edge technology of the time. They weren't so trouble-free that service departments feared losing their profits... rather they feared clogging up their service drives so that they were unable to service their regular cars!

Granted, some of these issues could have been prevented. GM's union contracts forced them to use A/C Delco lead-acid batteries for the first generation of the cars. After Delco was sold off to become Delphi (we all know now how well that has gone for them), GM immediately switched to Panasonic batteries which not only cured many of the warranty expense problems but also increased the nominal range of the cars immensely! In fact, I would argue that the car to have was the Panasonic-equipped lead-acid EV1 which had more than enough range for most commuters (70-80 miles on average) with much lower cost than the NiMH batteries of the series 2 EV1 which had a range of 120 miles or so, but had overheating problems, would create copious amounts of moisture while charging (to the degree that some owners saw gallons of water accumulate under their cars). With mass production, Pb batteries in the volume needed for the EV could cost less than an internal combustion engine. At the time, the NiMH batteries in that volume cost nearly $50,000... for a car with a capitalized least cost of $34k. It doesn't take a Harvard MBA to figure out that this isn't a money-making formula. Anyway, I digress.

I agree that EV1 drivers, for the most part, were highly enthusiastic about their cars as was I. However, this had nothing to do with their reliability and low maintenance needs but rather the styling, the performance when they were running, and the feeling of driving such a quiet and clean car.

5- GM knew they wouldn't make any money on EVs in the short term.

The movie makes a good point that GM made a lot more money selling Hummers than EV1s... in fact they bring in Ralph Nader to make this point. True, and gasoline cost about $1.25/gallon at the time and SUVs were selling like air conditioners in Texas. However, I think this point oversimplifies the point and attempts to make GM planners look like idiots that they were not.

The engineers and planners at GM knew that EVs were more easily compared to personal computers than to cars when it came to technology updates. Moore's Law certainly held true during the live of the EV1. The first generation car was highly advanced but very expensive to build. The second generation that came out in 1998 was already much further advanced, with control electronics (the brain of the car) half the size and half the cost of the original. Production of advanced batteries has also increased substantially with the advent of laptop computers, PDAs, cell phones, and digital cameras in the past decade. One of the reasons that the new Tesla electric car is able to drive the range it does is because they are able to use thousands of standard sized Lithium Ion computer batteries rather than the expensive purpose-built batteries of the EV1. GM knew that these changes were coming and that they could have a head-start on electric cars with the EV1.

However, the fact is that GM didn't make any money selling internal combustion engined cars either! GM hasn't made money selling and producing cars in North America in a long time. Their only profits this decade came from financing and their mortgage division. GM had a lot of bigger problems than figuring out how to make money selling a few thousand electric cars.

While Ralph Nader and the movie makers like to portray GM and its executives as big, rich, isolated, myopic, evil, and self-serving they had it wrong. GM is not rich. They lose billions of dollars a year selling cars. It's hard to believe, but they didn't have unlimited resources to make everything and given these problems, I think cutting the EV1 program (as much as it pains me) was the right thing for them to do in the short term. Corporations have to be self serving by law... the managers are held responsible for the financial interestes of the shareholders of the company. Mr. Nader may not understand this, but GM managers certainly did in this case.

Personally, I believe that GM's greatest failure with the EV1 was in not using it as an example of their environmental leadership and not moving on from there quickly with something else like hybrids.

Today, despite their sales of hundreds of thousands of gas guzzling trucks and SUVs, Toyota is regarded as the "greenest" auto maker. I agree, their hybrid cars are fantastic for the environment and very well engineered, but I believe that GM had a big opportunity to put themselves in this position and they blew it. Big Time. Hummer big.

Once again, GM is playing slow leader and trying to catch up. They almost act as if $3.00 per gallon gasoline came a total shock to them. It certainly caught their product line-up totally off-guard.

6- There was a deep waiting list for EV1s.

I agree with the movie on this point. In fact, the local event-focused marketing efforts worked and the Saturn EV specialist team indeed created a deep list of thousands of interested people. There was actually a good amount of momentum growing as friends, coworkers, and acquaintances of early drivers saw the cars in action and got to experience them. Large employers in Northern California like HP and Sun Microsystems invited us in for full-day ride and drives on their campuses and many of them began to install free chargers for use by their employees who leased the cars. It was a heady time.

The problem was that there were no cars available to deliver for over a year.

Between the first generation EV1 and the second, GM had huge unexpected delays. It wasn't a matter of simply taking out the lead-acid batteries and popping in Stan Ovshinsky's NiMH packs like the movie alleges. Rather the entire car had to be redesigned to accommodate special cooling requirements and drainage needs of these new cells. Special venting and cooling had to be designed to keep the batteries from overheating (remember, they also leased them in Arizona where ambient temperatures alone could kill a $50,000 battery pack). I think GM jumped into Ovonics without a full understanding of the engineering difficulties their batteries entailed. Even former GM CEO Bob Stempel went to work for Ovonics as their CEO after leaving GM (you can see him in one of the ads shown in the movie). Talk about an old-boy's club.

So, while I think that GM grossly overstates the point by claiming that only 50 people of the list of thousands turned out to be serious, they also ignore the issue that more than 12 months had passed since most of these people filled out paperwork to begin the leasing process and they were finally contacted to see if they wanted the car. Customers lose interest, buy other cars, and just distrust companies when this happens.

My final thoughts:

I like electric cars and I still believe that there is room in our marketplace for them. I personally wish I was driving one now and I wish it could be an EV1... despite the issues, I think was an outstanding product. I also know some of the folks working on the new Tesla and I wish them the greatest of luck.

However, to think that the dimwits running General Motors actually had the forethought or the power to pull off a "conspiracy" like the one portrayed in Who Killed the Electric Car? is just ridiculous. You think if these guys had the wherewithal to sway public opinion to the degree alleged in the movie that they wouldn't first use this power to get people to buy the cars and trucks they already make and to pay what they want for them? Heck, they can't even give these cars away in some cases!

I still live in Northern California and I swear that I don't even know a single person who owns a GM car (including me!). I see some driving SUVs, but can't name a single one who drives a passenger car made by GM (or Ford or Chrysler for that matter). The EV1 was unique for GM in many ways. It was the first time they branded a vehicle "GM" instead of as one of their divisions. It was the first time they put a small corporate team out in the field to handle the sales and service needs of customers directly. It was the first time they knowingly went out to sell a product they rationally knew they could not make money on for years or even decades. And it was the first real opportunity in more than 30 years for them to change public opinion in places like California about their technology, their products, and their company. But they failed.

They didn't fail because there isn't a market for electric vehicles. They didn't fail because they had some grand conspiracy to make it fail. I think the movie made some good points but in my opinion they failed because the regulators and bureaucrats making the rules were themselves shortsighted. They failed because the oil industry (that does have more political sway and money than the car manufacturers... certainly more sway with the recent federal administration) was concerned about the mandate and exercised their political and financial might. They failed because consumers, for the most part, are swayed by fashion and fleeting taste for things like huge SUVs and have short memories about things like oil shortages and high gas prices. They certainly failed because of their own corporate inertia. But in the end, Who Killed the Electric Car? is entertaining and passionate but not the whole story.