Between the financial meltdown and the auto manufactures bailout it is easy to overlook the long term trends of the auto industry. Only this September GM celebrated its 100th birthday by lifting the wraps off its next generation car, an electric car called the Chevy Volt. Just few days later Chrysler also showcased its own electric cars. With gas hitting more than $4 a gallon earlier this year the American auto manufacturers have gotten into dire straits from poor strategic decisions made in the last decade. But now car companies, ranging from giant GM to Silicon Valley startup Tesla are looking to use technological innovation get ahead. Global warming and national security concerns are driving the market towards electric cars. Electric cars have the potential of being gasoline free zero emissions vehicles (ZEV) when run from renewable electricity.
Earlier this year, Ford was persuaded to keep their light truck plant open in St. Paul. While it is very important to keep today’s automobile manufacturing in Minnesota, we should also be looking towards future. Where will automobile manufacturing be in the next 10 years? Gov. Schwarzenegger recently convinced Tesla to the setup their new manufacturing plant in California instead of New Mexico. What can Minnesota do to compete in Great Electric Car race?
The Electric Car
The quest for the electric car is driven by the need for zero emissions vehicles. But electric cars also have another advantage that will endear them to American drivers; efficiency that does not come at the expense of engine power. It will be possible to get muscle cars, light trucks and mini vans all that give Prius like efficiency. As the realization of electric cars performance spreads throughout the market place, the demand will skyrocket.
However electric cars do have an Achilles heel, the battery. There is no available battery technology that can power a typical car for 300 miles and recharge in 10 minutes. Running out electricity in the middle of the freeway with a six hour recharge time is not an option for consumers. Some companies are releasing niche-market battery-only cars, but the consensus approach is to build electric cars that go for a short distance on battery power then a gasoline powered generator kicks in.
The gasoline generator backed electric car is sometimes called extended range electric car or a plug-in hybrid. These cars are a critical stepping stone towards zero emission vehicles. Even when running on coal-dominated electricity from the grid these cars have lower CO2 emissions than gasoline powered cars. And after the gasoline generator kicks-in they have hybrid-like efficiency.
As battery technology improves the battery range will go up till finally the gasoline generator is no longer needed. Already researchers in Stanford University have developed a material that can create long range batteries that also can recharge very fast. The electric car promises to be a major disruptive technology in the automobile business. And with lessons learnt from the computer revolution the old industrial giants are not going to let the entrepreneurs and venture capitalists get ahead this time.
The State of the Electric Car Industry
Silicon Valley got interested in electric cars about 5 years ago. Tesla Motors, a California startup is producing a high-end battery powered sports car that will never use gas. They use an advanced lithium battery that the gives their car, the Tesla Roadster a range of almost 250 miles without any gasoline and with Porsche beating performance. With Tesla starting to garner positive press, GM launched its own electric car program. Their first car, the Volt goes 40 miles on battery and has an on-board gasoline generator for backup. If the batteries are recharged every night then for the majority of the daily commutes, the car will not use any gas. An unusual approach being pursued by another California company called Better Place. This company is developing an infrastructure to support battery powered cars. They will build rapid battery changing and charging stations. A critical piece of their plan is batteries that can easily be swapped out. This is important since batteries can take several hours to fully charge.
There are many other companies that are pursuing similar approaches. The key feature in most of these plans is high-tech batteries. These batteries are quite expensive but are expected to come down in price as the technology improves. However there are concerns that it will take a long time for high-tech battery technology to be truly ready for the mass market. After the R&D bugs are ironed out it may take many more years to build efficient and large scale manufacturing supply chain.
A Faster Approach
As the technology stands today, the high tech battery is the only bottleneck to an electric car industry. New battery technology is needed to give electric cars a long gasoline free range. But using today’s battery technology will still give about 5 to 10 miles of battery range. A system with economical cars and a network of simple charging stations at workplaces can be built on today’s technology. The simple network of recharging stations could be just outlets at commuter and company parking lots. This network would double the gas free range to 10 to 20 miles.
This is the fastest way to get a large number of electric cars out in the market place. From an environmental perspective it is better to get a million cars that have 20% reduction in CO2 emission than have 10,000 cars that are truly zero emission. And widespread economic benefits only come from mass market products. From both economic and environmental perspectives wide scale deployment of incrementally green cars would be much better than waiting for the best battery technology.
But from a marketing perspective incremental improvements are difficult to sell. Both environmental and businesses interests tend towards wanting dramatic improvements in technology. The paradox of commercializing an emerging technology is that getting to market fast is the critical factor in minimizing costs. A good enough product that gets to the market faster is better than getting a better product later. The key is identifying the minimum threshold that can get the product out into a mass market. Electric cars with simple battery technology are at that point. But someone will have to legitimize this approach.
What can Minnesota do?
The worsening economy is slowing down the nascent electric car industry. Tesla has already announced a delay in starting their new factory. Cash strapped GM may not be able to sell the Volts at as low a price as it wants. In this climate any state or region that can legitimize and facilitate a lower cost approach can attract the industry. Minnesota can take four concrete steps.
1) Legitimize the low tech battery approach. The state can use its bully pulpit and partner with advocacy groups to popularize this approach. The very act of the state pushing the solution can create a seed market of early adopters.
2) Ensure that incentives are properly targeted. The state should ensure that the incentives do not discriminate against electric cars with lower tech batteries.
3) Help with the regulatory framework. The nascent electric car industry will need help dealing with state and federal regulations. Sometimes the regulations may need to be simplified. And sometimes the only requirement is help to navigate complex regulations.
4) Develop a network of simple charging stations. The simple charging stations will typically be standard outlet not unlike the engine block heater outlets common in northern Minnesota. The state can partner with electric utilities and employers to create a network.
5) Create a seed market by purchasing some electric cars for state projects and state needs.
Minnesota has a highly educated workforce and a state government with a history of supporting environmental businesses like wind power. By providing the right incentives we have a great chance of becoming an electric car industry cluster and a leader in the Great Electric Car Race.