To EV or not-EV: that is the question

The Thinker by Rodin

EV = electric vehicle, of course. Next year I am planning to replace my semi-green 2005 Honda Civic Hybrid, a logical choice as I noted at the time. So I’ve been poring over Consumer Reports, principally its last auto issue, studying all the cars on the market and trying to figure out the next one to buy. I want to buy one in 2019 not only because the Civic will turn 15 (it was bought in 2004) but also because it’s likely that its $3500 battery will need to be replaced in 2020. The old one died a week after its warranty ran out; I think they are programmed to die. I’d prefer not to have to shoulder that cost.

The auto industry is in a period of great flux; a problem brought home by GM’s recent plant closings and layoff announcements. The Trump Administration may believe that the oil era will last forever, but the more I study the auto market the more I am convinced the oil era is ending. This is great news if you believe oil use must be curbed to address climate change. What’s surprising is that our automakers have pretty much figured it out too. The electric car is coming and it’s going to kill the internal combustion engine.

This is not wishful thinking. It’s going to happen. There are a couple of major reasons why this will happen. As usual it will be less about the need to address climate change, as it will come down to simple pocketbook issues. Electric cars are an emerging market that you currently pay a premium to own. But that will change. When anything becomes widely mass-produced, it gets cheaper. Electric cars will get much cheaper in the years ahead. The real innovation is these cars in the battery technology.

Yet there’s another reason electric cars will become a no-duh purchase five or ten years from now: they should be much less expensive to maintain. Internal combustion engines are complex beasts. Electric motors though are dead simple. No pistons and cylinders to worry about. The car will not need a radiator or presumably much in the way of oil in the crankshaft. EV owners already know that when it comes to acceleration, EVs can’t be beat. Put your foot on the accelerator and you will find yourself pushed into your seat. And you will pass others by without the roar of an engine. For a while, it will seem surreal.

So GM is actually playing catch up. It’s killing many of its sedans basically because these will eventually be replaced with EVs. Right now, their electric car lineup doesn’t have much to show for it: just the Bolt and the Volt, last I checked. They can’t mass produce a whole bunch of new EV models yet because the demand isn’t there. But that will change as costs come down. People are already deferring car purchases, waiting for the price of EVs to come down, which largely explains the slowdown in car manufacturing. Meanwhile, the EV charging infrastructure is quickly coming together. Long distance travel is no longer much of a concern with EVs because super charging stations are becoming easy to find. We already have a Tesla supercharging station right across the river in Hadley, Massachusetts, about five miles away. You can fully charge your vehicle at these stations in about ten minutes.

Right now the cost of using a supercharger is less than buying the equivalent in gasoline. Most people will charge their vehicles at home at the going kilowatt-hour rate. Add in enough solar panels to your home and after the investment in the panels much of the time you can run your EV for free. Of course, if you don’t choose green energy at home, your EV may not be that good for the environment. But that’s changing too. Here in Western Massachusetts all sorts of megawatt solar farms are going up. And we already buy energy from offshore wind farms.

Spending $100K for a Tesla is out of our budget, but spending $37K or so for a Chevy Bolt is probably not out of our budget, if I assume the $7500 tax credit. To get it though I have to be one of the first 200,000 EV owners and hope the Trump administration doesn’t kill it altogether first. We could buy another hybrid car, but its cost of maintenance over the 10-15 years would make it competitive with a low maintenance EV like the Chevy Bolt. I like EV’s being so much more mechanically simpler and thus cheaper to maintain.

So the EV trend is inescapable. Car manufacturers don’t want us car buyers to focus on this right now because it reduces car sales. There’s a lot of profit as long as car buyers don’t catch on. However, a carbon-emitting SUV you buy today is likely a purchase you will rue five years from now. You will look like a hopeless Luddite. Good luck trying to resell those suckers.

One approach we could use is what a lot of Americans are already doing: defer buying a new car until EV prices go down. I may have to pay another $3500 for a new battery for my Civic, but the car is paid for and it is reliable while being reasonably green. It may be cheaper in the long run. I have yet to test drive the Chevy Bolt, the only EV I am likely to buy. I may not like it. I’ve watched test drive videos of the car and it looks pretty good, but I’d prefer something better but as affordable. It just doesn’t exist yet.

So I might end up with a Toyota Camry Hybrid instead. 48 mpg is nothing to sneeze at, but even with its advanced hybrid technology, it’s clear to me that EVs will displace hybrids too. If I am going to join the 21st century car technology, I’d best do it right with an EV.

Asleep at the wheel

The Thinker by Rodin

Based on reading news reports yesterday, it seems the SUV’s days may be numbered. Yesterday, General Motors announced plans to close four truck and SUV plants by 2010 as a result of shrinking sales for these vehicles. Ford Motor Company has also cut production of trucks and SUVs. Sales of large and midsize sports utility vehicles are down 30 percent compared with the May 2007. To try to get rid of them, Ford is offering substantial discounts. Good luck with that. With gas prices in my neighborhood now at $4.019 per gallon and with the summer driving season just starting, buying a SUV or any vehicle with low miles per gallon looks very stupid.

Despite their popularity, the SUV epitomizes America at its worst. SUVs were always expensive. Double the cost of gasoline and it is like adding an extra hundred dollars a month or more to your car payment. Unless your SUV is paid for, this either makes your SUV unaffordable or moves it into the luxury category. Moreover, the more you drive an SUV the more unaffordable it becomes. Even the automobile manufacturers’ attempt to put lipstick on a pig by making hybrid SUVs has not worked. GMC has sold only 1,100 of its Chevy Tahoe hybrids. That’s 1,100 total nationwide.

Unsurprisingly, fuel-efficient small cars are now hot. Fuel-efficient hybrid cars are even hotter. The Washington Post reports that owners of the Toyota Prius compete against each other to prove they are the more fuel-efficient driver. Also rising in popularity is mass transportation. Overall ridership was up 3% in the first quarter of the year compared with a year ago. In Baltimore, light rail usage is up 17 percent in a year. The Metrorail system here in Washington D.C. is running more and more eight-car trains, and most rush hour trains are still standing room only. While only 5% of Americans use mass transit regularly, you can bet many more wish it were an option and would use it if available. They have just unwisely chosen to live in an area that is not accessible to mass transit. More businesses and governments are allowing employees to work four 10-hour days so they can save on fuel costs.

General Motors seems to have figured out that gas prices will not return to nostalgic gas guzzling levels again. In one of the least surprising news stories of recent months, Rick Wagoner, the current GM chairman and chief executive said, “We at GM don’t think this is a spike or temporary shift; we believe that it is, by and large, permanent.” Which is why it is closing plants and laying off employees. GM has shrunk to half the size it was in its heyday and will now shrink even further. Thousands of American workers are among victims of their unenlightened leadership. Our friends in the North American Free Trade Agreement are also feeling GM’s pains. A plant in Canada and another in Mexico are among those that GM plans to close.

While GM’s sales plunged 28 percent and Ford’s dropped 16% compared to a year ago, some automakers are sitting pretty. Honda Motors, which has engineered fuel efficiency into its cars for more than two decades, reports its auto sales rose 18% in May. Both our cars are Hondas. I have been driving a fuel efficient 2004 Honda Civic Hybrid for three and a half years and routinely average 37 to 40 miles per gallon. We will likely add a third Honda to our family shortly. Our daughter needs a car for college, which begins in August. While we looked at used cars, we found we could purchase a fuel efficient Honda Fit for the same price as a used car that is three or four years old.

America’s love affair with the automobile is destined to downsize in the 21st century, but it will not go away entirely. Clearly, we are now in the transition phase where we have to live within our means in an increasingly expensive world. Unlike the oil shocks of the 1970s, this one is not going to go away. It may moderate from time to time. When even General Motors acknowledges the long-term trend is real, you know the gig is up.

American automobile manufacturers should have learned from the oil shocks of the 1970s. Instead, they chose complacency. Why reduce shareholder profits by making long-term investments in fuel-efficient vehicles? Instead, executives can get big bonuses for short-term profits. Inertia pays because America’s brand of capitalism rewards short-term profit makers. The formula works of course until market forces change the dynamic. Then stockholders get the shaft for their obsession with short term profits. Auto manufacturers like GM are caught flat-footed. This is a company that is so unenlightened that it killed its own experimental electric car, the EV1.

Honda Motors is laughing all the way to the bank. Americans will still need cars, but they will need reliable fuel-efficient cars. The company showed the long-term vision that positioned them well for any change in market dynamics, which will translate into greater market share and greater profits. GM and Ford were largely asleep at the wheel, belatedly reacting to market forces rather than positioning their companies to profit from them. As a result GM and Ford are shrinking.

GM plans to either radically change or sell its Hummer brand. Once the world’s largest automobile company, it now looks in real danger of going out of business. It may join a long list of failed automobile manufacturers.

If I were a GM stockholder, I would be working to fire its whole management team. It needs new leadership with a clue on how to anticipate market dynamics. This way stockholders always win. It needs a consistent long-term vision. More likely though GM will suffer the fate of companies like Bear Stearns, and be sold off in pieces for chump change to some much smarter companies. If that happens, let us hope it is Honda Motors.