Engineers Cast Wary Eye on Role of Electric Cars

By JOSEPH B. WHITE   WSJ.COM  4/26/12

DETROIT—Auto-industry marketers are stepping up efforts to tout electric cars and plug-in hybrids to regulators and consumers, but at a gathering of industry technologists here, senior auto-company executives offered a sharply skeptical view of electric cars, predicting they will remain a marginal part of the U.S. market well into the next decade.

In presentations Tuesday and Wednesday at the annual Society of Automotive Engineers World Congress, senior auto-industry executives in charge of technology strategy, research, and regulatory issues delivered the same message: Barring an unforeseen breakthrough that significantly drops the cost of automotive batteries, fully electric cars and plug-in hybrid vehicles are likely to remain confined to a niche of under 10% of the market through 2025 and beyond.

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"By 2025, we see battery electric vehicles still with too long a payback, and inadequate range," said Joseph Bakaj, vice president for powertrain engineering at Ford Motor Co.

Sam Winegarden, executive director of powertrain-engine engineering at General Motors Co. made a similar point with a chart comparing the amount of energy delivered by a given volume or mass of fuel. On his chart, lithium-ion batteries, used in electric cars such as the Nissan Leaf and GM's plug-in hybrid Chevrolet Volt, were ranked close to zero compared to gasoline and diesel fuels, which delivered the most energy for the least amount of weight and cost to the consumer.

"The rumored death of the internal combustion engine is premature," Mr. Winegarden said.

Chris Cowland, director of advanced powertrains at Chrysler Group LLC, offered some revealing figures. A conventional, gasoline-fueled internal combustion engine and transmission make up about 10% of the cost of a $30,000 car, or about $3,000, he said. Ford Chief ExecutiveAlan Mulally at a green-car forum in New York City last week said batteries for the electric Ford Focus cost $12,000 to $15,000 for a car that is priced at $39,200, about $15,000 more than a petroleum-fueled Focus.

Some industry executives are bullish on electric cars, notably Carlos Ghosn, chief executive of allied auto makers Renault SA and Nissan Motor Co. Mr. Ghosn has pushed an ambitious effort to mass produce electric vehicles, retooling a portion of Nissan's factory in Tennessee to build as many as 150,000 electric cars a year.

Industry executives agree that a large-scale shift to electric vehicles would be the surest way to cut the auto industry's contribution to global carbon-dioxide emissions, which are linked to climate change. Auto makers face pressure from governments in all the major auto markets of the world to reduce dramatically the carbon-dioxide emissions and smog-forming pollutants generated as cars and trucks burn oil. There are also signs—including the strong interest in Tesla's forthcoming Model S electric sedan and Model X electric SUV—that a significant cadre of affluent, trend-setting consumers want electric cars and are willing to pay substantial premiums to own one.

But the industry executives gathered at SAE, many of whom are directly responsible for delivering propulsion systems that are reliable, efficent and cheap, said they are worried that regulatory demands on manufacturers to reduce fossil-fuel pollution don't take into account the difficulty of persuading consumers to give up the power, convenience and comparatively low upfront buying costs of internal-combustion engines.

The doubts about the market appeal and competitiveness of electric cars aired by technologists and engineers at the SAE conference highlight the increasing tensions between Washington and Detroit over fuel economy and environmental regulation. Those tensions were largely sublimated during the past several years as the federal government poured billions of dollars into bailouts of GM and Chrysler and extended low-cost loans to Ford to subsidize development of advanced-technology vehicles, including electric cars.

The Obama administration has put promoting electric cars at the center of its auto-industry policy, offering $2.4 billion in grants from its economic-stimulus program to boost some 48 projects related to electric vehicles or battery production. President Obama has set a goal of putting one million plug-in vehicles on the road by 2015.

All three of Detroit's auto makers and several of their big technology suppliers benefited from the stimulus money. In addition, the Obama administration has loaned money through the Department of Energy to a number of companies in the electric-vehicle business, including start-up electric-car makers Tesla Motors Inc. and Fisker Automotive.

But at the SAE convention, there was little talk of President Obama's electric-car sales goal.

Instead, industry executives with responsibility for technology and regulatory strategies said their companies are focusing on steady improvement of the efficiency of cars fueled by gasoline and diesel as they aim to comply with the administration's proposal to require that auto makers' new car and truck fleets average 54.5 miles per gallon by 2025, roughly double the average mileage of the fleet sold in 2010.

Robert Bienenfeld, senior manager forenvironment and energy strategy at Honda Motor Co.'s U.S. arm, said that by 2025, a customer who buys a plug-in hybrid could wait 10 years to recover the added upfront costs, compared with a 2025 car outfitted with a more efficient gasoline engine and transmission. The payback for an all-electric car would be even longer.

"Long term it's hard to see how (government) incentives address this in any sort of sustained way," he said.

Industry executives at the SAE conference returned repeatedly to their concerns about how much consumers are willing to pay for fuel-saving technology and how ready they are to accept cars that behave differently because of new systems to curb gas-guzzling.

"It's impossible to know what consumer preferences will be," said Richard Gezelle, national manager of technical and regulatory affairs for Toyota Motor Corp., which makes the No. 1 selling hybrid, the Toyota Prius.

Notwithstanding Toyota's relative success with the Prius, Mr. Gezelle struck a note of caution on the potential for hybrid and electric cars. Even as the number of hybrid models on sale has increased, he said, "market share has remained flat at 2.5% to 3%. If you are a hybrid, and not a Prius, you have struggled."