GM 2025: Will General Motors Survive the Revolution in Energy Affairs?
Robert Manning | June 23, 2009
The fate of General Motors, and perhaps the U.S. auto industry more broadly, will ultimately hinge on its success in the transition to the post-petroleum era, a process in its very early stages. Is there a new GM emerging from the ashes of the old, and will it survive beyond the public dole? It is not just about smaller cars that get better gas mileage; it is about positioning the U.S. auto industry for the future.
Betting on the Volt
The U.S. taxpayer, who now owns a controlling interest in GM, has a serious stake in these questions. GM’s futuristic plug-in hybrid electric Volt projects a sense of renewal. However, a recent lengthy analysis in the Washington Post (6-7-09) suggested that however intent GM may be in transforming its image, it is plagued by ambivalence about shaping the car of the future. Look no further than its new Camaro, an all-American muscle car that would be quite at home in the 1960s which, although it only averages 22 miles per gallon, is reportedly outselling Honda’s new hybrid Insight.
Yet GM appears to be betting much of its future on the Volt, a car that can go forty miles (well beyond the distance an average US driver travels in a day) on a single charge. The car, which is due to go on sale later this year, alters the role of the internal combustion engine, which kicks in when the battery wears down and recharges it. Rolling it out will be an impressive show of corporate determination.
But the problem is a bit more complicated. First of all, GM is initially only marketing about 10,000 Volts, and those at a price of roughly $40,000 (although a $7500 tax credit should make it somewhat more competitive). Even if the Volt is reasonably well-received, it will barely make a dent in GM’s bottom line for the near future. It is difficult to see how that adds up to a vision for redefining the company, especially since it is selling off Opel and Saturn, two divisions that many auto industry analysts think are among its most viable.
A Whole New World
We are on the cusp of what promises to be a major transformation of the auto industry: what is likely to amount to a transition away from a petroleum-based economy over the coming decade. President Obama has talked of the goal of a million plug-in hybrids on the road by 2015. Shedding unprofitable obligations and becoming a smaller, more modest car maker may give GM a decent chance at competing in the new, greener auto market. However, the next phase promises no less than the electrification of transport. Viewed from that perspective, the Volt only gets GM into the race for the future.
But to win, place or show, is another question entirely. Plug-in hybrids are also soon to roll off the assembly lines at Toyota. Ford will offer a plug-in hybrid Escape in 2010; Nissan and Honda are also moving in that direction. And BYD, a Chinese company in which Warren Buffet is a major investor, is offering a plug-in hybrid which it plans to sell for some $22,000 — almost half of the price GM plans for the Volt. Moreover, several small automakers such as Tesla Motors in California are already selling all-electric cars, albeit rather pricey ones (in the $100,000 range) and some have begun pilot projects aimed at a transition to electric cars in the near future.
There are however, many questions remaining about the viability of electric cars as more than a niche technology. For starters, the investment in infrastructure is a big question: how to plan and finance adequate recharging stations. Plug-in hybrids are often considered transition technologies to an all-electric or hydrogen fuel cell future. But it may be the case that it is a very long transition, or even that the plug-in hybrid may endure for some time. This is the uncertain and very fluid economic marketplace that GM and other US automakers find themselves in.
This transformation is still in its embryonic stages, but it is not a trend likely to be short-lived. Traditional internal combustion autos are not about to disappear next year or the year after that. But over the coming decade, we are likely to witness a gradual transition to growing numbers of plug-in hybrids and perhaps electric cars. Coupled with looming breakthroughs in commercial-scale biofuels (non-food based ethanol or biodiesel), plug-in hybrids could emerge as a new green favorite.
How high and how fast oil prices rise as the world digs out of the current global recession will be a key factor shaping the pace and scope of change. If optimists are correct and the economy kicks into growth mode sometime next year, expect oil prices, already hovering in the $70 per barrel range, to jump back up into triple digits in short order. While painful for consumers, that would be an important factor accelerating the pace of change, as new technologies would become more cost-competitive. Another key factor may be whether or not Congress passes legislation that places a value on carbon, so-called “cap-and-trade” legislation.
Regardless, change is coming. A revolution in energy affairs is likely to unfold over the coming generation. Once a smart grid is in place, plug-in hybrids may be feeding energy back into the grid overnight. And that is likely to be just the beginning. It is less a question of if than when. And the extent to which GM and Ford and other U.S. firms are able to compete will tell us much about how America fares in the 21st century economy.
Robert Manning is a senior advisor to the Atlantic Council. The views expressed here are solely his own, not those of any U.S. government agency. Photo: Getty Images.
Comments
I would suggest that the atlanticist assign someone much more familiar with new automotive technologies to author articles like this one. GM is not planning a 10K per year Volt output -
one should realize that immediately by the capacity of their battery assembly plant announce the other day. Obviously Manning doesn't keep up with events in this area. Another obvious indication is his claim that electrically propelled vehicles will "gradually" increase in sales volume. It's very very likely that the increase won't be gradual at all - it will be ignited by one of the several advanced new battery designs being worked on , either by A123 Systems (which should commercialixze within two years) or EEstor (which might be ready by EOY 09), or perhaps another. Manning denigrates the 10K production figure of the Volt, but faikls to understand simple amth when he writes as though Obama's dream of 1 million electric cars (which will cost $7.5 billion in subsidies) by 2015 will actually accomplish something. Anyone
with even the most elementary knowledge of the number of vehicles in this country knows that OBama is his usual stupid self - 1 million cars off the gas roles would result in a totally insignificant drop of 1/5th of 1 percent in demand.
Nor is an electric car fleet going to be "efficinet" meaning small and cramped. Nothing could be further from the truth.
And that Chevy Camaro that Manning thinks gets 23 MPG, actually gets 30 MPG on the highway, which is on a par with the Toyota Camry hybrid.
And as for that "infrastructure" that greenwashing local officials are excited about, by the time they build those slow charging, expensive stations, the cars they are targetting will be obsolete and will use gas stations for refueling, just like always. With fast recharging batteries, building new and expensive charging stations is an oxymoron. But then, that's par for the course for our brainless American govt officials.
Where to begin? This author obviously is not very close to the auto industry or his article would read more positively. First, the Camaro gets 29 MPG HWY making it industry leading in mileage in its muscle car segment. I note that, because the author apparently doesn't know that the GM lineup of vehicles has more MPG industry leading vehicles than any other manufacturer. In the Compact Sedan segment, the Chevy Cobalt gets 37 MPG HWY, beating the Honda Civic(34) and the Toyota Corolla(35) and the Nissan Sentra(34)and the Ford Focus(35). In the midsized segment, the Chevy Malibu gets 33 MPG Hwy, beating the Honda Accord(31) and 2010 Toyota Camry(32) and Nissan Altima(31). The 2010 Ford Fusion jumped ahead of the Malibu by one mile(34). The Chevy Impala is industry leading in its segment, getting 29 MPG HWY, beating the Toyota Avalon(28) the Nissan Maxima(26) the Ford Taurus(28)Chrysler 300(26). The Chevy HHR and the new 2010 Chevy Equinox and new 2010 GMC Terrain get 32 MPG HWY, beating the Honda CR-V(27) the Toyota Rav-4(28) the Ford Escape(28)the Ford Edge(28)and the Nissan Rogue(27). The GM 8-seat Crossovers get 24 MPG HWY, matching the Toyota Highlander and Ford Flex and beating the Honda Pilot(23). The Chevy Silverado and GMC Sierra get 21 MPG HWY matching the Ford F150 and beating the Dodge Ram(20) the Toyota Tundra(19)and Honda Ridgeline (20). The Chevy Tahoe and GMC Yukon get 21 MPG HWY beating the Ford Expedition(20)Chrysler Aspen (20) and Toyota Sequoia(19).
In additon, the 2010 Chevy Cruze will increase GM's lead in the Compact Family Sedan segment, when it replaces the Cobalt. The Cruze is currently estimated to get something just over 40 MPG HWY. Plus, the Chevy Spark is coming in the next year or two, delivering an estimated class leading mileage well over 40 in the sub-compact segment. In addition the HHR replacement, the Chevy Orlando, also will exceed 40 MPG HWY.
GM is close to perfecting their Homogeneous Charge Compression Ignition (HCCI) technology that will increase mileage by another 15 to 20%
Then GM will launch the Chevy Volt in November or December 2010(not later this year as the author reported)This game changing plug-in electric hybrid will be game changing in that it will allow urban drivers to go 40 miles per day on eighty cents worth of electricity. (The author doesn't mention that Toyota's plug in Prius production will only be 500 vehicles and leased to government and corporations--and only gets up to 10 miles on electric, maybe). Meanwhile, GM is already working on the Nano lithium technology discovered by Stanford University, which will increase the charging power of a lithium ion battery by a factor of 10. This could give future generations of the Volt a 400 mile range on electric alone. Early adopters will buy up the initial run of the Volt's and then GM plans to multiply the number of E-REV vehicles to at least 7 models worldwide to quickly get the R & D paid for so they can reduce the cost to a more reasonable $24,995-$29,995 per car. The Volt will be produced to run on gas, e85, hydrogen, and natural gas, providing the product to spur development of alternative energy refilling stations.
GM's propulsion, and alternative energy research is light years ahead of the competition. We are already seeing the results in industry leading, superior engineered vehicles over the last few years from GM. When cellulosic ethanol takes off in another year or two, GM already has 4M flex fuel vehicles on the road to make use of this gas saving blend of fuel. GM's electric battery research will come to fruition in just 18 months, and hydrogen fueled vehicles are only a couple years after that. It is the foreign competition that is now chasing GM for fuel efficiency and alternative energy solutions for tomorrows driving--and each month they fall further behind.
I have to agree with the other comments and make a couple of points about the volt that the author doesn't seem to comprehend in this story. If there is to be a conversion to alternative fuels and alternative propulsion it has to start somewhere. The volt may well be 40k in its first generation...but if you have listened to GM officials recently (and as shown on the camaro information this author is not following GM announcements very closely) you would know that GM is already developing generation 3 of the volt which will have a significantly smaller yet more powerful battery and they will get the cost down somewhere in the 20's where many more people can afford it. You would also know that GM just opened the only full scale battery research and development center in the U.S. where it employs the top researchers in the field and is already 2 billion dollars into developing the volt -- a pretty significant commitment to alternative energy development no matter what you think of the volt itself. GM has been clear that they do not expect to make money on volt generation #1 but will realize the benefit down the road in future generations.
The author does not "denigrate" the Volt. Merely raises questions about how it will fare in the new auto universe. The fact remains that the modest numbers of Volts available in 2010, will not make much of a dent in GM's bottom line. As they ramp up --and if consumers like it-- it may indeed dig GM out of the hole it has dug itself in.
None of the facts cited about other GM autos is in dispute (though the comments do read a bit like a brochure).
The point of the article is simply to suggest that GM is not the only one banking on the plug-in hybrid, and pose questions about whether or not a strategy that will succeed and be globally competitive over the coming generation is in place.
Good points all, but the Volt is not comparable to the plug-in hybrids such as the prius or the ford plug-in. Big difference there that is lost in most stories and comments. The volt is ALWAYS on electric power, the prius and the Ford are not -- merely versions of the current hybrids in which you can plug them in to recharge the battery which only runs under certain conditions. Thus the prius is sometimes driven by the battery (about 8 miles I believe on pure electric is the range) and sometimes on an internal combustion engine. The small internal combustion engine on the volt only produces electricity to supply to the electric drivetrain once the battery is discharged -- the familiar 40 miles on pure electric as forecast by GM. That's one reason why it is wrong to lop the Volt at 40k into the same category as the prius or insight or ford in the 20k range. The price difference may well effect sales but it does not mean they are the same vehicle with the same technology. However, the previous poster is right to wonder about the economy of electric vehicles especially since over the last 9-12 months with the dip in gas prices we have seen a recovery of sales of large vehicles and a drop in the sales of smaller more fuel efficient cars. Many of these stories are written with the premise that we are headed to a future with smaller more fuel efficient cars but I still have a family of 6 for several more years and thus my near term personal future has no such car in the cards.
Re: Eestor
Hey anonymous. I am an investor in Eestor, through Zenn Motors. There's no need to denigrate the writer.
Post new comment