How to Kick-Start the EV Market: Large-Scale Plug-In Hybrid Conversions for Corporate Auto Fleets
The electric car revolution is likely to start out at a walk, not a run, and few EV carmakers are talking about major volume in the first few years. It's possible, though, that the pace of electrification could be sharply increased with conversions of existing fleet vehicles to battery cars and plug-in hybrids. That's the premise of an ambitious Michigan-based startup called Alt E (short for "alternative energy"), and it's also a campaign by plug-in activist and CalCars.org founder Felix Kramer, who would like the Obama Adminstration to get behind the idea with major funding as a way to "cut oil use in half by 2020."
This is a good idea, but obviously a partial solution. We don't have much of a tradition of retrofitting vehicles in the U.S., though efforts like this could indeed take off with fleet operators -- especially with government incentives.
Although the Electrification Coalition (with members from Nissan, PG&E and FedEx) predicts that, by 2040, 75 percent of the miles traveled by so-called "light-duty" vehicles (cars/SUVs, small trucks) could be electric, other projections are much more pessimistic. The Boston Consulting Group, for instance, sees only "limited" penetration by 2020 unless there is "a major breakthrough in battery technologies." Such a breakthrough isn't likely, though batteries are going to get progressively cheaper with economies of scale.
High battery costs make widespread conversion of regular passenger cars to electric drivetrains impractical right now, says John Thomas, CEO of Alt E. But he said that conversions are eminently cost-effective for fleet cars and trucks, which are on the road most of the time. Alt E is setting up manufacturing facilities in Michigan with the capacity to convert 90,000 cars and trucks annually, and it is targeting fleet vehicles, starting with the Ford Crown Victoria in taxi service and the Lincoln Town Car (a popular limousine).
It's not a seamless business case. One drawback of plug-in hybrid conversions for taxis and delivery vehicles is that the recharge periods will take the vehicles off the road. That's the argument made by Shai Agassi of Better Place, who centered his recent demonstration of battery swapping on Tokyo-based taxis. With one-minute swapping times, those battery vehicles won't be out of service for very long.
Alt E has raised $15 million, and has another $18.3 million in state incentives for its 185,000-square-foot factory in Auburn Hills, Michigan. Gulf Stream Coach is an early customer, with a $60 million order to convert 3,000 shuttle buses in four years. Alt E wants to be in full production by the fourth quarter of 2011, but it will have a small fleet of production-intent vehicles by October. "Other companies have done this with onesies and twosies," Thomas said. "We want to take a cottage industry and go big with it."
Thomas and his two top lieutenants are all veterans of Tesla Motors. Thomas ran the program that became the Model, S, Tesla's second entry after the $109,000 Roadster that is a more affordable (but still high performance) battery sedan. He and his colleagues left Tesla when it consolidated all its operations in California. "Building big battery packs, as will have to be done for the Model S to get it to go 300 miles, turns out be the most expensive way on the Planet Earth to buy range," Thomas said. "The packs are heavy, so it's a negative spiral -- you add bigger batteries but that increases weight, and so you need an even bigger battery."
Alt E says the converted Crown Victoria can go from 14 mpg combined to 43 mpg as a plug-in hybrid in "charge sustain" mode (meaning its batteries are depleted, and it's onboard two-liter engine/generator is providing electricity and charging the battery pack). But here's the "uh-oh" part: The conversion will cost $26,500 to $35,000, depending on the size of the battery pack. That's a big upfront investment.
According to Thomas, "People hear that and say, 'holy-moly,' that's way too much.' The battery packs are really expensive, and that's why we're not targeting consumer cars. But for fleets, it's the first conversion that pencils in a reasonable amount of time." Alt E posits two scenarios: If the car travels 30,000 miles a year, payback is in 18 to 20 months. If it is always on the road as a taxi, it could do 100,000 to 125,000 miles a year and "pencil" in only nine months. Alt E claims to have a pile of letters of intent from fleet operators, who would buy one of two platforms (there is a larger one with a 3.3-liter engine) to convert vans, pickups and shuttle buses.
Kramer calls Alt E "big news." He thinks President Obama could leverage concern about the Gulf oil spill by enacting a program he calls "Drive Star" to convert as many as five million vehicles with the incentive of $7,500 federal tax credits that mirror the credits now available for new battery electric purchases. That would be $100 billion in tax incentives, if you're keeping score.
"These conversions are totally viable and will eventually cost only about $15,000," Kramer told me. "If you bought a used F-150 for $5,000 and then got it converted for $15,000, you'd have a $20,000 plug-in hybrid. An added incentive is that it would be a work truck with onboard 120-volt electricity."
I'm all for the federal government increasing incentives for purchasing cleaner vehicles, and they don't have to be new ones. Thomas says that his 90,000 annual conversions would save 114 million gallons of gasoline annually and could even. With 67 million conversions, we could even stop importing oil, he says. But I doubt that volumes will ever get anywhere near that. Conversions are a worthy corollary to putting new green cars on the road, not a replacement for it. Even new federal incentives are unlikely to get masses of people to take that plunge. The main focus has to be on OEMs and startups getting those vehicles into showrooms.
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Photos: Alt E