Image:Chevrolet Volt
Paul Sancya  /  AP
A Chevrolet Volt at the North American International Auto Show. Automakers are leaping into plug-in technology. One hurdle for buyers: the price.
Image: Paul A. Eisenstein, msnbc.com contributor
By
msnbc.com contributor
updated 10/29/2009 7:39:06 AM ET 2009-10-29T11:39:06

A California-based startup, Fisker Automotive, will spend nearly $200 million to purchase an abandoned General Motors assembly plant in Wilmington, Del., to produce a new line of plug-in hybrid electric vehicles.

The eponymous carmaker, started by Danish car designer Henrik Fisker, hopes to begin production of the extended-range hybrids, code-named Project Nina, by 2012, and is projecting sales could reach 100,000 units — half of that volume geared for export — by mid-decade.

“This is a major step toward establishing America as a leader of advanced vehicle technology,” said CEO Fisker.

Or is it?

Many auto industry experts and environmentalists see plug-ins and a similar technology known as the Extended-Range Electric Vehicle (the Chevrolet Volt is the best-known example) as a practical compromise between conventional hybrids and pure battery-electric vehicles. The latter are plagued by high costs and limited range. Typically after 100 to 150 miles, the vehicles must be parked for an extended recharge that makes long-distance driving impractical.

Plug-ins are similar to the popular Toyota Prius in that they use two interconnected sources of power. The Volt, for example, has enough batteries on board for about 40 miles of zero-emissions driving, enough for the typical American’s daily commute. For longer drives, the gasoline engine kicks in.

That eliminates the so-called “range anxiety” associated with vehicles running solely on battery power, explains David Cole, director of the Center for Automotive Research, or CAR. But Cole stresses that this doesn’t ensure the success of plug-ins and related technology.

The lower cost of electric power, about one to two cents a mile, compared with 10 cents or more for gasoline, is a selling point, but not necessarily an easy one, according to Cole, who  was one of the organizers of a recent conference dubbed “The Business of Plugging In.”

Fisker and GM aren’t the only makers exploring plug-in hybrid options. Ford plans to bring out a version of its own, as does Toyota, which next year will launch a fleet test of a plug-in hybrid version of the popular Prius.

While the technology may make sense to environmentalists and government regulators, the real challenge is to convince consumers, cautions GM’s product development director Tom Stephens. To do that, prices must drop.

Fisker’s first plug-in, the Karma, will cost $87,900 when it debuts next year. Project Nina, named after Christopher Columbus' flagship, is expected to produce a “family” vehicle that will sell for about $39,900 once federal tax credits are included. The Volt, meanwhile, is expected to come in around the same price. In other words, significantly above the average $25,000 price tag of conventionally powered vehicles.

“We expect that price to come down,” said Stephens, the keynote speaker at the plug-in conference. By the third generation, GM is betting the batteries in Volt will be smaller, lighter  and significantly more cost-competitive. CAR’s Cole agreed, suggesting it is possible that “with development,” a lithium-ion battery pack the size of the one in Volt could come down to “$4,000 to $5,000,” compared with $12,000 or more today.

But there are plenty of other “ifs.” For one thing, automakers need to encourage a significant expansion in the list of suppliers producing plug-in parts. That would likely yield new technology even as it drives down costs.

And there are other “partners” that need to come onboard if plug-ins are to become successful. Right now the technology “is a headache for the (electrical) grid,” cautioned Dennis Assanis, director of the University of Michigan’s new energy lab.

While most suburbanites have access to 110-volt power in their garages, it’s less common in urban settings, where a vehicle like Volt might prove especially appealing. And there’s a need to add chargers at offices and parking structures, too.

Automakers like GM, Ford and Toyota have been forming alliances with utility companies across the country, including Michigan’s DTE Energy. “The challenge (to popularizing plug-ins and pure electric vehicles) is the customer experience,” said DTE Chairman and CEO TonyEarley. “It has to be seamless. Consumers can’t be worrying about things like where they can charge up.”

Earley believes plug-ins have a definite advantage over pure battery-electric vehicles because they can instantly switch to gasoline power, and not only because of the added range. That would “give us time to build up an infrastructure,” he noted, something a push to pure electric propulsion would require immediately.

How much that will cost is uncertain, and some experts have forecast numbers that run well into the billions. For his part the Earley believes it will be far less expensive. For one thing, he anticipates most users, at least initially, would charge up their vehicles at night.

“And we’ve got huge excess capacity, off-peak,” said Earley. “So, if we fill these valleys, off-peak, it actually lowers our fixed costs to customers.”

The renewed run-up in the price of oil may worry consumers, but most of the more than 700 participants in the plug-in conference welcomed the news. Every penny added to the price of gas makes alternative power just a little more attractive, said Tony Posawatz, head of the Volt program. If petroleum hit $150 a barrel and stays there, he and others agree, the low cost of electricity would make plug-ins fairly competitive on an operating cost basis.

Pump prices have been rising recently. As of Tuesday, drivers were paying more on average for a gallon of fuel than they did a year ago. Crude oil prices have soared because the dollar, the currency that is used to buy and sell oil, has tumbled.

Despite that, the business case is far from certain, one reason why manufacturers new and old are lining up for government assistance. Fisker, for one, is using a $528.7 million loan, authorized by the $25 billion Advanced Technology Vehicle Manufacturing program, to move ahead on Project Nina.

Every little bit helps improve the business case, said GM’s Stephens, “to make the (plug-in) vehicle more sustainable.”

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