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Automakers all charged up over electric cars

Just a few years ago, automakers took a scattershot approach to alternative fuels. But now a consensus is forming that the all-electric car is the wave of the very near future.
Image: Chevrolet Volt electric car
A plug is seen extending from the Chevrolet Volt electric car during the 2009 Detroit auto show.Mark Blinch / Reuters

Just a few years ago, the world’s automakers took a scattershot approach to the growing need for alternative-fuel technologies, pursuing strategies for  everything from hydrogen fuel cells to ethanol, biodiesel and natural gas.

Now a more well-defined strategy is taking shape. Almost every automaker at this year’s Detroit auto show — from General Motors and Ford to China-based BYD — unveiled plans to create a mass-produced electric car within two or three years. The race to go electric is truly on. The biggest question is, who will be first to the finish line?

“Electricity is the future,” said Aaron Bragman, an automotive industry analyst at consultancy IHS Global Insight. “Looking around the Detroit show, it certainly seems as though we’ve decided on a propulsion system for the future. Eventually, all roads will lead to that electric destination; it’s the most efficient propulsion system we have. It’s finally starting to catch up in terms of the technology, and over the next few years there will be a real proliferation of it.”

In truth, Tesla Motors already has won this race. The California-based start-up showed off its $109,000 all-electric two-seat Roadster sports car in Detroit, the only production vehicle on sale to the general public. Tesla also announced it has signed a deal to supply its lithium-ion batteries for an electric version of Daimler's two-seat Smart car.

But the real prize in the race to go electric will not be for a niche sports car or mini two-seater, said Bragman.

“When you create a passenger car that can carry four or five passengers and go 350 miles on a single charge that takes 15 minutes — that would be an impressive feat, and no one has done that yet,” he said.

Several major automakers at the Detroit show said they are hotly pursuing this goal, driven by the rapid development of smaller lithium-ion batteries.

GM said it plans to build a U.S. factory to assemble advanced lithium-ion batteries for its Chevrolet Volt plug-in electric sedan, which the automaker plans to bring to market by late 2010 for a price of $30,000 to $40,000.

Ford said it plans to sell an electric sedan in the United States by 2011, while Toyota showed a tiny electric commuter vehicle called the FT-EV that it plans to sell in Japan, Europe and the United States by 2012. China’s BYD, which doesn’t even sell cars yet in the United States, announced plans to sell plug-in vehicles by 2011. Nissan, which was not represented at the Detroit show, has said it will sell an electric car in the United States as early as 2010.

Tesla, which has encountered many well-publicized setbacks in building its Roadster, is also taking aim at the mainstream market. Chief Executive Elon Musk said the company hopes to unveil its five-seat “Model S” premium sedan next month. The car will list at $57,400, although the aim is to eventually reduce the cost to $30,000, executives said.

The “electrification” of vehicles has the potential to bear fruit for the struggling automotive industry, said Deutsche Bank analyst Rod Lache.

Lache expects to see “tremendous growth” in the electrification of cars over the next few years, rising to 20 percent of the U.S. market by 2012, he said at a conference held in conjunction with the Detroit show.

“It’s driven by policymakers’ concerns about foreign-oil dependence, and also by advances in the safety, performance and life expectancy of battery technology,” he said. “The new lithium-ion batteries can last for 19 years, and even at that point you have 80 percent of capacity left. This is not your cell-phone battery where you throw the cell phone away when you’re done. This is a big advancement.”

Electrification will change the industry's business model, said Lache. An electric car can get 5 miles per kilowatt hour, or 2 cents per mile, compared with 10 to 40 cents a mile for gas-powered cars, he said.

Companies like Palo Alto, Calif.-based Better Place are looking at take advantage of this price differential, Lache said. Companies like Better Place will seek to provide charged batteries to drivers and charge by the mile, he said.

That model could work well in countries like Israel and Denmark where gas prices are high governments are committed to reduce dependence on foreign oil.

“There is so much capital being deployed in this area now that I think it will come quickly and create jobs, and I think the incoming (Obama) administration will be looking at this too,” he said.

The question of which automaker will benefit most from electrification remains open. Toyota just unveiled its third generation Prius hybrid gas-electric car, so it has a "head-start when it comes to managing electrical systems," said Global Insight’s Bragman.

GM also has learned a lot about electric cars through its work on the EV1, the first production-quality battery electric vehicle produced in the United States. The project was cancelled in 2003.

“Any company can take the advantage,” Lache said.

“Electric cars will be the iPods of the future, and we are at the pre-deployment stage,” he said. “It’s not as if we’re at the point where we have an iPod and the iTunes service already established. This is a huge opportunity. Any automaker can take advantage of this big development.”