The End of the Gasoline Age

All of a sudden, the auto industry's movement toward electric vehicles (EVs) has become a stampede. Toyota's (NYSE: TM  ) plan to invest $50 million in Silicon Valley's Tesla Motors got a lot of attention when it was announced last week, but there's much more going on. This is clearly a moment when established global players, emerging-markets powers, and brand-new startups are all rushing in to what seems more and more likely to be a historic shift to electrified transportation.

They're rushing to claim more than just market share -- governments around the world are dishing out subsidies, hoping to speed the transition to a less-oil-dependent future. Here in the U.S., House and Senate leaders, accompanied by representatives from battery maker A123 Systems (Nasdaq: AONE  ) and start-up EV maker Bright Automotive, just introduced an $11 billion plan intended to speed the development of infrastructure needed to support the mass adoption of EVs.

As drafted, the bill would provide up to $1 billion for as many as eight "deployment communities" -- cities and regions that pledge to use the funds to establish public charging stations and other EV-specific infrastructure. Few such stations exist now, but they're seen as key to mass EV adoption, and their development -- along with other infrastructure, such as beefed-up power transmission networks -- is becoming a priority.

A global shift
The U.S. government has been offering alt-fuel-related incentives for years, but they're not alone. Japan's clean-car incentives program has driven Toyota's Prius to the top of that country's sales carts, and China is widely expected to offer incentives to clean-car buyers in the near future.

That latter expectation is probably behind the joint-venture deal that Mercedes-Benz's corporate parent Daimler (NYSE: DAI  ) just announced with Chinese battery-and-auto-maker BYD. The two companies are expected to release a jointly developed car in the near future, likely a Daimler-enhanced version of BYD's all-electric e6.

BYD, which is partly owned by Warren Buffet's Berkshire Hathaway (NYSE: BRK-B  ) , has previously said that it will launch the e6 in the U.S. by the end of this year, joining a long list of automakers promising new EVs by late this year or early 2011.

A whole lot of Leafs
Speaking of EVs due in late 2010, Nissan (OTC: NSANY.PK) on Thursday announced a $1.7 billion investment in a new lithium-ion battery factory in Smyrna, Tenn. When it opens in 2012, the plant will be able to supply battery packs for up to 200,000 vehicles annually -- and right next door is an assembly plant that will be able to produce up to 150,000 all-electric Nissan Leafs a year.

While Nissan probably isn't expecting those kinds of volumes initially -- CEO Carlos Ghosn recently said that the U.S. allocation of 2011 Leafs is already sold out, at 13,000 -- 150,000 Leafs a year is an ambitious number. Nissan is clearly counting on volume to make a reasonable profit at its announced $33,000 price for the Leaf. And they're counting on more than that -- the size of the new battery plant suggests that the Leaf will be joined by other Nissan EVs in the not-too-distant future.

Nissan wasn't the only automaker announcing a battery-plant investment this week -- Ford (NYSE: F  ) and start-up CODA Motors announced smaller, but similar, investments in plants in Detroit and Ohio, respectively. CODA is a southern California-based start-up that is planning to bring a Chinese-made electric four-door sedan to the U.S. market. When? You guessed it -- late this year.

Whether CODA delivers or not, it's clear that EVs are about to hit the mainstream in a big way.

But will any of these cars be fun to drive?
Just in case you horsepower fiends were starting to despair, imagining a future of shoebox-sized cars that sound like sewing machines and look like they were designed by Birkenstock, take heart: According to a report in the U.K.'s Auto Express, Volkswagen's super-mega high-end Bugatti division -- builders of the $1-million-plus 250-mph-plus Veyron supercar, a leading over-the-top status symbol among car-mad hedge fund managers worldwide -- has built an 800 horsepower electric sports car prototype.

It is unclear whether the car, said by someone close to the project to have "absolutely unbelievable" acceleration, will ever see production -- but if it does, expect drop-dead styling, mind-blowing performance ... and a seven-figure price tag.

Fool contributor John Rosevear wonders how long it'll be until Chevy builds an electric Corvette that's as fast as that Bugatti. He owns shares of Ford. Berkshire Hathaway is a Motley Fool Inside Value recommendation. Berkshire Hathaway and Ford are Motley Fool Stock Advisor choices. The Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (14) | Recommend This Article (16)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 28, 2010, at 4:33 PM, paeanhera wrote:

    This may all sound fine and good. Trouble is the powerhouses contribute more to carbon dioxide than any other source (cars, heating the house, factories, for example. Further, the infrastructure is getting old. I wonder if it will bear this additional load. The public has already shown their resistance to paying higher rate to get off fossil fuels or for capital improvements. 230 kv lines are expensive. So are the transformers. Cheap gas and its concomitant urban sprawl is part of something not sustainable in the long run. "The growth economy" is another. Cheap electricity is another. Better fund local small scale power generation projects. This goes much together with encouraging local food production towards something a little more sustainable in the long run, something for the succeeding generations.

  • Report this Comment On May 28, 2010, at 5:47 PM, PositiveMojo wrote:

    Just one minor problem...

    One electic car consumes the power of three homes. Can you imagine the impact on the power grid if three homes were added to every home on your street? Brown outs and black outs would be common place. So there are steps that need to be taken before we can achieve that solution.

  • Report this Comment On May 28, 2010, at 5:48 PM, PositiveMojo wrote:

    Just one minor problem...

    One electic car consumes the power of three homes. Can you imagine the impact on the power grid if three homes were added to every home on your street? Brown outs and black outs would be common place. So there are steps that need to be taken before we can achieve that solution.

  • Report this Comment On May 28, 2010, at 6:13 PM, maiday2000 wrote:

    How about the real problem...you are going the same distance but it costs twice as much! Do you realize we are "subsidizing" these cars to the tune of billions of dollars, and not getting one tangible thing out of it. The title of this article should be, "the greatest wealth destruction of our time."

  • Report this Comment On May 28, 2010, at 9:20 PM, xetn wrote:

    What maiday2000 said. This is the real issue; if EV were a real sustainable business model, NO subsidies would be required. Every entrepreneur with an eye for profit would be going all-out to provide a product.

    All of the people who believe in green technology forget about the fact that battery production and electric production are NOT green.

  • Report this Comment On May 29, 2010, at 7:50 AM, Natador54 wrote:

    @maiday2000 - You're worried about wealth destruction? How is shipping $600B into the pockets of foreign Sheiks, fighting wars, and environmental disasters, all to maintain our oil addiction a good way to create wealth? The transition to cleaner, renewable energy must begin and electric and hybrid cars can make an important contribution toward that goal.

  • Report this Comment On May 30, 2010, at 4:43 PM, BobMichigan wrote:

    Sure, we've heard that before.

    You would think that people who understood markets would understand this: The price of oil will go as low as it needs to go to make electrical the second choice. No conspiracy, just as supplies rise the price will drop until people use it again.

    Unless you tax the .... out of gas, and I have seen no political will to do so. Michigan cannot even raise the gas tax high enough to pay for road maintenence.

  • Report this Comment On May 30, 2010, at 4:52 PM, goalie37 wrote:

    As a shareholder of some "Big Oil" companies, I would like to hear what their plans are. Would the electric recharges be in Exxon stations?

  • Report this Comment On May 31, 2010, at 1:21 AM, dgmennie wrote:

    "The end of the gasoline age" is a bit overstated simply because battery technology (for cars) has not yet kept pace with needs and expectations. Vehicles that travel only 50 to 100 miles between charges will not prove acceptable to a public that can now go 300+ miles between tankfuls using conventional gas engines or hybrids.

    Furthermore, batteries are not a SOURCE of power, they merely STORE (some of the) power generated elsewhere. There are inherent losses in (1) generating electric power, (2) converting it to chemical energy in a battery, then (3) recovering the electricity from the chemical energy to power the vehicle. The current system (bad as it may be) allows stored chemical energy (gasoline) to immediately power the vehicle, eliminating all the energy conversion steps required to go electric.

    The most important breaktroughs (mass-produced at reasonable prices) have yet to occur in the electric vehicle market. Needed are storage batteries with extremely high energy density that can be charged and recharged endlessly without deterioration. These must be coupled with INEXPENSIVE local sources of electricity that any vehicle owner can access, such as arrays of solar cells on home roofs.

    Once the key technical components are in place, demand will permit an electric vehicle market to bloom without government subsidies. Think of the Internet and the personal computer. Nobody had to nurture their evolution with political correctness and tax money. Rather, they are wildly successful and help GENERATE tax money.

    All technical innovation must be viewed in this light to ascertain commercial viability. Creating artificial demand via subsidies is NEVER the answer, regardless of wishful thinking to the contrary.

  • Report this Comment On May 31, 2010, at 1:44 AM, dgmennie wrote:

    "The end of the gasoline age" is a bit overstated simply because battery technology (for cars) has not yet kept pace with needs and expectations. Vehicles that travel only 50 to 100 miles between charges will not prove acceptable to a public that can now go 300+ miles between tankfuls using conventional gas engines or hybrids.

    Furthermore, batteries are not a SOURCE of power, they merely STORE (some of the) power generated elsewhere. There are inherent losses in (1) generating electric power, (2) converting it to chemical energy in a battery, then (3) recovering the electricity from the chemical energy to power the vehicle. The current system (bad as it may be) allows stored chemical energy (gasoline) to immediately power the vehicle, eliminating all the energy conversion steps required to go electric.

    The most important breakthroughs (mass-produced at reasonable prices) have yet to occur in the electric vehicle market. Needed are storage batteries with extremely high energy density that can be charged and recharged endlessly without deterioration. These must be coupled with INEXPENSIVE local sources of electricity that any vehicle owner can access, such as arrays of solar cells on home roofs.

    Once the key technical components are in place, demand will permit an electric vehicle market to bloom without government subsidies. Think of the Internet and the personal computer. Nobody had to nurture their evolution with political correctness and tax money. Rather, they are wildly successful and help GENERATE tax money.

    All technical innovation must be viewed in this light to ascertain commercial viability. Creating artificial demand via subsidies is NEVER the answer, regardless of wishful thinking to the contrary.

  • Report this Comment On June 02, 2010, at 9:45 AM, 60Chevy wrote:

    This shift in energy production will parallel the shift in agriculture that took place 300 years ago. We hunted and gathered food for thousands of years until we developed methods of production. Then the dust bowl of the 1930’s came, and only then did we develop sustainable methods of production. Today we hunt and gather energy. The few super-rich people who control the supply keep most of the wealth. With the emerging sustainable methods of energy production, and the ability to store that energy, the market will fracture into a million pieces and new wealth will be created at the local level. These shifts in infrastructure are very long term investments. The stock market is concerned with the next 50 milliseconds; it’s hard to ask them to invest in anything that is five years down the road. So we ask the government to spend tax dollars to make these investments, to prime the pump. This allows us to compete with other nations where their governments are doing the same. Does the system work all the time? No. Do we sometimes prime wells that never produce? Yes. I understand a sustainable method of production; it produces more energy than it consumes, and does not harm the environment. What is "green" exactly?

  • Report this Comment On June 03, 2010, at 12:33 PM, 60Chevy wrote:

    Oh, and one more thing:

    FedEx just bought 600 trucks with batteries from A123, at $150K a piece. We are talking about a fifty-thousand dollar truck with a hundred-thousand dollar battery. If they had purchased one or two electric trucks, just to drive around and look “green” for the media, that would be one thing. Spending sixty million dollars on batteries is something else altogether. And next year FedEx is planning another purchase of a thousand electric trucks. Soon to follow will be UPS and every other company that delivers bread and soda pop and potato chips and beer, and the US Post Office, and all the taxi cabs, and so on and so on. Soon, highly populated communities will place huge taxes or a complete ban on all diesel powered delivery trucks. “Electric Trucks Only” inside the beltway of Houston, there’s a referendum the people will get behind. When the smog lifts you will see for yourself; the End of Gasoline Age is upon us.

  • Report this Comment On June 07, 2010, at 8:05 PM, 60Chevy wrote:

    Buy on the rumor, sell on the news.

    http://ir.a123systems.com/releasedetail.cfm?ReleaseID=477186

    Electric Transportation, Are We There Yet ?

    Yes.

  • Report this Comment On September 21, 2010, at 11:10 AM, electrobicidotcm wrote:

    We are all fleas on the same dog. People who want continuous economic growth, or think it is good or even possible, need to realize that it is an impossibility. If the population of fleas on a dog, and their levels of consumption, grew uncontrolled, the dog would eventually become ill and then many of the fleas, if not the dog, would die.

    It is myopic in the extreme to think that the only metric by which to evaluate an idea, is whether or not it makes money. On a dead planet, dollars are useless. Dead dog = dead fleas.

    Enough sunlight reaches the Earth every HOUR, to provide all mankind's energy needs for an entire YEAR!

    How stupid is it to keep burning fossil fuels at the rate we are burning them now???

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