The Auto Industry Can Be Saved

November 25, 2008 by preplan

I just read yet another article stating that the American auto

industry is a decade or more away from being able to profitably

produce and market alternate energy vehicles. They have been saying

this for 30 years. The problem is, that compared to gasoline and

diesel powered cars, all electric and electric hybrid cars are

substantially more expensive. Some claim that Toyota loses money on

every Prius it sells. I’m not sure why that needs to be, but let’s

just accept the cost differential as fact. I’ve said it before, the

answer is simple, eliminate the competition - pass legislation

banning the production and import of gasoline and diesel powered

vehicles. Poof, problem solved, now all car companies will be

competing with each other to produce the most desirable next-gen

vehicles. All car companies will not be distracted developing and

marketing a dozen different lines of vehicles that compete with

next-gen vehicles. The rush will be on to design, develop, and tool

up, and as I also said before, if we can produce hundreds of

thousands of tanks, aircraft, jeeps, and heavy weapons in the span

of 4 years during World War II, with our robot driven highly

efficient production methods today, we certainly can do what it

takes to solve this problem.

The focus has been on the cost of the car when in reality the focus

should be on the cost of ownership. Cost of ownership includes the

purchase price, service, and all operating costs such as fuel and

oil. When we look at operating costs and if we come up with the

most cost effective means of fueling alternative vehicles, the

next-gen vehicles win hands down even if you need to replace a

$6,000 battery every 5 years!

Anyone that has been following my articles knows that I have been

pushing the PRE-Plan, a plan to allow every electricity consumer,

individual and business alike, to invest directly in large-scale

renewable energy and get their share of the electricity produced as

their return on investment. I won’t rehash the PRE-Plan, you can

read about it in my book or visit the web site. Lets take two

vehicles, a $30,000 gasoline powered car and a $45,000 all electric.

I’m going to add $5,000 to the all-electric vehicle to invest

(using the PRE-Plan) in large-scale renewable energy, enough to

eliminate my fuel expense for 20 to 30 years. So, I now have a

$30,000 gasoline powered car and a $50,000 all electric.

Let’s assume that gasoline remains relatively cheap for the next

10years ($3/gallon average) and that our cars last exactly 10 years.

An all electric vehicle doesn’t need much regular service, doesn’t

need the oil changed, has an all electric transmission, and is

basically significantly less mechanical than the gasoline powered

cars. We might expect to spend $500 per year on regular maintenance

for the gasoline powered car and perhaps $100 per year for the

all-electric. With current battery technology it is estimated that

we may need to replace the battery as often as every 5 years and

possibly only every 10 years, we’ll go with 5. Let’s assume we drive

15,000 miles a year and the gasoline powered car gets 30 miles to

the gallon.


Gasoline All Electric
Purchase Price $30,000 $45,000
Annual Service $5,000 $1,000
Battery Replacement $0 $6,000
Fuel $15,000 $5,000
Total $50,000 $56,000

The alternative fuel vehicle turns out to be $6,000 more expensive,

but that’s not the whole picture. I said before, the added $5,000 to

purchase electricity through the PRE-Plan covered 20 to 30 years,

yet we are assuming our vehicle only lasts 10 years. That implies

that we have an additional 10 to 20 years worth of pre-paid fuel for

our next vehicle(s), thus reducing the initial costs of those by at

the very least $5,000 each. We can also anticipate that gasoline and

even electricity prices ten years from now will be substantially

higher, substantially tilting the equation in favor of an

all-electric vehicle.

There are a number of advances in battery technology that may

already be nearing production, but even if they aren’t widely

available for ten years, such advances will further and further tilt

the cost advantage of all-electric. These new batteries promise to

receive a full charge in as little as 5 minutes, offer 15 or more

years of useful life, and be relatively cheap to produce and be

environmentally friendly. Assuming all other things remain equal and

the cost of these new battery technologies is the same as existing

batteries, we would end up eliminating the $6,000 battery

replacement cost from the table above and since we have already

pre-paid for the electricity, we eliminate the added $5,000 for fuel

and this holds true for not only our next car but our next two cars;

a total saving of $11,000 per purchase or $22,000.

As long as the auto industry is allowed to produce gasoline and

diesel powered vehicles they will be compelled to do so at the

expense of the environment while pitting their existing gasoline and

diesel marketing strategy against next-gen vehicles. The above

formulas won’t work as well if we assume that automakers can boost

the average gas mileage to 60 miles per gallon, yet that ignores the

reality of our need to eliminate out dependence on foreign oil and

to address climate change. Once again, we tend to lose focus when

we look at the window sticker price in isolation. We should not

allow the car companies to continue adding to the problems of oil

dependency and global warming and the car companies should be

begging the government to impose such legislation, thus eliminating

the fall-back on gasoline and diesel. If the vehicles end up

costing more in order to be profitable, fine, that’s the price we

pay.

One of the things we all know to be true but haven’t found a way to

quantify are the hidden costs of gasoline and diesel powered

vehicles. There are health costs, terrorism tied to our Middle East

dealings over oil, military expenditures, and on and on. We all

know that a gallon of gasoline should cost closer to $10/gallon, we

just can’t figure out how to get from the current $2 to the $10

figure, nor do any of us want that. What we want is for these

sticky problems to go away and for us to be able to drive as far and

fast as we wish and for it to cost little or nothing and cause no

pollution and no hardship.

If we don;t use the PRE-Plan to fund the electricity used to power

all-electric vehicles, we might be looking at electric costs of

around $100/month depending on where you live and the cost of

electricity. For people living in an area where electricity costs

$0.06/kWh, their cost might be less than $50, for people living in

Hawaii or Alaska, thier price might be over $200. With the

PRE-Plan, assuming that the cost to build the reneable energy

projects are essentially the same from one region to the other, the

cost of conventionally produced electricity is irellevant and our

$5,000 investment will purchase all the electricity needed

regardless of if you live in Hawaii or Spokane which have vastly

different costs for electricity. To really understand how we can

save the auto industry, the economy, and the environment all at the

same time, I suggest you read my book. The book was written before

the current financial meltdown but it is even more viable now that

our economy is teetering on the brink of disaster.