Can Electric Cars Save Detroit, Jobs and the Economy?

Coda's sedan is just one of a small fleet of battery cars appearing in 2010. (Credit: Coda Automotive)

Nobody knows how many people will be lined up at the dealership doors with checkbooks on hand when the new wave of battery electric and plug-in hybrid cars--including the Nissan Leaf, Chevrolet Volt, Coda sedan, Fisker Karma, Wheego Whip Life and BYD E6--enter the market by the end of the year.

It's a no-brainer that green cars--if they're produced in sufficient numbers--will be a boon to the economy, and a rare lift for American auto manufacturing. A new report issued Tuesday by the Center for American Progress, the United Auto Workers and the Natural Resources Defense Council concludes that new vehicle technology could create as many 150,000 U.S. jobs (whether they'll also be unionized is anyone's guess).

Many of those jobs will flee overseas, the report says, unless the Department of Energy continues to subsidize car and battery plants on American soil. "We want to reduce carbon pollution and many unemployed people want to return to work, and building better cars can help with both," said Peter Kehner, executive director of NRDC. The report estimates that the U.S. could capture as much as 75 percent of the "total technology value" (and the same percentage of job benefits) from the new green cars.

Any potential for job creation, of course, is tied to the size of the market for green cars. Several players in the emerging EV industry, from suppliers and auto companies, testified in a little-noticed Senate hearing in February, talking about what could be "a very significant demand gap," as Mary Ann Wright of battery maker Johnson Controls described it. She said the worldwide capacity to build EVs by 2015 could be four million vehicles, but there might be demand for only two million.

The solution, as the suppliers saw it, was for the federal government to step up in the short term and not provide start-up capital for American plants, but actually buy large fleets of green cars. "These fleet programs are a great way to stimulate demand," Wright said.

Federal buy-in is indeed important. The green car market could be slow to develop. "I think pure battery EVs have a relatively limited market," said David Cole, chairman of the Center for Automotive Research. "There's a lot of range anxiety. You have to fill the back seat and trunk with batteries to create a long-range vehicle."

Other barriers to widespread adoption besides range anxiety include high purchase prices (Corolla-sized and appointed cars will cost $40,000), sheer unfamiliarity with new technology, and a lack of dealer networks (at least for the startups). The federal $7,500 tax credit for battery cars will help with the former issue. And their advantages in dealerships will help Nissan and Chevrolet gain market share.

There are a number of surveys that measure potential EV sales in the early years. IHS Global Insight sees three scenarios with the most optimistic (51 percent of the market for battery EVs and plug-in hybrids in 2030) depending on an activist federal intervention in the market. "Business as expected" (ie, limited federal help) gets us to 20 percent market share by that date.

A recent Deloitte survey also sees three possible outcomes, with a conservative volume (again, of both battery cars and plug-in hybrids) amounting to 1.9 percent of a 15 million U.S. car market in 2020, or 285,000 cars and trucks. In 2015, the conservative view is that only 45,000 cars would be sold, making up just .3 percent of the market. The "aggressive" scenario has green cars with a 5.6 percent market share by 2020 (840,000 sold). Deloitte's key takeaway: "Due to barriers such as battery cost and gas prices, adoption will be slow for the first three years, but will pick up as battery costs decrease."

Ending on an optimistic note, there's the report from the University of California at Berekley's Center for Entrepreneurship and Technology last November. It says EVs could account for 64 percent of light vehicle sales in the U.S. by 2030 (when they'd be 24 percent of the cars and trucks on the road). That's certainly encouraging. The report uses the phrase "electric cars," and doesn't clarify if that includes both battery cars and plug-in hybrids.

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