Like Banking, Auto Industry Needs Cautious Reinvention

Commentary

They want us to reinvent the automobile industry. You’ve heard or read that. Swell.

This industry makes a product beloved around the world from California to China, from Minneapolis to Mumbai. People love cars. We’ve learned to build them so cheaply that even poor people can get behind the wheel or dream of the day when they will.

And now we want to scrap it and do something completely different? The last industry we re-invented was banking. You remember the way bankers used to be: Dull fellows who took our money in at 3% and lent it out at 6%. How unexciting. Then boring bankers reinvented their industry with derivatives, mortgage-backed securities and sub-prime lending. Suddenly, they were rich and sexy.

Now we wish bankers had stayed boring. Yet, we still want to reinvent the auto industry to create energy security and combat climate change.

So that’s what we will do. Change the industry to make it green and responsible, with electric vehicles, preferably recharged at night with clean energy from giant windmills and solar panels.

Everyone is getting into the act. General Motors, Ford and Chrysler are playing ball. Toyota will have a few electric vehicles running around this fall; Nissan/Renault will build EVs for Israel and Denmark, and later for the U.S. Mitsubishi is building a small EV for Japan. Mercedes promises one next year. It’s terribly exciting, but enormous promises are being made on untested technology.

The power is to come from lithium-ion batteries, but as far as I can tell it takes $6,000 to $10,000 worth of Li-ion batteries to allow a car to go 40 miles (64 km) on electric power, and much more to go 150 miles (240 km).

And how about the 40-mile range that some auto makers think is the perfect target for electric-only operation? There’s a statistic that the typical car runs 30 to 40 miles a day, suggesting that’s enough range for most American cars. Who pays $30,000 for a car just to drive to and from work?

We buy vehicles for personal mobility, because they are versatile tools. They take us to work, and from Detroit to Los Angeles, up Pike’s Peak and across the Utah desert with 1,000 lbs. (454 kg) of passengers, 500 lbs. (227 kg) of stuff in the trunk and a load on the roof.

And they’ll tow the boat, too.

Then there are the recharging posts. We will need them, like parking meters, to repower our EV batteries. Maybe we’ll need millions. What will that cost, digging all those holes in the street, and connecting them to power company lines?

No one is against the idea of an EV, and it’s time to start experimenting. They may be workable one day. But it may take decades before we see volume production, and probably not until we can come up with a low-cost battery pack that offers 150-mile range and can be recharged in five minutes.

Meanwhile, the fuel economy of ordinary engines continues to climb. We aren’t reinventing the internal combustion engine, but we are improving it steadily with direct injection, forced induction and dual-clutch automatics. We’ll have subcompacts such as the Ford Fiesta and Chevrolet Cruze getting 40 mpg (5.8 L/100 km) on the highway. It will be difficult to sell expensive electrics or even hybrids against such efficient small cars.

And we don’t know what will happen to the price of fuel. Even at $7 or $8 a gallon in Europe, they have not reinvented the car. They just went to diesels.

Improve, test, experiment, yes. But let’s hope government and industry do not get carried away. After all, reinventing banking did not work out so well.

Jerry Flint is a columnist for, and former senior editor of, Forbes magazine.