On July 15, Barack Obama came to Holland, Mich., and wrote another chapter in his administration’s Chicago-style, take-no-prisoners political manual. At a groundbreaking ceremony for an auto-components factory, the president called the district’s Republican congressman, Pete Hoekstra, a hypocrite for attending the event after voting against the stimulus funds that had financed the factory. Obama’s cheap shot, delivered while Hoekstra sat a few feet away, drew criticism because such events are usually considered friendly; Hoekstra’s appearance was standard protocol for a congressman showing respect for the presidency.
Largely forgotten in the political scuffle was the company that had received the $150 million gift from the taxpayers: LG Chem, a Korean multinational that makes batteries for electric vehicles (EVs). If the Hoekstra insult represented Obama’s penchant for hyper-partisan politics, the LG Chem giveaway symbolized this president’s appetite for grandiose big-government schemes to remake entire industries.
In the case of autos, Obama has long held a messianic belief that EVs are the future. It is part of his transformational vision that Americans should be greener, more urban, and more like Asians and Europeans in their lifestyle choices, in order to be moral citizens of the planet.
The president is an admirer of South Korea’s “Green New Deal,” a massive, government-funded effort to transform the smokestack-heavy Asian nation into a green economy. Like our Western European allies, South Korea’s government has pledged large sums — 2 percent of GDP — to transform the country’s energy sector with investments in wind, solar, and battery technologies. LG Chem, Korea’s largest chemical firm, has been a direct beneficiary of this government largesse, becoming one of the world’s leading producers of lithium-ion batteries for cars.
Still, creating a Korean market for EVs will likely require even more government intervention — and that’s in a nation where most car buyers live in a cramped urban environment (1,260 people per square mile), which makes frequent recharging convenient, while shouldering $6-a-gallon gas prices. The United States, by contrast, is a sprawling, suburban country, with 94 people per square mile in the lower 48 states — and gas prices half those in South Korea.
LG Chem knows there is no U.S. market for EVs — which is why an $11 billion foreign firm had to be lured with $150 million in welfare from the U.S. government. If there were a future for EVs here, LG Chem would be investing its own money.
Even sales of hybrid-electric vehicles, which can run on gasoline or battery power, are falling after more than a decade in the American market. This year hybrid sales have dropped to below 2 percent of the market, from a high of 3 percent when gas prices hit $4 a gallon in the summer of 2008. In Korea, hybrids have failed to garner more than 0.5 percent of the market.
For all the White House hype, battery power is the technology of the past. Writes Tad Friend in The New Yorker:
At the turn of the 20th century, electric vehicles outsold all other types of cars. “Electric road wagons” and “Electrobats” were popular with women, because, unlike gas-powered vehicles, they required no strenuous cranking to start. (The Columbus Buggy Company proclaimed, “A delicate woman can practically live in her car yet never tire.”) Cars with internal-combustion engines gradually took over, because they were easier to refuel and they cost less, as Henry Ford’s assembly line breakthroughs made his cars cheap enough for nearly everyone.
#page#Over the last century, entrepreneurs tried sporadically to revive the EV market, but they were always tripped up by the vehicles’ Achilles’ heel: A limited range, typically less than 100 miles between rechargings. EVs will never spread beyond urban areas, writes Friend, until America has “a recharging infrastructure . . . that feels as ubiquitous as the country’s hundred and sixty thousand gas stations.”
That might be understating the case. Consider the Nissan Leaf, an EV due this fall that will be equipped with the world’s most advanced lithium-ion batteries. It promises a 100-mile range — after which it will have to be recharged for 8 to 20 hours, depending on whether you want to invest in a purpose-built charging system or use your 110-volt wall outlet. To charge an EV within the five minutes that Americans are used to spending at the gas pump would require an 840-kilowatt connection, which would drain as much power from the grid as a 100-unit apartment building.
Naturally, Obama’s green allies have an answer for this: government billions to develop urban recharging stations, so that EV owners can charge their cars in parking garages during an eight-hour workday. Paris and Tel Aviv are early test beds for this technology, with the French and Israeli governments partnering with a private firm called Better Place. Senate Democrats just picked $5 billion from the Washington money tree to subsidize similar projects in the U.S.
Proponents of such projects say it’s a chicken-egg situation: Drivers won’t buy EVs until the infrastructure is in place, but no one will build the infrastructure until there are more EVs. Hence the case for government subsidies to jump-start the process. Yet given EVs’ limited range and long charging times, and America’s vast sprawl and enthusiastic drivers (about 50 percent more miles driven per capita annually than in Europe), the subsidies required would be monumental.
In addition, what supposedly makes EVs green is that they can use electricity produced from wind or solar power. Yet the most common and cheapest fuel for electrical generation is coal, and charging an EV with electricity from a coal plant merely shifts emissions from one place to another. Running cars on wind or solar power would be much more expensive than using fossil fuels, and thus would require — you guessed it — more subsidies.
Given their inherent fueling and cost disadvantages (an EV power train costs five times as much as one on a conventional gasoline vehicle), electric cars have largely remained toys for the rich. The only fully electric passenger vehicle on the road today is a $110,000 sports car manufactured by Tesla Motors (founded by PayPal multimillionaire Elon Musk). The two-seater, quick and silent, has become a status symbol among California’s wealthy; owners are said to include George Clooney, Leonardo DiCaprio, and Google founders Larry Page and Sergey Brin. But the company has never made a dime.
So, naturally, Obama’s Energy Department invested $465 million this year to help build Tesla’s next big thing — the $57,500 Model S electric luxury sedan. Congress will subsidize the Model S’s wealthy buyers with another $7,500 in taxpayer funds for each purchase.
Musk isn’t the only California millionaire cashing in on Obama’s vision. Former Aston Martin and BMW designer Henrik Fisker also hopes to make luxury vehicles for America’s gentry, so the administration has lined his pockets with $529 million in low-interest loans to make the $88,000 plug-in hybrid Fisker Karma and the $45,000 electric Fisker Nina sedan.
#page#Large automakers scoff that these boutique firms will never be able to build EVs for the masses — which is why Big Auto is getting EV subsidies of its own. It is also getting regulatory help: In an effort to force the production of battery-powered vehicles, Obama has mandated a 35.5 mpg fleet-average fuel-economy standard by 2015. The goal is absurd (the current average for new vehicles is around 25 mpg), and the law is riddled with loopholes — including credits for automakers making EVs.
In this unholy alliance of Big Government and Big Auto, the carmakers exacted their price — more taxpayer billions to underwrite their research, in addition to the same $7,500-per-vehicle tax credit that buyers get for purchasing a Tesla. And since plug-in hybrids like GM’s Chevy Volt cost $40,000 — or about the price of an entry-level BMW — the program amounts to yet another set of subsidies for buyers with six-figure incomes.
In an early sign of his in-your-face political approach, Obama made a campaign stop in Detroit in May of 2007 to confront the Big Three and demand “the transformation of the cars we drive.” He told a roomful of auto executives that they were making the wrong vehicles at a time when their “competitors were investing in more fuel-efficient technology.” He said they had “continued to reward failure with lucrative bonuses for CEOs.” He said the carmakers “refuse to make the transition to fuel-efficient production because they say it’s too expensive.”
Obama compared global warming to the Nazi threat in the 1930s, saying it was “jeopardizing our planet” and risked “setting off a chain of dangerous weather patterns that could condemn future generations to global catastrophe” with “record drought, famine, and forest fires.” He warned of a threat so imminent that it “will require a historic effort on the scale of what we saw in those factories during World War II. . . . It starts with our cars — because if we truly hope to end the tyranny of oil, the nation must once again turn to Detroit for another great transformation.”
Obama promised generous tax incentives and a national overhaul of the health-care system so that automakers could “invest the savings right back into the production of more fuel-efficient cars and trucks.” America may not have been listening to this radical campaign rhetoric, but Obama has kept his promise to the car executives.
When the president makes his planned visit to Detroit on July 30, his first since that 2007 campaign stop, he will extol the success of his government/industry alliance in fighting the climate war. He will visit GM’s Hamtramck plant, where the plug-in Chevy Volt will be assembled with LG Chem’s lithium-ion batteries.
But he will also visit Chrysler’s Jefferson North assembly plant. That sprawling facility makes Chrysler’s most profitable vehicle. It is a product whose resurgent demand has created 1,100 UAW jobs this year alone. It is a plant that needs no taxpayer subsidies, no loans, no handouts.
That’s because the Jefferson North plant makes the gas-guzzling Jeep Grand Cherokee SUV — a car Americans actually want to buy.
– Mr. Payne is the editor of The Michigan View.com and editorial cartoonist for the Detroit News. He can be reached at email@example.com.