Scrutiny of Electric Vehicles Follows Bankruptcy of Subsidized Battery Manufacturer

Electric-car-battery manufacturer A123 Systems received $249 million in federal grants. It filed for bankruptcy on Oct. 16, prompting Bloomberg reporter Angela Greiling Keane to look at the progress of President Obama's goal of 1 million EVs by 2015

Keane's piece focuses not so much on the A123 Systems bankruptcy as much as it does the lack of progress on meeting Obama's goal. However, since President Obama's green energy goals have become a campaign issue, this latest 'Solyndra-like' bankruptcy provides fodder for the Romney/Ryan ticket.

"President Obama has put $5 billion in taxpayer money behind his goal of having 1 million electric cars on U.S. roads by 2015. The Republican presidential ticket says it's money wasted on "losers"... (C)ar buyers so far haven't embraced electric vehicles in numbers close to Obama's goal. Electric-vehicle sales since 2011 totaled fewer than 50,000 through September, just 5 percent of the president's target", Keane writes.

"Obama's $5 billion investment in electric cars includes loans and grants to car and battery producers, spending on charging stations and $7,500 tax credits to car buyers. Recipients of loans and grants include Nissan Motor Co., which got a $1.4 billion loan to build the Leaf and its battery pack in the United States; Fisker Automotive, which Republican Paul Ryan criticized in last week's vice presidential debate for building its first model in Finland; Tesla Motors; and A123 Systems Inc., the battery maker that filed for Chapter 11 bankruptcy protection (Oct. 16)."

Despite its auspicious start in 2010, Nissan Leaf sales have been disappointing. According to the Sept. 4 Detroit News, "Nissan Motor Co. said it sold just 685 Leafs in August, down 50 percent from August 2011. For the year, Nissan has sold 4,228, down 31.5 percent." While GM's Volt sales have been much higher, large inventories caused extended halts in production of the plug-in electric vehicle that can also run on gasoline, unlike the Leaf that is only runs on battery power.

Brett Smith, co-director of manufacturing, engineering and technology at the Center for Automotive Research in Michigan was not optimistic on American acceptance of electric cars. "(The business model) isn't there yet for volume. It isn't there yet for reaching the mass consumer. And it probably isn't going to be there for a while."

In addition, a Congressional Budget Office report, "Effects of Federal Tax Credits for the Purchase of Electric Vehicles", questions the efficacy of the $7500 federal credit for new purchases of electric vehicles.

For example, the CBO report states, "Increased sales of electric vehicles allow automakers to sell more low-fuel-economy vehicles and still comply with the federal standards that govern the average fuel economy of the vehicles they sell (known as CAFE standards). Consequently, the credits will result in little or no reduction in the total gasoline use and greenhouse gas emissions of the nation's vehicle fleet over the next several years."

Full Story: Electric car sales falling short of goal

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Irvin Dawid's picture
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A123 accepts Johnson Controls loan offer

Bloomberg News follow-up on the electric-car battery manufacturer's bankruptcy:

"A123 Systems Inc. (AONE), the U.S. electric-car battery maker that filed for bankruptcy this week, won court approval to borrow as much as $15.5 million from Johnson Controls Inc. while it prepares to sell its assets....A123, the recipient of a $249 million federal grant, said it would sell its automotive-business assets to Milwaukee-based Johnson Controls in a deal valued at $125 million. A123, based in Waltham, Massachusetts, listed assets of $459.8 million and debt of $376 million as of Aug. 31 in Chapter 11 documents......"

The Chinese auto-parts maker, Wanxiang Group Corp., had offered to buy the company outright. While it is working on a deal with them, the company preferred to deal with Johnson.
Irvin Dawid, Palo Alto, CA

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