Wednesday, December 10

A $50 Billion CalCars Plan to Save Detroit

As the age of oil ends we have stopped buying the cars Detroit makes, so now they don't have the money to build the fuel efficient vehicles we do need.

Yet many near-term solutions such as the Volt (which had been on track for 2010) could have driven us out of the age of oil. We have come to an impasse.

An interesting idea CalCars founder Felix Kramer is proposing would be a way to generate $50 billion for the auto industry and just get us the low carbon driving options America needs.

Put together 5 million deposits on EVs and PHEV orders at $10,000 each.
Give the $50 billion that that would generate to automakers to build the orders.
Refund $7,500 to the buyers within a year via the EV tax credits passed in October.
Allow orders placed up till next April to count towards the 2008 tax year for tax credits.

Between public and private fleets, those buyers could account for nearly a million orders alone. Private fleet orders would come from car share and taxi companies and universities. Some construction companies are paying to convert truck fleets to electric. The Federal government alone buys 75,000 cars a year. There is pent-up demand for the post oil age vehicles.

The genius of the CalCars plan is that it addresses that demand, and utilizes its force in a judo - like move.
WHY ARE CAR SALES FALLING? Not just because of the economic crisis. The more Americans hear that better cars are on the way, the more individuals and fleets will be reluctant to commit to inefficient vehicles whose resale value may fall quickly because they run only on price-volatile, polluting fossil fuels. We can harness these impulses.
As taxpayers, we have already invested in all the R&D that created these vehicles; last year's Energy bill had $25 billion for EV development under Section 136 of the 2007 Energy bill --almost $800 million of that went into the Volt alone. However, getting from the design room to the factory floor has been like pulling teeth.

Ford, for example, has now successfully test-driven its PHEV for over a year with Southern California Edison. Yet, despite a year of real-world driving success, Ford has no plans to produce their PHEV before 2015.

But $10,000 deposits on particular models would enforce specific action, and not waste autocompanies precious financial resources making more of what customers do not want. For small companies, deposits help focus precious resources where they can generate a certain return. Big companies need to have the same focus.

The automakers would not be able to start collecting deposits on the orders till they issue a maximum price estimate and specs. They would be given till Dec. 31, 2012 to fill the orders.

It is a novel idea but not untried. SmartForTwo and Tesla both took deposits to help them fund their production and gage the level of customer interest. But are there five million customers in the country who care enough? I think so.

The extraordinary number of people who were willing to donate their hard-earned money this election season to ensure that the country gets safely out of the Bush Error might suggest that there are more of these idealistic and altruistic people willing to put down hard money on a better future for the planet than the economic news would suggest.

WHY NOT ENLIST THE AMERICAN PUBLIC'S BUYING POWER? We're inspired by how Americans rose to past challenges: We raised $17 billion Liberty Bonds in two years in World War I. And 85 million Americans bought $185 billion in War Bonds during World War II. Especially since dollars back then were worth over ten times more than now, our proposal is small in comparison.
Here's the kicker. Any automaker that wants to receive federal loan guarantees beginning in January 2009 would have to commit by the end of this month to have at least one eligible plug-in vehicle for sale by the end of 2010 in volumes greater than 10,000.

The other funding ideas, such as robbing the Section 136 Innovation funding that jumpstarted the EV and PHEV industries, are counterproductive. So, if you think the CalCars idea is workable, you might want to spread it around.

Photo by Flikr user joshmeister