Will GM Be Killed By The Electric Car?

John Addison submits : A recent movie and several books asked the question “Who killed the electric car?” then answered GM. Indeed, the major auto makers successfully defeated California’s attempt to mandate that 10% of car sales be electric vehicles [EV]. GM retrieved the EV1 at the end of their lease periods and crushed almost all. Yet, GM and other auto makers have continued to pour billions into electric motors, advanced batteries, hybrid-electric propulsion, and electric vehicles where hydrogen fuel cells supply electricity to electric motors.

The more relevant question is this, “Will electric vehicles kill General Motors?” Most people on the planet cannot afford gasoline powered cars. Increasingly they can save $200 for an electric scooter. Over 30 million people drive electric vehicles. Jonathan Weinert reports on the exploding popularity of e-bikes in China.

As incomes increase, early adopters in China, India and other emerging nations will upgrade to new generations of light electric vehicles [LEV]. Most of these vehicles will have 3 or 4 wheels and carry increasing numbers of passengers and loads.

Established market leaders commonly ignore or sarcastically dismiss low-cost and under-powered alternatives to their market leading products. Initially downloaded music in MP3 players had poor sound quality and was illegal. Now the music industry is transformed as people listen to high-quality music downloaded to their iPods and smartphones.

IBM was so dominant with mainframe computers that it suffered years of anti-trust litigation. Digital Computers sold far less powerful, but cheaper, mini-computers to labs. IBM ignored the threat of the mini-computer until the information technology industry had shifted to networked minis. Continual innovation and dropping prices of chips and networking brought another revolution with PCs replacing mini-computers. Digital did not learn from its own disruptive success and dismissed PCs as useless. Digital was later bought by Compaq, the very company that disrupted the minicomputer success. PCs are now under attack by the Internet. Microsoft is watching Google very carefully.

Just as a body’s immune system will try to reject a newly transplanted heart, successful organizations reject disruptive change. The phenomenon is so common that business schools now require the reading of Clayton Christensen’s The Innovator’s Dilemma and Geoffrey Moore’s Crossing the Chasm. Let us hope that the executives of GM are reading these classics. Reading my book Revenue Rocket is also recommended.

The interiors of vehicles are becoming electronic in everything from displays to entertainment systems to GPS guidance. Under the hood, it is the same story. Mechanical parts are being replaced by electronic components. In hybrid vehicles, electric motors are doing more; the companion gasoline engines are getting smaller. In the future vehicles will be primarily electronic. Internal combustion engines will be retired. Small vehicles not requiring long-range will get their power from the electric grid. Vehicles requiring more range or carrying heavier loads will be electric vehicles with hydrogen fuel cells.
Some at GM get this. GM is currently putting 100 hydrogen fuel cell Equinoxes on the road. A couple of weeks ago, I drove this exciting vehicle on surface streets and on the freeway. It is a powerful car that many would want to own. The R&D people at GM have an exciting vision that includes advanced batteries; regenerative braking; a thin “skateboard” platform common to multiple vehicles; drive-by-wire replacement of mechanical links to pedals and steering wheel; and electric motors. GM plans to start selling its next generation fuel cell vehicle by 2011. GM’s CEO Rick Wagoner has stated plans to lead in plug-in hybrids, when battery technology meets its quality standards. The vehicle will use a big 3.6L engine.

Will the heart transplant take? Or will the patient’s antibodies reject the needed organ? In 2005, GM reported a loss of over $10 billion. Its global market share has shrunk to 13%. Thanks to its pension obligations, labor contracts and overhead, it cannot make a small car at a profit. It focuses on large SUVs and large trucks with gas guzzling engines in hopes of making money. The bulk of the corporate momentum is not in future electric vehicles but in big vehicles with engines.

Toyota, riding on the success of hybrids and more fuel-efficient vehicles, is overtaking GM’s position as #1 market share leader globally. It threatens to beat GM to market with a plug-in hybrid. Within three years, Nissan Motor Co. plans to develop and market subcompact electric cars powered by self-developed lithium-ion batteries.

Honda wowed visitors at the LA Auto Show with its 350-mile range hydrogen fuel-cell Concept FCX, which it will start leasing to consumers and business in 2008. When Honda started selling motor scooters in the U.S. in 1959, GM could not have anticipated Honda’s future success in cars. Now as the global market shifts towards electric vehicles, Honda is also one of the leader’s in selling e-bikes in Asia. Is it déjà vu all over again?

In the sea of change that is beginning, tsunamis are racing to crash on America’s shores. One is Asian production of vehicles with electric drive systems. Another is the disappearance of cheap oil. Another is global demand for affordable vehicles. We will see how skillfully GM navigates in a perfect storm.

John Addison is the author of business strategy book Revenue Rocket and the upcoming book Save Gas, Save the Planet. He publishes the Clean Fleet Report and is a popular speaker.

Comments

[QVM Group:]

Excellent article!

Reminds me somewhat of a quote by philospher Will Durant saying that a nation [read company] cannot be destroyed from without, until it has destroyed itself from within.

2006 Dec 23 09:45 AM

[Angelo Bert...:]

You wrote: "The bulk of the corporate momentum is not in future electric vehicles but in big vehicles with engines."
A lot of people such as yourself are making a lot of noise these days about environmentally friendly unpowered tiny cars. I think it would be a tragic mistake if the nation (and the world) goes down the path of small electric cars. The U.S. (most technologically advanced nation on earth) should be thinking of ways to go forward and not backward with these tiny unpowered death traps. I'll never get rid of my Ford diesel Excursion. Detroit should be thinking of faster and even more powerful and bigger vehicles that could approach aircraft speeds with computer control, or perhaps even go airborn. Let's not get caught up in this temporary fad. Think bigger, faster, more powerful!

2007 Jan 01 11:10 AM

[Mark B:]

Excellent article, I think perhaps the point in all this is can the transportation industry diversify and evolve in the U.S? It's all about the batteries, if the batteries can become capable of meeting the power demands without compromising safety,longevity and dependability along with comparable performance requirements I think that this country will lead the world in future powerdrive technologies. However the road to success will have many obstacles mainly because of fear of change and because of stigma's attached to electric vehicles. Hey dude with the giant diesel truck Electric vehicles can and will in the future be safe large and powerful , stop stinking up my air and causing asthma attacks, dinosaur.

2008 Apr 28 06:40 AM