Will Plug-In Vehicles Be Obsolete Before They Are Profitable?

Mar. 30, 2010 1:40 PM ETTM, NSANY, AONEQ, HEV, JCI, XIDEQ, AXPWQ165 Comments
John Petersen profile picture
John Petersen

Last week I did a 40-minute interview for Hedge Fund Radio, a weekly investment program hosted by John Thomas, the Mad Hedge Fund Trader. While our conversation focused on the unassailable mathematics supporting my contention that plug-in vehicles are wasteful, I was fascinated by John's description of his recent conversations with Toyota Motors (TM) where Toyota confirmed its commitment to NiMH battery technology for hybrid drive and fuel cell technology for electric drive. It's somehow comforting to know that the world's most successful automaker agrees that the first modern plug-in, GM's EV1, died from congenital birth defects and the same flaws will almost certainly doom the next generation of cars with plugs.

The best part of the interview was that it gave me a chance to clarify and crystallize my thinking on the basic problem of using batteries to replace the fuel tank for an average American who drives 12,000 miles per year and would normally buy a fuel-efficient car with an internal combustion engine. The quick and dirty summary is:

  • In a conventional fuel efficient car, a typical user will burn 400 gallons of gas per year;
  • In a $22,500 Toyota Prius, a 1.3 kWh battery pack will save 160 gallons of gas per year, or 123 gallons per kWh;
  • In a $40,000 GM Volt, a 16 kWh battery pack will save 340 gallons of gas per year, or 21 gallons per kWh;
  • In a $44,000 Nissan Leaf, a 24 kWh battery pack will save 400 gallons of gas per year, or 17 gallons per kWh; and
  • In a $110,000 Tesla Roadster, a 53 kWh battery pack will save 400 gallons of gas per year, or 7.5 gallons per kWh.

Economists would call that a rather shocking example of the law of diminishing returns.

The fundamental problem is

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John Petersen profile picture
I'm a lawyer and accountant who's devoted the last four decades to advising entrepreneurs on corporate finance, SEC registration and reporting, and corporate governance matters. All of my client projects have involved high levels of uncertainty, compressed timelines, and urgent financial needs that demanded unparalleled responsiveness. I know how to get major projects completed on time and within budget. I'm a 1979 graduate of the Notre Dame Law School and a 1976 graduate of the W.P. Carey School of Business at Arizona State University. I was admitted to the State Bar of Texas in 1980 and subsequently licensed to practice as a CPA in 1981. While I don't hold myself out as a practicing accountant, I regularly use my in-depth knowledge of accounting methods, processes, and procedures to offer nuts and bolts counsel to clients who need integrated advice on finance-driven legal matters.As general counsel for the C Change Group, I'm involved in all of that company's domestic and international initiatives.

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