One Million Electric Vehicles by 2015? Well, It’s a Start.

In the State of the Union address President Obama announced a goal of 1 million electric vehicles on the road in the United States by 2015.  Part of that plan involves continuation of some existing incentives such as the $7500 credit on a purchase, but some new incentives and actions as well—incentives to communities for vehicle fleet conversions, HOV access and other steps. In addition the GSA will purchase 40,000 alternative fueled and fuel-efficient vehicles as replacements for aging vehicles in its fleets. 1 million sounds like a nice number, and we have to start somewhere, but let’s hope the number is significantly larger.

There are over 240 million vehicles on the road in the US now, and a replacement of 5-7% of those vehicles a year. Those vehicles average about 20+ miles per gallon.  Replacing 0.4% of the fleet with vehicles averaging, let’s say, 100 miles per gallon equivalent, under the most optimistic assumptions reduces our oil-equivalent consumption by about 12 million barrels a year and CO2 consumption by about 4 million tons.  Unfortunately, we import 9 million barrels of oil a day.  However, it’s a start! It also has the effect of stimulating activity in electric vehicles and associated and competitive technologies.  Importantly, it will stimulate activity on increased fuel efficiency of all types.  In my view, this is where we need to focus—set very aggressive targets on average fuel efficiency for each manufacturer selling in the US with a goal to getting the whole fleet—all 240 million vehicles–up to 60 miles per gallon or better in 25 years. That does start making a big dent in CO2 emissions and our dependence on foreign oil. I have written about this in earlier posts, (see TRADE DEFICITS, ENERGY INDEPENDENCE AND, OH YES, CO2 EMISSIONS—November, 2009).  In other words, provide incentives for fuel efficiency in general.  With electric having the potential for the highest efficiency, the credits and other specific incentives there will drive the rest of the industry, but lets get more explicit on very aggressive fuel efficiency targets.  The competitive juices and the resulting innovation will get us there.  President Obama talked about out-competing and out-innovating the rest of the world. That has to start with competition and innovation at home.  More to come.

 

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About Jack Rivkin

Jack Rivkin retired in 2008 as EVP, CIO, Head of Private Asset Management of Neuberger Berman(NB) and from NB's Executive Management Committee. He was also on the Lehman(LB) Council on Climate Change(CC) and the NB CC Fund Advisory Board. He has been engaged with the United Nations and other entities on policy issues related to Private Capital and CC. He is an Associate Fellow of the Asia Society. He has continued on the NB Mutual Fund Board and with his CC responsibilities. He began his investment career in 68 as an analyst at Mitchell Hutchins(MH), and became Director of Research(DOR) there. After Paine Webber(PW) acquired MH, he served as DOR; CFO of PW; CEO of PWMH-the equity trading and investment arm of PW; Chmn of MH Asset Management and President of PW Capital. 87-92 he was DOR and, subsequently, Head of the Worldwide Equities Division of LB. 93-95, he served as a Vice Chairman and DOR at Smith Barney (now Citigroup). He was an EVP with Citigroup Investments 94-01, responsible for private equity investments. He was also an adjunct professor at Columbia University teaching a course in Security Analysis. He joined NB in 2002. He is the co-author of “Risk & Reward—Venture Capital and the Making of America’s Great Industries,” Random House, 1987. He is a regular guest on various media. He is the principal subject in a series of Harvard Business School cases describing his experience as DOR and Equity Head at LB. He has served as a director of a number of private companies and the NYSSA. He is currently a director of Idealab, Dale Carnegie, Operative, World Policy Institute and other private companies. He is a member of the Economic Club of NY, the Anglers Club, Theodore Gordon Fly Fishers, and a lifetime member of Trout Unlimited. He continues to be an active private equity investor when he isn’t fly fishing. Mr. Rivkin earned his Professional Engineering degree from the Colorado School of Mines and his MBA from the Harvard Business School

3 thoughts on “One Million Electric Vehicles by 2015? Well, It’s a Start.

  1. Instead of giving incentives to purchase cars, why don’t we solve two problems with one massive increase in gasoline tax? This will frustrate people from buying gas guzzling cars while helping states or federal budgets. Incentives are an artificial and expensive way to change things. Penalties might work better to motivate people to change their long-established habits.

    • Or maybe we could just confiscate all of the gas guzzlers and crush them. Let’s start with yours, since I define a gas guzzler as any car that uses gasoline. That should cure you of your long-established habit of driving wherever you want whenever you want.

  2. Very tough to do politically at this stage. However, something has to be done about the Highway Trust Fund if Obama is serious about infrastucture spending. Historically Congress has been prepared to raise fuel taxes for the Trust Fund. They have even used gasoline taxes as a part of General Funds. Something could happen there. Unfortunately, the geopolitical situation in Africa and the Middle East could produce the equivalent of a tax by raising the price of oil significantly because of uncertainty and actual reduction in supply.

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