U.S. Money and the Green-car Revolution

The U.S. Department of Energy has granted Nissan Motors $1.6 billion in loans to fund the company's program to build capacity to manufacture more than 100,000 electric cars a year at its plant in Smyrna, Tennessee by 2013.  At the same time, Ford Motor Co. received $5.9 billion in Energy Department loans to help retool plants in Illinois, Kentucky, Michigan, Missouri and Ohio to produce 13 fuel-efficient models, including 5,000 - 10,000 electric cars a year by 2011.  These are good news moves for the green-car movement.  Both GM and Chrysler have applied for loans for expanding their fuel-efficient and electric vehicle models, but until their stability following bankruptcy has been determined they are not likely to secure these loans soon.

Nissan's plan is to be building an all-electric, five-passenger sedan when its Symrna plant is complete. They could be producing upwards of 150,000 vehicles a year at that point.  While all-electric vehicles are a focus, the growth of hybrid vehicles may be more important for the green-car movement and auto-customers alike.  According to industry sales data, from January 2004 to April 2009, about 1.25 million hybrid cars and SUVs were sold in the United States.  The U.S. Bureau of Transportation reported that there were 139 million passenger vehicles on the roads at the end of 2006.  If we assume that 95% of all the hybrids sold in the five-year period 2004-2009 are still on the road, then this segment accounts for only 0.89% of the total fleet.

Hybrid vehicles are a luxury good to a large extent due to their premium sales price.  That has made their sales quite sensitive to the price of gasoline.  As the chart above shows, the 12-month moving average of hybrid cars sold (red line) peaked several months before gasoline prices peaked at about $4 a gallon. With the recession and falling gasoline prices, it is not surprising that hybrid vehicle sales are falling.  Part of the fall, especially for the Toyota Prius, is that the company is preparing to introduce its Model 3, which is supposedly much more fuel-efficient and an over-all better vehicle than earlier models.

Until the government comes to grips with either larger vehicle subsidies or higher gasoline prices, willing the public to buy more hybrid vehicles will be difficult until the recession ends.  Although, maybe the Obama administration is planning on just having GM and Chyrsler make only small, green-cars so the consumers' choices will be extremely limited.