Did GM Secretly Want EV1 To Fail?

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My article on the EV1 and the Chevy Volt last week got an incredible response and seemed to raise more questions than it answered. Many readers had never heard of the EV1 and had questions about it, so before I get to the feedback I thought I would give a few websites that will give you the background of the EV1.

General Motors EV1

California Air Resources Board (CARB)

And now to the questions, which there are plenty.

Bill wrote in and asked:

When people were willing to pay for the E-Cars when the lease ran out, how much were they willing to pay? How much did it cost GM to produce and sell?

It was widely reported that GM was offered $1.9 million for the final 78 EV1’s stored at a facility in Burbank, CA. or just under $25,000 per car. As far as the costs, those numbers are a bit tougher to narrow down. As best I can tell, GM has never announced an actual amount it spent to develop the EV1, or how much each vehicle cost. Development costs were most often rumored to be around $1 billion, but some have said it was closer to half that amount. Per vehicle cost based on the lease amount puts it around $35,000 to $45,000 per vehicle, although some have said as high as $80,000 per car.

From Jim:

I liked the premise of your article. Just one thing I must point out. The lack of a gas engine and generator made the EV1 much more efficient than the Volt. It probably made it possible to increase the battery capacity as well. This might explain the extra mileage it could get.

Jim, I completely agree with you. The added weight of the engine and generator in the Volt must have a detrimental impact on the mileage. But what I don’t understand is why is a gas engine needed on the Volt? Ten years ago, the EV1 with nickel metal hydride batteries could go up to 150 miles without a gas engine. Why can the Volt only go 40 miles on its batteries before a gas engine is needed to recharge the batteries? Seems like a feeble attempt at true innovation. I can’t believe in my wildest imagination that battery technology has regressed in the last 10 years.

John wrote in with the following:

There are issues of mass production (try turning out hundreds of thousands of anything that complicated that must work under the conditions they do), product liability (the reason I suspect GM took them all back), cost/affordability, return on investment, unions, serviceability and training, and more to consider. That's before you even attempt to market and sell it to a public that wanted large SUVs. An aluminum electric vehicle sounds far easier than it is. Hence, no company has successfully brought one to market. Not GM, Toyota, Honda, or the Germans.

Think about it and you will realize your analysis is somewhat shallow and wishful.

Regards,
John

John, I took all of these things into consideration and still can’t let GM off the hook. To spend a reported $1 billion to only turn out around 1000 EV1’s is GM’s fault. GM could have easily doubled or tripled output to drive down the cost per vehicle. After all, every single one they produced was leased. It seems GM never intended to reach economies of scale, or else they would have produced more than 1000 units to drive down the cost per vehicle. This obviously made the final return on investment abysmal, perhaps intentionally on GM’s part. It made it easier to kill the program. GM knew of all of these issues you mentioned before it started building the EV1. They still green-lighted production. To me, this means they were willing to accept the projected return on investment, costs, etc. Your final point that no other manufacturer has done it is incorrect. Toyota built RAV4 electric vehicles at the same time as the EV1 and sold them to the public. They only stopped when the CARB mandate was overturned.

Neal commented:

According to the article I just read in Car & Driver, the Volt is not a hybrid and the 1.4 liter 4-banger drives a generator that only re-charges the lithium-ion battery, as there is no mechanical connection to the drive wheels.

When you cited the near-zero maintenance of the EV1, you neglected battery replacement, which would have been necessary at some point if GM had sold the EV1s to the eager would-be buyers, and probably was a major factor in GM's decision not to sell the cars. When the first of those EV1s needed a new battery, what sort of publicity would have been generated and what effect on the future electric car market do you think would have occurred when that battery swap price was announced?

You are correct Neal. The engine in the Volt does not drive the rear wheels, it only recharges the batteries. As I mentioned earlier, I don’t see why the engine is needed when 10 year old technology in the EV1 didn’t require a gas engine. Also, even though the engine doesn’t drive the wheels, it still burns gas, which is what electric vehicles are supposed to get us away from. Very counterproductive if you ask me.

Regarding the battery technology, that is also why I don’t think GM wanted the EV1 to work. The batteries that were in the Gen 2 EV1’s were nickel metal hydride. These have been proven in the RAV4 EV to run up to 1500 deep cycles before expiring. This is equivalent to 150,000 miles. How many people today drive cars that long? GM would not make any money on replacing the batteries, since at that point owners would simply get rid of the car rather than pay the $25,000 cost for a new battery pack. GM would never offer a product that would consistently run to 150,000 miles before needing replacement. All auto manufacturers work under planned obsolescence. The EV1 had very few parts that would break down that the dealership could make money on.

Art wrote in with a dizzying list of amps, volts, and watts needed to power an electric car. While I am glad I am not an electrical engineer so that I don’t have to think about those things, he did have the following to say:

Do the math & convert what the car uses to kilowatt hours & see what it does to your electric bill.

So in reality, what killed the electric car are the laws of physics.

Sorry Art, can’t agree with you on either count. The EV1 drew 18.7 kWh of electricity to fully charge. The national average cost for a kWh of electricity is now $.11, so a full charge (unless I am drastically overlooking something) costs around $3.00. Given that the average American drives around 50 miles a day, they would have to recharge every 3rd day. So in a 30 day month, they will recharge 10 times at $3.00 per charge. $30.00 a month increase in my electric bill to save buying almost $200 in gas a month is perfectly fine with me. Even GM has said the Volt will cost around $.80 a day to operate, which works out to around $24/month.

And if the laws of physics were that overwhelming, the EV1 would have never been driving down the streets of Southern California, which it did. Toyota also overcame the laws of physics by successfully building the RAV4 EV, and there are a host of small companies such as Tesla building them now. Even Chrysler is planning an electric vehicle capable of going 150-200 miles on a full charge.

The most common point that many people who support GM make is why GM would spend an estimated $1 billion on a car they didn’t want to work. The simplest answer is greed. As I mentioned in my first article, an electric engine means GM can’t make money on oil changes, spark plugs, belts, filters, hoses, etc. A GM report showed that they make a larger profit on $9 billion in sales of parts and service than they do on $150 billion in vehicle sales. GM would gladly ‘waste’ $1 billion in development cost to protect part of $9 billion is sales.

Also, the $1 billion reportedly spent to develop the EV1 was over numerous years. GM spends $5 billion annually on advertising according to their last annual report. So the total development cost of the EV1 amounts to around 3 months of advertising for GM.

In the end I am not sure if I am upset that GM killed the EV1 because of greed, or upset that GM dropped the ball and killed what could have been the first step towards lessening our dependence on oil. The EV1 was not perfect by any means. It had limitations, but so does every car .But it was a start, and could have been built on and improved as battery technology progressed. Given time, I think it could have turned into an affordable and widely accepted method of transportation. Instead we waited 10 years for the Volt, which is in my opinion a worse option since it still burns gas.

At least GM has somewhat regretted the decision. The current CEO Rick Wagoner said in a June 2006 interview with Motor Trend magazine that "Axing the EV1 electric-car program and not putting the right resources into hybrids. It didn't affect profitability, but it did affect image."