In 2011 a video entitled Who Killed the Electric Car? was published. It is a very effective bit of propaganda but quite misleading. The key issue left out was the cost of producing the EV1 electric car. About 1100 EV1's were produced by General Motors (GM) and leased to selected drivers at a monthly cost of $250 to $500. The drivers thought that this was somewhere near what would be required to cover the cost of producing them. It wasn't. When the development cost was averaged among those cars their cost was about $340,000 each. That average cost is not the relevant figure. Of more relevance is what General Motors calls the piece cost, which economists call the marginal cost. That cost seems to have been somewhere in the range of $16,000 to $18,000 in 1992. That would be about $25,000 to $28,000 in 2012 prices. About one half of the piece cost came from the propulsion system. The piece cost does not include the cost of equipment and structures and other costs associated with the enterprise. One can get an idea of what price by noting that the price charged for the Tesla electric car in California is $100,000. Only posturing Hollywood types are willing to pay that price. Quite likely GM would have had to sell the EV1 for $50,000 to $60,000 in 1992. The number they would have sold at such a price would have been minimal. Therefore the decision to not to produce the EV1 was quite reasonable and rational. Apparently GM set a list price of about $34 thousand for the EV1 but they did not sell any because they did not want to do so. A $34 thousand price in the early 1990's is about equivalent to $50 thousand in 2012.

However the way GM closed out the program was not reasonable or rational. GM called in the EV1's from drivers who desperately wanted to keep them and GM hauled them to Arizona and crushed them. GM inanely called it recycling. It was a public relations disaster for GM. Alternatively GM could have auctioned them off for probably $20 to $30 million and saved the significant cost of transporting them to Arizona and crushing them. The sales contract could have stipulated that GM would not be responsible for any future costs or accidents due to design flaws of the vehicles. Instead GM incurred a lasting reputation for sabotaging the electric car. It was not true that the top management was prejudiced against the electric car. In fact several top managers were highly enthusiastic about electric cars. However one can have little hope for a company that carried out such a disastrous program as the recall and crushing of the EV1's.

Most of the true story of the EV1 is told in Michael Schnayerson's book The Car That Could which 1996. Unfortunately the story of the crushing of the EV1 came after Schnayerson published his book.

The Electrovette

The story starts years before the EV1 program. In the late 1970's GM decided to design an electric car. It was called the Electrovette, in part because it was a Chevette converted to battery power. Its motor was direct current (DC) and its batteries were zinc nickel oxide. It was significant that the motor was DC because DC motors required the contact of conductors made out of carbon (brushes) with a copper ring (commutator) of the spinning rotor. This led to friction and arcing (sparking) and thus energy losses. The zinc nickel oxide batteries gave a greater range than standard lead acid batteries by cost significantly more. Even with the zinc nickel oxide batteries the driving range was no more than 100 miles.

Kenneth R. Baker was put in charge of the Electrovette program. The motivation for the Electrovette program was the possibility of increasing costs for gasoline. After the development program was completed the price of oil fell due to completely unrelated factors. The Electrovette was deemed to not have a significant market and was dropped.

The Solar Car Race in Australia

In 1985 GM bought Hughes Aircraft for close to six billion dollars from the Howard Hughes Medical Institute, a foundation Howard Hughes had created. Despite several marriages and numerous romances Howard Hughes never had any children and he left his estate to the medical institute. Hughes Aircraft dealt in the most advanced technologies and was heavily involved in the U.S. space program.

Hughes Aircraft did not exactly fit naturally into the GM organizational structure and its management was on the lookout for some way to show its technical expertise could be of value to the automobile company. In 1987 Hughes Aircraft, which built the solar panels for satellites, was invited to participate in a race of strictly solar propelled cars from Darwin in North Australia to Adelaide in the south. Hughes Aircraft passed the invitation on to GM and GM was interested because it appeared quite likely with the superior solar panel technology of Hughes Aircraft and the automotive design skills of GM that GM could win the competition. GM was hungry for something to illustrate that GM was on the forefront of transportation technology and not the technologically stagnant dinosaur it was reputed to be. However when Howard Wilson, the Vice President of Hughes Aircraft, pitched the proposal to Lloyd Reuss, the head of GM's North American operation, Reuss turned it down. On his way out of Reuss' office Howard Wilson saw Robert Stempel, who was in charge of GM's truck and bus operations and GM's overseas operations. Wilson pitched the proposal of GM entering the Australian solar car race to Stempel and Stempel agreed to support it.

GM chose to have its solar racer designed by the talented engineers at the Southern California research and design (R&D) firm of AeroVioronment. AeroVironment had two world-class engineering designers of Paul MacCready and Alec Brooks. MacCready had designed and built the human-powered flying machine that won the long-standing prize money for such a machine. Later he built flying machines for crossing the English Channel, one of which relied upon solar power. Brooks had designed and built a pedal-powered water craft that skimmed the water surface. AeroVironment brought in another world-class engineer as a consultant on the project. He was Alan Cocconi. Cocconi's assignment was to build a device to convert the direct current (DC) from the solar cells to alternating current (AC) so AC motor could be used to propel the vehicle. AC motors did not need the brushes that sapped power and created heat in DC motors. The device for converting DC to AC is called an inverter. The ordinary AC of public utilities has a frequency of 60 cycles per second; the AC for the electric car was set to 20,000 cycles per second.

Alan Cocconi

Cocconi also was able use the inverter to create braking and the regeneration of electricity to recharge the vehicle's battery. When power was not being delivered to the motor the AC motor acted as an AC generator and the inverter converted the AC to DC which recharged the battery. This process was called regenerative braking or regen for short.

The racer had a teardrop design for aerodynamic efficiency with the surface covered with solar cells. The racer was so streamlined that its drag coefficient was only 0.12 as compared to a value of about 0.25 for ordinary production cars. The proposed design was accepted in Detroit thanks to the support of Robert Stempel, who had become a staunch advocate of electric car technology for GM. It was built and in the race starting in Darwin it immediately took the lead and never was passed. Its winning time was just under 45 hours for an average speed of just under 42 miles per hour. It was a great public relations success for GM.

The GM Concept Electric Car

In the late 1980's GM top management rehired the R&D firm of AeroVironment, this time to design a concept electric car. It was significant that GM went to an outside firm. It was similar to IBM having an outside firm design the personal computer which it marketed in 1982. An outside firm was not constrained by past practices and thus would likely do a better job than an inside organization. AeroVironment completed its design assignment and built a prototype. Roger Smith, the CEO of GM at the time, introduced the electric car prototype at the Los Angeles auto show in 1990. He was so pleased with the response that he went on to announce on Earth Day of 1990 that GM would build this car.

Roger Smith

GM Decides to Design an Electric Car for Production

In the early 1990's with this renewed interest in an electric car at GM Kenneth R. Baker was chosen to manage the program.

Kenneth R. Baker in retirement

Baker was a bit reluctant to manage another electric car program after his disappointment at the cancelation of the first, the Electrovette. But after seeing the support for the new electric car program among top GM he decided to take the assignment.

Baker was told to think in terms of an annual production of no more than 25 thousand vehicles per year. A new model for the standard GM lines would typically involved production of 250 thousand or more. GM had four years previously acquired the Hughes Aircraft Co. with its advanced expertise in electronics. Hughes also had developed a regime for the management of technical development which it called system engineering. GM adopted system engineering for its programs and the electrical car program needed to use that approach.

When Baker and the other technical people at GM examined the concept electric car built by AeroVironment they found that there was much that needed to be redesigned for a production car. The AeroVironment team reported that their electric car had a driving range of 120 miles. Baker and his team found that figure meant a lot less than it appeared to mean.

The AeroVironment range […] was real, but the news stories failed to mention that the car's side mirrors had been removed, its windows and doors and body seams taped, that the seals had been cut off bearings to reduce even that bit of drag.

More important, the stories failed to mention that the regen braking had been cranked up so high that on level ground the car would nearly stop as soon as the driver let up on the accelerator; on steep hills, of course, the high regen recouped that much more energy, yielding that much more range. And the car had been driven until its pack was 100 percent discharged, punishment which no battery could repeatedly sustain. […] [I]n real driving conditions, with the regen adjusted, and the pack taken down to 89 percent depth of discharge, the car's range was more like 70 miles. On a sunny day. A windless sunny day. A windless sunny day on which the driver chose not to use the heater and cooling fan.

The Car That Could, page 10.

To achieve lower air resistance the concept car was built with only 5 inches clearance above the ground. GM required 8 inches of clearance for its cars. An engineer found that the electronics of the concept car was failing after, on average, about twenty hours of driving time.

Ken Baker and his team had their work cut out for them. Meanwhile another organization was throwing its weight around.

The Bolshevik Tactics of the California Air Resources Board (CARB)

CARB was created in 1967 by the Mulford-Carrell Act which combined the Bureau of Air Sanitation and the Motor Vehicle Pollution Control Board. This Act was signed into law by then-governor Ronald Reagan. CARB is a department within the California Environmental Protection Agency.

CARB is unique in that California is the only state which is permitted to have such a regulatory agency. This is because California is the only state that had such a regulatory agency before the passage of the Federal Clean Air Act. Other states can adopt the CARB standards, or they can use the Federal standard, but they cannot set an air regulatory standard of their own.

The eleven members of the Board are appointed by the governor. The Board is roughly evenly divided by the professionals in the fields relevant to regulating air quality; the other half are representatives of the regional air quality district organizations such as those of Los Angeles, San Francisco, San Jose and San Diego. One wonders whether any economists were appointed to the Board. The proper mode of regulation and operation of CARB would have been to impose a charge (tax) on pollution emitters based upon the amount of the pollution emitted. The CARB would have to find a level for the charge that reduced the total emissions in an air basis to the level it could sustain and still maintain adequate quality. The choice of adequate quality would have been a social rather than scientific decision.

The granting of regulatory power to CARB was perfectly legitimate but as so often happens with institutions having to do with environmental issues they often take on a quasi-religious nature and end up operating like a band of talibanic nitwits. In the case of CARB the nitwittery had to do with the promotion of electric cars. The questions of technical, financial and economic feasibilities of electric cars were unanswered but nevertheless people became advocates of their promotion. The members of CARB became imbued with this advocacy and went beyond the proper concern with air quality to trying to force the introduction of electric cars. Instead of allowing the consumers to choose lower pollution vehicles as a way to economize on the emissions charges the members of CARB decided to dictate with a mentality reminiscent of the Bolsheviks of the Russian Revolution that automobile companies would have to sell specified proportion of electric cars in California or be killed financially. In September of 1990 CARB adopted a schedule for the types of vehicles that could be sold in California in the future. It was a complicated program but the crucial provision was that in 1998 two percent of the automobiles sold in California had to have zero emissions. It did not really make much sense to require two percent of the automobiles sold by an automobile company in California to be zero admission vehicles but CARB was demanding it.

Consider the social class consequences of such a policy. Suppose it costs $100,000 to produce each electric car as opposed to $25,000 for a conventional gas-powered car. At a price of $100,000 the company might not sell any cars. The company would then have to face losing money on the electric cars in order to make a profit on conventional cars. Suppose the price of electric cars is lowered to $50,000 and the company sells enough to constitute one percent of its sales. This is not enough. The price would have to go still lower. Suppose at a price of $40,000 the sales of electric cars reach the required two percent. At $40,000 only the wealthy would be buying those electric cars. So the net result of the mandate would be that the wealthy advocates of electric cars are getting something they want at $40,000 that they would not be willing to pay for the $100,000 cost of production.

Though the CARB mandate was unreasonable and outrageously self-serving to the members of CARB it was there on the horizon for GM and put it into a bind with respect to the development of an electric car. In order to make a case that the mandate should be removed or postponed it had to emphasize the difficulties of producing an electric car while at the same time developing such a car. The focus of the attention was on the technical problems of developing such a car, but there was a whole set of additional problems of getting such a car into production. And, to reiterate, the final and most difficult problem was how to produce profitably an electric car at the price level such that its sales would amount to two percent of total sales. This may well have been impossible.

The Basic Problems at GM Involved in the Design of the EV1

The design of an electric car for production was a difficult task but the GM did a credibly good job. The process was plagued by organizational conflicts at GM. It was also plagued by some of the designers insisting upon pursuing their pet ideas. For example, the group assigned to the task of designing the body was set upon making the body all out of aluminum. That objective seemed to take precedence over all others and imposed problems upon some of the other design teams such as those responsible for the safety of the car in a crash.

Perhaps the difficulties of the design process can be illustrated by the trivial problem of the choice of a name for the car. Originally the name chosen was Santana, a not particularly good name but also not a particularly bad name. That name was dropped when it was found that a French car company had used it for one of its models. The alternate name chosen was Impact, a particularly bad name for an automobile. Somehow GM was not able to perceive that Impact was a poor choice and to change it. This indicated some institutional psychosis at GM.

The more general problem of institutional psychoses at GM had to do with the rivalries among the divisions of GM. For example, GM had two divisions, Delco Remy and Delco Electronics, located only fifty miles apart in central Indiana. Delco was originally Dayton Engineering Laboratories, a company founded by Charles Kettering, the inventor of the automobile starter and later head of GM. Delco Remy was given the assignment of producing all of the battery-starter-motor (alternators) for GM cars. Delco Electronics was responsible for producing all of the radios and electronic controllers for GM cars. Hughes Aircraft was a high technology company purchased by GM in hopes of utilizing its world-class expertise. Delco Remy and Delco Electronics were intent upon protecting their traditional assignments within GM. Hughes' management was intent upon demonstrating Hughes' value to GM. The electric car offered to Delco a whole new and important field covered by its battery-motor assignment. But the electric car needed sophisticated electronics if for nothing more than the inverter required to convert direct current (DC) to alternating current (AC). Hughes' management also saw the inverter as something that they could and should do. There was another GM authority, the Automotive Components Group, that had say-so concerning which divisions produced what. And there was Kenneth Baker with responsibility for bringing the electric car to production caught in the cross-fire of the turf war.

In addition to such turf problems there was the institutional schizophrenia connected with the perhaps impossible mandate imposed by the California Air Resources Board (CARB). GM had to emphasize the difficulties of producing an electric car. GM management did not want any positive publicity concerning the electric car that would encourage CARB to dig in its heels concerning the 1998 mandate.

Despite all of the engineering and institutional difficulties Kenneth Baker did a magnificent job of getting the production model designed. With difficulty about eleven hundred EV1's were produced. They were leased out to gather information about the public's acceptance of the electric car with its limitations. If GM had set the lease rate at a level commensurate with the cost of production they would not have gotten any takers except a few posturing Hollywood celebrities. Instead GM leased them at a bargain rate to gather information about drivers who were neither already sold on the idea of an electric car nor adamantly opposed to it. The company did not want to lease them to the electric car enthusiasts and so had to try to weed them out. This of course puzzled the enthusiasts who thought the program was a normal vehicle marketing operation. Of course GM was not entirely successful in eliminating the enthusiasts.

GM subsequently announced that it was discontinuing the EV1 because there was no demand. What it meant was there was no demand at prices exceeding the cost of production. It should have done a better job of explaining this. Instead the enthusiasts took this to be a lie because they thought that demand was a term that was independent of price.

The End of GM's EV1 Program

The way GM chose to end the EV1 program seems to have been a tragic, foolish mistake. GM recalled all of the leased vehicles and, all but a few, were smashed. GM could have auctioned them off for probably for enough to bring in from twenty to thirty million dollars. This is a paltry sum compared to the seven hundred million dollars or more that went into the program. GM did not want to be responsible in the future for providing parts for the EV1's but that could have been eliminated in the sales contract. Likewise for any defects in design that might develop after years of use. The destruction of the EV1's was a public relations disaster for GM. Toyota and Nissan which also produced some electric vehicles also chose to smash their cars, but they did not get the bad publicity GM got.

(To be continued.)

Source:

Michael Shnayerson, The Car That Could, Random House, New York, 1996.