There have been sharp critics of the 'Cash for Clunkers' initiative in the US, investment-auto-motives one of them. That plan, like those in the UK, Germany, France and Italy, simply re-directs monies from the responsible masses and puts them in the pockets of the relatively few who seek a new cheap new rides.
Those trade-in car buyers effectively event driven arbitragers who will only momentarily buoy a percentage of US production - as much of that money is spent on small foreign imports – the annualised July sales figure of approx 11.7m reflecting little of the realistic 10m new norm that the national industry (GM & Chrysler in particular) must prove it can successfully trade upon.
As $1.0-2.5bn tax dollars are directed toward the mass market (another clunker initiative still being discussed), so President Obama is keen to demonstrate the administration' s commitment to automotive clean tech in EVs and hybrids. Ford, GM, Chrysler, Nissan and the likes of Tesla have already been publicly allotted their government grants from an amalgam of the 2007 Energy Bill and the $787bn stimulus package of approximately $435m.
After the obvious names in the sector, now the focus is on the battery supply-base and US medium-heavy truck-makerss like Navistar International; hosting the Presidential announcement at its Wakarusa plant in Indiana. An area much like Michigan hard hit by the economic crash and eager for stimulus monies to be converted into local jobs.
Having developed the International DuraStar diesel-electric hybrid truck, Navistar has now been given $39m to produce 400 EV trucks, averaging $97,500 per truck, but intending to develop the EV competence base within the company. The new product(s) come from the creation of a JV with Modec, a well known e-truck producer; and from first impressions of the showcased truck, implicitly appears to effectively license current Modec technology, with perhaps ongoing R&D work. It is as yet unclear how this initiative and its monies fits with the USDoE PHEV School Bus programme that is expected to cost $10m. Either way, although the School-Bus and Generic EV Truck programmes differ in their propulsion system solutions there should be a basis for cross-project co-learning.
But much will expected given the Modec, other manufacturer and governmental 'piggy-backing'. [NB investment-auto-motives' previous recommendation that the US must seek RoW clean-tech assistance, Modec an implied capability provider].
The truck sector across the globe has been obviously hard-hit, with only Indian and Chinese truck-makers seeing a rise in orders, so it is hoped that Navistar's usual customers presently devoid of liquidity and strategic intent to buy at present can buy-into the green vehicles in 2-3 years when the US economy has hopefully re-awoken and Navistar's own captive finance house can re-lend to a greater extent.
All in all, 20 states will benefit from the state expenditure in clean tech, the Tier 1 supplier Johnson Controls gains $299m so it can climb up the value-curve, having already formed a French JV from which it can now migrate knowledge into the US.
A123 Battery Systems gains $249m from a large $1.5bn programme dedicated to battery technology development and production, an effort so catch-up with and ideally beat Japanese, Korean and Taiwanese abilities. Though it must be noted that Japan is in reality about a decade ahead of the US in the field of mass market application, in-service monitoring and next generation cost & weight improvement. Thus it is assumed that a portion of this fund will be dedicated at today's US-Asian JVs and attracting additional Asian FDI to transplant its power-knowledge, mirroring the experiences of transplant vehicle factories. However, the irony has been noted that US monies are being given to the US divisions of foreign nation corporations; eg $151.4m to Compact Power, a division of S.Korea's LG Chem Ltd.
Beyond this, $500m goes to others designing electric motors and drivetrain components, perhaps the benchmark in the latter arena set by PSA recently with its low-cost 4WD adaption technology that links an electric motor to the rear axle for part-time 4WD. Other countries', other VM's and other OEM's efforts will be evaluated through what are known as whole-vehicle, vehicle-system and charging-systems 'tear-down' exercises to appreciate what today's 'world-class' engineering looks like. So $400m has been set aside to do just that. Ultimately to “copy +” the best of today and fund R&D to move the science and the eco-tech genre onward.
Joe Biden, Vice-President, is reported as saying “We’ve got to get ahead of this curve,” [otherwise] “We’re going to get left behind.”
The US has made progress in the past, but the science long been in gestation, at best past EV efforts like GM's EV1 and Toyota's US RAV4-EV either at best miss-timed to market or at worst claimed to be cynically calculated PR stunts to prove EVs shortcomings in the mid-90s. US made Hybrids in everything from Silverado pick-ups to Taurus sedans have not been big sellers compared to mainstream hybrids like the Japanese Prius, Civic, Camry and now Insight.
Part of this $2.4bn is to propel US capability forward and start declining the worrisome unemployment figures, but ironically Japan has its own unemployment concerns, now at a 6 year high. It has set the bar for auto-clean-tech, and now may be wishing to focus its own national agenda upon clean energy creation – with next generation solutions spanning everything from nuclear to solar – and of course domestic housing and commercial premises technologies. To do so it will undoubtedly be looking for the cross-fertilization from its auto-industry to do so, with the intention of licensing the IPR and products to the world.
In this recent US initiative, there are 48 identified auto-related projects that will share $2.4bn. In order to avoid playing cross-sector catch-up some of that ought to be set toward setting a road-map for a “technology-ripple” that can affect other equally high – if not higher - CO2 emitting sectors.
At a time when the US is so obviously relatively low on that all important value-curve, it must better plan its way forward to climb and latterly regain control of the curve itself.
Fund recipients such as Navistar with its RV chassis arm may do well by working with its RV build customers to track and model motor-home energy usage & CO2, taking learning from low-energy RV installed products and adapting them to the broader market, either individually as products in their own right or in league with commercial home developers providing a suite of domestic solutions.
History recounts that such ideologies and business models have worked in the past, indeed so for Navistar's former entity International Harvestor. Between the 1930s and the late 1950s the US auto industry created Home Appliances divisions such as Ford's 'Philco', GM's 'Frigidaire', Chrysler's 'Airtemp', Nash's 'Kelvinator' and Studebaker's 'Franklin Appliance Co'. International Harvester maintained its own branded electric appliances marketed to farmers wives benefiting from an expanding electricity grid to rural regions. Today that grid nationwide and worldwide (ie GCC countries) is becoming 'Smart-Grid'.
US industrial policy-making would do worse than reflecting that cross-functional interactive philosophy, and perhaps should demand more of its industry players, to truly see the long-term results of government investment, and the exercise to not simply end as a feasibly the biggest 'sunk-cost'* for possible little return of US history.
[NB. See Auto Task Force's major concerns about the GM Volt business case*].
