Plug-In Hybrids: Will They be Affordable?

Plug-in hybrid electric vehicles (PHEVs) have no more committed champion than Felix Kramer, founder of the nonprofit California Cars Initiative, also known as CalCars.org. Kramer was advocating for the commercialization of PHEVs when most carmakers were still denying that a business case could be made for them. Now, with PHEVs from both General Motors (the Chevy Volt) and Toyota (an adaptation of the Prius) scheduled to join independent entries from companies like Bright and Fisker in the marketplace, is Kramer celebrating?

That’s the sound of at least one hand clapping enthusiastically. He sees the PHEV market developing faster than he would have thought possible a year ago. “But I’m still very concerned about people’s expectations with what the carmakers will deliver,” he said. “And I’m also very concerned that the rate of market penetration will not have a big-enough impact on climate and energy security. Carmakers are still working on a business-as-usual basis, and that’s not good enough. We need full speed ahead.”

General Motors is, for instance, planning to build only 10,000 Volts in 2010, and 30,000 to 60,000 in 2011. But the Detroit-Hamtramck plant that will assemble the Volt has the capacity for more than 200,000 vehicles annually, says Jon Lauckner, GM’s VP of global program management.

Despite the current recession-related slump in hybrid sales, Kramer thinks the economic argument for PHEVs will make itself. They will have a bigger bottom line than already pricey hybrids, but PHEVs are eligible for a big federal tax credit. And depending on which analysis you subscribe to, he says, there’s between $6 and $16 billion for plug-in cars in the stimulus bill (plus the $25 billion in the Department of Energy’s Advanced Technology Vehicles Manufacturing Loan Program).

“The $7,500 tax credit turns the $40,000 Volt into a $32,500 Volt,” Kramer says. “And both Texas and Oregon have proposed additional $5,000 state tax credits. If the Chinese carmaker BYD can get its affordable PHEVs to market, then their $20,000 car would be eligible for the $7,500 credit. That would make them price-competitive with anything on the road.”

Big ifs, of course. BYD is talking about selling the F3DM, with 60 miles of all-electric range, in the U.S. in 2011 but there’s a long road between here and there. No Chinese automaker is currently doing business in the U.S. And the car is unlikely to retain its $20,000 domestic price.

Still, it’s quite clear that President Obama is a big fan of PHEVs. As I write this, he is touring the Edison Electric Vehicle Technical Center “Garage of the Future” in Pomona, California, and will probably talk about EVs with Jay Leno tonight. Obama campaigned on helping get a million plug-in hybrids on the road by 2015. He said—it’s on the record—that the entire White House fleet would be converted to plug-in within a year of his taking office. And, by 2012, he said half of all federal vehicle purchases would be plug-in or all-electric.

Right now, Obama would have to fill the federal motor pool with Tesla Roadsters. There’s not much on the market. But he’s planning on jump-starting the industry.