Electric car subsidies: We'll need 'em for years

electric_cars.top.jpgFord, Nissan and other automakers say that it will be years before they can produce electric cars at a profit. Until then, they will continue to depend on Government subsidies. By Octavio Blanco, online editor


LAGUNA NIGUEL, Calif. (CNNMoney) -- It'll be years before automakers can take the training wheels off their electric car making divisions, but how many years is an open question.

"We expect subsidies will help us achieve half-a-million cars a year," Carlos Tavares, Nissan's executive vice president, said Wednesday at a panel at Fortune's Brainstorm Green conference. "That's when we can reduce costs for the customers ourselves."

Thats about two or three more years of government subsidies, according to Brian Dumaine, Fortune's senior editor, who moderated the panel.

Tavares didn't object to Dumaine's estimate, but Ford's electric car chief, Nancy Gioia, did.

"I'm not sure I'm in full agreement, we're looking at a million plus vehicles a year," to be self sufficient, she said. That's a lot of electric cars for automakers, especially considering that today there are just a small number of plug-in vehicles plying America's roads.

The biggest obstacle they are encountering is battery technology, which is still very expensive. "A full battery vehicle is still a substantial expense," Gioia said. And that's something that Nissan's Tavares agreed with. "Affordability is key," he said.

Ford (F, Fortune 500) and Nissan are going after the affordable car market, so scale is of great importance to them. They have to build -- and sell -- lots of affordable electric vehicles before they start making money and be weaned off subsidies.

"It's all about the battery at the end of the day," said Ford's Gioia.

But higher-end car-makers don't necessarily need to hit those numbers. "We don't need a half million for economy of scale," said Henrik Fisker, CEO of Fisker automotive. "A hundred thousand will do."

But Fisker agreed that making an electric car will remain much more expensive than a gas powered vehicle for some time. "I don't think that in five years you can make an electric vehicle that you can make as much money from as you would from a gas powered car."

When it comes to subsidies for electric car buyers, Fisker says that they shouldn't come in the form of tax credits that consumers have to wait for, but rather more immediate incentives.

"It would be beneficial to get subsidies at the dealer," he said.

Fisker suggested that besides cash incentives, other types of perks should be offered. Those could include car pool lane priviledges and limiting access to tightly-packed downtown areas to electric vehicles.

Besides affordability, the panel addressed another electric car challenge -- range anxiety. That's the fear the car run out of juice before you get to your destination.

NRG's president of electric vehicle services, Arun Banskota, thinks he has the solution: put charging stations all over the place and get drivers to pay a flat-rate to access them all.

"We have a subscription model," he said. "Its $89 a month and gives consumers total pricing certainty.

Currently NRG's (NRG, Fortune 500) charging plan is available in Houston and is expanding to Dallas. It's being well received, he said, although everything is relative. To date the plan has a subscription base "in the respectable double digits."  To top of page

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