Bob Lutz conversation

After the premiere of Revenge of the Electric Car I had a chance to ask Bob Lutz a couple of questions. Bob was featured in the film as the top executive of GM who pushed the development of the Volt. He is a long time GM executive and fully defends GMs development of the Hummer and other gas guzzlers. He says that GM just gave people the cars they wanted. He also says, "You don't have to believe in anthropogenic global warming to support electric cars." [that may be true on one level, but to me believing in fossil fuel generated CO2 as the leading cause of global warming is simply believing in science, and how you can support electric cars if you don't believe in science is a puzzle to me—but I digress] I later read that he was indeed a global warming denier and that he had supported impractical and unecological hydrogen fuel cell cars and had helped to kill the EV1.
So here was a unique opportunity to talk to the real thing—a member of the U.S. corporate ruling elite. The film referred to entering GM as "going behind enemy lines" and here was the personification of the enemy. Yet Mr. Lutz was now a genuine supporter of the Volt and electric vehicles. I had hoped that the auto companies would part ways with the oil companies instead of being their staunch allies. Mr. Lutz is an example of that split, one that needs to continue to widen.
My question for Mr. Lutz was a follow-up to a comment he made in the film. A scene in the film shows him next to the Volt assembly line in Hamtramck, Michigan; he says that "all cars on this assembly line will be Volts." So my question to him was when this was going to happen. I was pleased to hear him say that he was pretty sure that all the cars on that assembly line are now Volts. My follow up question to him was how long did he think GM would keep making internal combustion engine cars. His response was that, "The piston engine isn't going away any time soon. The Volt is expensive. Run the numbers. The Chevy Cruze only costs $17,000." I responded saying, "I have run the numbers. . ." but then I paused because I thought he may be right about the Cruze being cheaper than the Volt. He surprised me by continuing, "What should happen is that the gas tax should go up 25 cents every year. That way people could look ahead and make decisions based on the future cost of gas." That surprised me because it sounded like what the Sierra Club and environmentalists have advocated for years, but a solid alliance of oil and auto companies have made it politically impossible. Anyway, there were lots of people waiting to talk to him, and I wasn't sure of my numbers comparing the Cruze to the Volt, so that was the end of our conversation. Later, I wished I had told him that we drove Volt #575 and were big fans—but I didn't think fast enough to say that. I also wished I had asked him when he thought the price of the Volt was going to come down, since that would make the car a lot more attractive. (Personally I think the price will come down when more competition hits the market in the next few years.)
His comments did get me to thinking—are we using different numbers and are my numbers wrong? I have several thoughts on this.

• One is that gas on the east coast is still around $3.70 per gallon compared to $4.25 in Oakland, so that makes a difference.
• Also, the PG&E nighttime pricing of electricity at 5 cents per kilowatt hour is also a big advantage for us in Oakland. I've been surprised that even the Oakland Tribune isn't aware of this great deal for electric cars, so it's not a surprise that Bob Lutz would not be aware of it. The film makes the point that electricity is like paying $1.00 per gallon for gas. Assuming the U.S. average of 20 miles per gallon for gas, that would be 5 cents per mile. However, as I've argued in this blog (see FAQs at bottom) that the cost is closer to 2 cents per mile (although I'm still learning and fine tuning that estimate).
• Another is financing. I am basing my cost estimates on obtaining a 15 year house refinance loan at 5% interest. Now obviously not everyone can do that, but spreading the cost out makes the electric car a more attractive investment since it means that you start saving money immediately. In fact this would be a great area of government support for electric cars—helping people spread out the cost through longer term loans. My understanding is that that GM offers a maximum of 5 year financing. Of course here I may be biasing this by living in California where the cars last forever. Back in my home state of Illinois, the salt on the roads in winter eats up the cars so they don't last 15 years. This is another problem that needs addressing. (I'm not counting the tax deduction you get for interest on your house mortgage, which not everyone can claim, but it does save us about 5% on our payments and even more in the first few years, so it's the way to go if you can qualify.)
• And I count the $7500 tax credit for the Volt, which I'm sure Mr. Lutz also includes. I understand California may have a tax credit as well, but I'm not sure about that, so I'm leaving it out for now.

Anyway to respond to his comment and re-run the numbers: The Volt costs $40,500 and the Cruze costs $17,000. Subtracting the tax credit means the Volt costs $33,000--$16,000 more than the Cruze. The Cruise gets about 35 miles per gallon. At $4.25 per gallon that is 12 cents per mile. If you drive 10,000 miles per year on the batteries (at 2 cents per mile), that is a savings of 10 cents per mile x 10,000 miles = $1,000 per year. If you borrow $16,000 at 5% interest for 15 years that costs you around $1500 per year, so Bob is right--the Cruze is cheaper until the price of gas hits $5.95 per gallon, or if the Volt can knock $6000 off its selling price. Compared to cars getting worse mileage than the Cruze (like our old Honda Civic that got 25 mpg), however, the Volt wins with the current numbers. For example, compared to an average car that gets 20 miles per gallon, the savings is 18 cents per mile--$1800 per year—so the Volt saves $300 per year. But electric cars are much more fun to drive, and they are not susceptible to rising gas prices, and (if you believe in the same science that built the Volt) they don't destroy the earth, so the Volt is the clear winner, even against the Cruze.