Are gasoline prices over $2 a gallon spurring drivers to switch to hybrid vehicles? How will car manufacturers and the federal government respond? Brian Wynne, president of the Electric Drive Transportation Association, joins OnPoint to discuss tax incentives in the energy bill, R&D of hybrid cars, and hydrogen fuel cell use, among other issues.
Brian Stempeck: Hello, and welcome to OnPoint. I'm Brian Stempeck. With us today is Brian Wynne, president of the Electric Drive Transportation Association. Brian, thanks a lot for joining us today.
Brian Wynne: Pleasure to be here.
Brian Stempeck: A couple of days ago we had the House Energy and Commerce Committee, got into the energy bill markup. What are really the top priorities for your organization there? And tell us a little bit about what your group does, as well.
Brian Wynne: OK, well, EDTA is a community of interest promoting electric drive as a foundational technology for the sustainable mobility future, and our primary focus in the energy bill, really, we have three things that we're trying to accomplish in the energy bill: consumer-based tax credits for hybridized vehicles; fleet purchase capabilities for companies and federal government fleet owners that want to buy electric drive vehicles in their fleets; and, of course, a robust federal investment in the hydrogen and fuel cell future.
Brian Stempeck: Let's talk about the first thing you mentioned, which is the tax credits for the hybrid cars. When Congress passed the Corporate Tax Bill last year, they didn't really do anything new when it came to the tax credits. What are the kind of things that you're looking for to give consumers, you know, an opportunity to buy these cars?
Brian Wynne: Well, currently, there is a $2,000 deduction, which is going to reduce next year and then phase out. We're at a stage in the market adoption process with hybrids in particular where we really are going to need some additional help to reduce the cost differential between the hybridized vehicles, which have their own value and benefit, but also have the costs associated with a duel drive system relative to a conventional vehicle. So we're looking for consumer-based tax credits that will reduce the delta between those two.
Brian Stempeck: 'Cause basically right now when you buy a Toyota Prius or you buy a Honda Accord hybrid, you're paying, what, about $2,000 to $3,000 more than your typical car?
Brian Wynne: Yeah, it's difficult, because they tend to load up the hybridized vehicles with all the latest technology, so it's difficult to do an exact comparison with a conventional counterpart vehicle. But it's clearly a, because you've got two drives in the car, and there's electronics and technical controls that make the two work together, it's a more expensive platform right now.
Brian Stempeck: Given that a lot of lawmakers in Congress are really looking to keep the costs down on the energy bill and the tax credits, are you having trouble getting this through at all? I know they want to scale the tax portion way down, and the House Ways and Means Committee is going to be looking at that.
Brian Wynne: Well, it's -- no question, it's a very fiscally challenged environment, and we have to look at cost and benefit. We think that hybridized vehicles, and electric drive vehicles in general, are exactly what the country needs right now in three different arenas: energy, security, pollution, and greenhouse gases. Electric drive is a solution in each one of those really critical areas. So, when we look at it from that perspective, we think it's really worth the investment.
Brian Stempeck: But can you make the argument that consumers are already getting those? Last month, in March, I believe it was, you had Ford, Toyota, and Honda sold 16,000 hybrids, which is more than they've ever sold in a single month before.
Brian Wynne: Right.
Brian Stempeck: Which is a huge number of hybrid cars. We have gasoline over $2 a gallon. Why the need for tax credits at all? Can you argue that the market's responding on its own?
Brian Wynne: Well, what we like about the fact is that consumers really do like the vehicles. They've been very well received; and, yes, we do have waiting lines in some instances for these vehicles. The challenge that we're going to face, however, is that ultimately the consumer is going to compare that with a conventional vehicle that's already on the marketplace. And, until we get to manufacturing scale with these vehicles, and you're clearly not there with the numbers -- we're not there with the numbers that we currently have, even though we're moving in the right direction, we're going to have to reduce that cost differential to broaden out, to get the true, what we call broad market adoption.
Brian Stempeck: What kind of numbers do we have to see to see the costs of these cars actually come down? I know for a lot of cars, it's billions of dollars in investment, takes a long time to recoup those costs. I mean you have automakers like General Motors who say, "We think Toyota's losing money on every single Prius it sells." Is that accurate?
Brian Wynne: I don't if that's accurate. What I do know from watching technology adoption cycles in the past is you're always going to have to invest in the front end of the cycle to try and get a new technology in the marketplace and to get to manufacturing scale. One of the things that we need to remember, too, is that we're not just -- electric drive is not just showing up in hybrid vehicles. It's also still in the battery electric vehicles, which have not become as prominent as we had hoped they would, but they've gone to some very, very interesting niche applications such as neighborhood electric vehicles. We also use battery plug in vehicles to replace support equipment at the airport, which reduces emissions and also fuel -- reduces fuel usage. And then, as we get more and more of these different applications that come online, we will broaden out that scale. So it's not just about are we making money on this particular hybrid platform right now. It's a question of how do we build the manufacturing scale and make sure that we've got a robust supply chain, as well.
Brian Stempeck: Why do you think it is that we've seen a lot of automakers, American companies for the most part, who hadn't really got on the hybrid bandwagon? You have a lot of different automakers as your member companies in your association.
Brian Wynne: Sure.
Brian Stempeck: Like GM, like Toyota, I believe. Why do you think it is that GM, one of the biggest automakers in the world, hasn't stepped to the plate here and said, "We're going to follow the lead. Consumers clearly want hybrids. They're spending the extra couple thousand dollars to get them, you know, at the dealerships." Why aren't they going out there and putting out a hybrid?
Brian Wynne: All of the auto manufacturers are coming out with new vehicles over the next two years. I think we're anticipating 16 or 17 new product announcements over the next two years alone. All of the vehicles, or all of the automobile companies have been working on electric drive for many years, and I think what we're doing with hybrid vehicles is we're standing on the shoulders of some of the work that has been done in the past on battery EVs. And let's not forget that fuel cell vehicles are also electric drive vehicles, and all of these companies are investing, in some instances, billions of dollars in electric drive and in fuel cell technologies. So I look at it as a suite of technologies. Electric drive is the foundation. What you're seeing with hybrids now are very prominent examples which you and I can go to the dealership and buy, and there'll be more and more of those.
Brian Stempeck: You were just talking about the electric vehicle program which, of course, in the 1990s was put in place in California as a way to kinda encourage development in some of these zero emissions vehicles.
Brian Wynne: Right.
Brian Stempeck: But a lot of people look at that experiment as largely a failure. It did give us some of the technology, sure, that's used in hybrids today. But the neighborhood electric vehicles that you were mentioning, a lot of people derisively will call them golf carts and that people aren't going to drive around in a car like that with limited range. Isn't there the same concern today with the Bush administration and some of the automakers putting a lot of money into hydrogen if this is just another far off goal like the electric vehicles were, that maybe never is going to come to fruition?
Brian Wynne: I don't look for silver bullets. I think if you look at it as different horses for different courses, and what is it that we're trying to achieve, then you can look at these different vehicle platforms and evaluate them for the benefits that they provide. Neighborhood electric vehicles, I think, are starting to get very interesting in certain communities that are arguably going to be challenged to reach attainment under the new rules. And so you've got those that are different kinds of hybrid platforms that are coming along, some of which also may potentially plug into the grid, as well. And I don't think that we should minimize the importance of the advances that were made with pure battery EVs, and some of the value that gets -- that accrues from the applications that are currently getting a lot of attention.
Brian Stempeck: Besides the tax credits in the energy bill for hybrid cars, you mentioned another priority is the hydrogen research, of course.
Brian Wynne: Right.
Brian Stempeck: How is your group involved in dealing with fuel cells?
Brian Wynne: Well, it's, for us, hydrogen represents truly a platform that can be sustainable mobility with all the attendant benefits to that. There's phenomenal potential from fuel cell vehicles and from the hydrogen future but, obviously, some really large challenges and some societal movements that are going to be needed in order to take advantage of those benefits. The foundational technology, again, is electric drive. All of the fuel cell vehicles are electric drive. Many of the fuel cell prototypes that are out there today are also hybridized vehicles.
Brian Stempeck: Right.
Brian Wynne: They benefit from regenerative braking, which is used in hybrid vehicles. And so, again, the more we can build the supply, and the more we can -- the more manufactured electric drive vehicles we can have, I think the closer in we can bring that fuel cell vehicle.
Brian Stempeck: When you talk with members of Congress or with staffers on the Hill, what do you tell them on hydrogen cars? What's the best role right now for Congress to do something? You have companies like GM who are investing billions of dollars, or at least they claim, in doing this private sector research. What do you see as the role of the federal government and of Congress when it comes to fuel cells?
Brian Wynne: I think it's the leverage that private investment. We've got to use public resources to leverage the private resources that are already going in here, and we've got to steer that research. I think one of the things that EDTA does is we allow the companies to look at how to collaborate with one another to answer the challenges that are common to all of them. A key challenge, just to give you an example, of course, will be infrastructure. To move to a hydrogen economy, we need to be able to address this question of where are we going to fill the vehicles. If a consumer is going to utilize a vehicle, it's got to be convenient for them to refill the vehicle. There are large challenges there that go actually beyond just the scope of EDTA, and the members as broad as my membership is, and it requires that we have government policy that is encouraging people to collaborate and to focus on those questions so that we can get to that quicker.
Brian Stempeck: Do you think the Department of Energy is on the right track with that? I mean there has been some criticism that they're spending too much money too early on some of these demonstration projects, and that a lot of researchers say there's some really basic R&D that needs to be done, that you could be doing, and it's not happening.
Brian Wynne: Well, I think -- I disagree that there isn't basic R&D that's happening. But the demonstration programs, I think, are really important because we have to see how the vehicles operate out there in the environment. And let's not forget that different environments, different vehicles are going to operate different environments. We do a lot. For example, we do a gathering once a year of all the demonstration projects from around the world on fuel cell buses, which is an interesting platform, because you can try different things on a bus and handle different storage issues on a bus that you can't necessarily do at this point on a conventional vehicle. And to watch the way the users of these buses collaborate with one another, share information, and then give that information back to the vendors, the OEMs, and the people that make the fuel cells and the controllers. It says to me demonstration projects are really, really important, and they tell us where we need to do more basic research, more R&D.
Brian Stempeck: How does Congress keep tabs on that? One of the big critiques of the fuel cell investment and the White House insistence on that, is that these goals are 15, 20 years out, and we seem to have another -- we have hybrid cars that we could be solving the problem with now. How do you justify the long-term decision, and why not just spend more money on the tax credits and more money on pushing the hybrids? It seems like your group does a little bit of both.
Brian Wynne: We do both.
Brian Stempeck: Why not just pick -- I know you talk about you need a suite of options. When you have the technology that thousands of consumers are already using on an everyday basis, why not push for hybrid cars now? Why not go for a CAFE increase or fuel economy increase?
Brian Wynne: Well, we are in favor of more -- getting more and more hybrids out there. We are in favor of broad market adoption for electric drive across the board. Let's not forget, 15 years is not that far away. When you look at the kind of engineering challenges and the kind of economic challenges that we're going to face to actually take advantage of the promise that fuel cell vehicles hold, then we need to get working on that right away. And the targets that we've got to hit have really got to be focused on technology issues and engineering problems. Getting over those engineering challenges and making sure that when we get to the place where we're ready to expand the manufacturing of the vehicles, we've got to make sure that we've got a robust supply for electric drive. Because, at the end of the day, the fuel cell vehicle is an electric drive vehicle. So I see a connection here. There is a continuum here all the way from the learnings that we've had and the benefits that we've had from battery electric vehicles, all the way in through to the plug in, to the fuel cell vehicles of the future.
Brian Stempeck: Do you think that Congress is actually going to be able to do anything on this this year? I mean for the past few years, they've been unable to pass an energy bill. And even just on the tax credits you're talking about for hybrid cars, it would seem like something that everyone would support, but then you have companies like DaimlerChrysler who'd rather build a clean diesel car and want tax credits for that, too. So how do you, I mean these are -- it seems like a pretty easy case to be made for hybrid tax credits, but when it gets down to it and you have lobbyists from these different companies competing, it's not. How do you overcome those kind of intra-industry squabbles?
Brian Wynne: Well, there are -- it's a very competitive industry; and that's part of what makes it a great industry. The challenge that we've got is to make certain that we're collaborating. We're staying focused on what the accomplishment is, what it is -- what is the goal that we're trying to achieve here? What are the benefits that we're trying to get to? And I think that, to get back to your question about are we going to get an energy bill, EDTA believes that we really need a national energy policy, and transportation's a key part of that. If we don't get guidance from Congress on this, the industry is going to continue to work on these things, and we're going to continue to collaborate on them through organizations like EDTA and others. But there's no question that we need to be focused on what the objective is. And I think we've got an increasing number of forcing functions, if you will, with gas prices continuing to set new floors all the time, with the challenges that we've got on energy security, the refining, all of the other things that many of your other guests have spoken of. I think that Congress is going to have to focus on this, and we're hoping that we're going to get it done.
Brian Stempeck: Last question for you, Brian. In the event that Congress isn't able to do something, the other arena people are looking towards is the states. If California, with their rules they pass -- reduce greenhouse gas emissions from cars. You know, Canada just signed a big deal with the automakers to kind of voluntarily reduce emissions from cars. Where do you see, in the event that there is not an energy bill, where do you see it's likely action? Where is your group looking next?
Brian Wynne: Well, first off, I'm not going to give up on the energy bill. I think the good news about this is that there's nobody against electric drive. There's nobody -- everybody can see that the benefits are really clear. That also applies at the state level. There is a, I think, a gathering momentum at the state level to move forward here on energy policy. But, frankly, if we don't have a federal lead on this, it's not going to work terribly well, and I think we've got to have action from Congress.
Brian Stempeck: All right, well, we're out of time. We're going to stop there. I'd like to thank our guest today. That was Brian Wynne, president of the Electric Drive Transportation Association. I'm Brian Stempeck. This is OnPoint. Thanks for watching. Thanks a lot, Brian.
Brian Wynne: Thank you.
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