Electric Car Industry Tainted by the “Solyndra Effect”

By · October 26, 2011

The cleantech industry as a whole, and the electric vehicle industry in particular, have been in the news nearly every day since Solyndra went bust, and not in a good way. The media and blogosphere are repeatedly asking the question, Which company will be the next recipient of DOE money to crash and burn?

While this is a natural follow-up story for journalists (I confess, I was a card-carrying member of the Fourth Estate for nearly two decades) to pursue, the circumstances around the electric vehicle (EV) industry are very different. While some of the companies who have received DOE loans or grants will inevitably falter, it is way too early to cast aspersions on companies like Fisker and Tesla, or on the industry as a whole.

Rightly or wrongly, the Obama industry has made nurturing an industry for manufacturing plug-in vehicles and batteries a top priority of its stimulus program. If you don’t believe that the government should be involved in supporting the R&D efforts of new technologies (especially those that will reduce carbon emissions), than read no further. But if you believe that having an EV industry in the U.S. is worthy of taxpayer investment, you’ll have to be patient to reach a verdict.

Simply put, there would be not be much of an EV or battery industry to speak of in the U.S. without the help of the Energy Dept., and Japan, Korea, and the European Union would be left to run grow the industry. It’s fair to say that that road would be much more challenging without U.S. automakers involved, and thousands of jobs would not have been created.

The focus post-Solyndra has been on Fisker and Tesla, and with both companies more than a year away from shipping their first vehicles targeted at less than the ultra-rich, you’d have to score the impact of those loans as incomplete. For a full picture, we should also be looking at all of the auto manufacturers and battery makers who have received grants and loans since the loan program and bailouts were started by the Bush Administration in 2008. These include:

  • Nissan: Received a $1.4 billion loan to retrofit plants for EVs in Tennessee . They are selling the Leaf (made in Japan today) and will shift production in 2012-13.
  • Ford: Received a $5.9 billion loan for retrofit factories in several states for more fuel efficient technology. They have announced several new plug-in vehicles (C-Max Energi, Focus Electric) that will be made here. As shown below, Ford is expected to have the largest share of the PEV market beginning in 2013.
  • General Motors: Earlier this year, the company withdrew a $14.4 billion loan application for retooling because the company had turned around its finances sufficiently using the previously allocated bailout loan of $50 billion. In addition to the Volt, GM recently announced the production of the Chevrolet Spark EV and Cadillac Converj.
  • Chrysler: Received $7.6 in bailout loans in 2008-9. The company applied for an AVTM loan, but has been waiting for a decision from the DOE for well more than a year. Chrysler’s commitment to vehicle electrification under the Fiat regime has been underwhelming by comparison, so perhaps the DOE is looking for stronger action before pledging funds.
PEV sales

The 2009 ARRA program awarded grants of $1.5 billion to 19 companies that produce or assemble vehicle batteries or their components. Manufacturing has recently started or will do so shortly at many of those plants, including facilities owned by Johnson Controls, A123 Systems, Compact Power, Dow Kokam and Exide, which has brought jobs to Michigan, Tennessee, Indiana, Oregon, Florida, Pennsylvania, and Georgia.

Among the battery companies that received grants, EnerDel has had the most troubles. The company’s battery manufacturing was linked to a deal to provide equipment to EV company Think, which has been through several bankruptcies and recently received yet another life-saving loan, this time from Russia.

We are in beginning of a 500-lap race to determine if EVs will be successful in the United States and globally, so it’s extremely premature to judge how successful or not the federal government’s investments will be. Just because a company or two blew a tire in the first lap doesn’t mean the entire race is a failure.

Comments

· Anonymous (not verified) · 2 years ago

There is nothing wrong when gov't "invests" in solar / ev / clean tech industries.
There is sthg wrong when politicians, in this case, Obama and his administration, plus his political party contributors, get mingled into the application and approval processes.

The Solyndra fiasco is nothing more than a political drama in reality; it's unfortunate that the entire clean tech energy industry got pull into it and get a bad name for it.

In contrary, one doesn't see any public endorsement or political showing in the oil, tobacco, healthcare (insurance) or financial industries, and they are all doing extremely well!

· · 2 years ago

@Anonymous,
Unfortunately, politicians, Obama, and his administration are the government, therefore, since the government must be mingled in (actually 100% in control of) the application process, there's no way to keep them out.
You can't have the government do something yet not have it be political. That's why many of us don't want the government to be involved in any more than is absolutely necessary. Politics always dominates.
I hope you're trying to be facetious with your last paragraph.

· Norbert (not verified) · 2 years ago

Glad someone puts the loans to innovative new companies in perspective to the sums the larger older companies have received.

· · 2 years ago

If the worst that can be said of clean energy investment debacles of the past 3 years is that a small percentage got miss-allocated with the likes of a Solyndra or a Fisker (the largest infraction of the latter seeming to be that they created a few jobs in Finland,) then I tend to think that much of what got spent in the way of green energy R&D will have been worth it.

What are we talking about here? A billion dollars? Considering that the oil-driven Iraq war will probably cost around 4 trillion dollars when it's all said and done - and add to this the amount of human loss and suffering - then I can certainly forgive Uncle Sam for picking a questionable company or two in the quest to get us into a new energy future.

The Tennessee Valley Authority; The Hoover Dam; The defeat of Axis powers in WWII; The Marshall Plan; The Interstate Highway System: NASA . . . all examples of government programs that melded with private industry. None were perfect, politics certainly influenced them and all had waste involved to one degree or another. But, ultimately, they made our lives better in their day.

· · 2 years ago

Sure, let us spend TRILLION dollars on wars to butcher innocent people in far off lands. That is the best use of our money - as Cheney & his cronies showed us.

· Samie (not verified) · 2 years ago

Benjamin Nead, great points mentioned above. The "Man on the Moon" project would certainly not be a great accomplishment today, or having a feeling of ingenuity, or pride for our country but merely just government waste or say some weird socialistic plot to take away our freedom. Kind of sad if you ask me. Also, as a country we could have done a lot more after Sept. 11 but most non-military citizens didn't want to sacrifice anything, unlike those who grew up in the WW2 era.

As for the loans why is this a big deal? Investing in R&D is the right thing to do if it is truly a shift away from our current energy system that we want. It also helps business meet future regulations and reduces the burdens on them when it comes time for more legislation/regulation.

· Chris T. (not verified) · 2 years ago

Not only are these things appropriate, they are also loans: not grants (which never get paid back), and not "investments" in the VC sense (which are generally quite risky but demand extreme return in compensation: the idea is, you put a billion bucks into five things, four of them go bust and you lose all of that, and the fifth one pays you back 10 billion and thus you win big).

Because these are loans, even if the company goes bankrupt, some or all of the money can be recovered. (Recovery depends on the value available after restructuring or dissolution, and one's "position in line": the loan's "seniority".) Of course, because they are loans, the dollar-value return on the money tends to be low as well.

The thing is, "returned dollars" is not the point here. The idea is that these loans are used as carrots, and dangled in front of greedy companies (note: we want companies to be greedy, and they are, we just need to tweak and regulate them to point the greed in useful directions) to induce them to conduct economic activities in ways that—we hope—will benefit society. The EV industry has some pretty clear benefits, and I, for one, believe these loans are achieving their objectives quite handily.

· Samie (not verified) · 2 years ago

Chris T
I'm not a huge fan of grants to help businesses transition, they often rewarded political cronyism and do little to spur real market innovation or the best price for the consumer. As for Solyndra well that was stupid political PR with ineffective background checking, kind of like "Mission Accomplished" every administration has its duh moments.

Chris you are exactly right about the loans being a carrot. While I disagree with the word greed, as most businesses are being rewarded for their customer relations, market position, risk taking, and innovation, I think you are right about aiding our business community in transition but the key as you said is that loans should be a carrot. The next step is for government to follow up on its investment "carrots" as an incentive for markets to scale up new technologies.

Remember that regulation by itself can be meaningless and costly. The key for government is to aid in reducing the burdens of regulations and creating a transition period for consumers and producers.

· jim1961 (not verified) · 2 years ago

I look at DOE loan guarntees for clean energy the way I look at past government support for projects such as the Hoover dam. The Hoover dam would have never been built without government assistance. The Hoover dam continues to pay huge dividends decades after it was constructed. Furthermore, there have been numerous success stories in the DOE-supported clean energy business. Here's some news you'll never see on Fox News that covers the healthy growth of the solar photovoltaics (PV) industry.

http://www.sustainablebusiness.com/index.cfm/go/news.display/id/23041

· Chris T. (not verified) · 2 years ago

@Samie: yes, mere regulation itself is neither good nor bad, it's just regulation. What good government does is figure out which regulation is helpful and which is not, and replace unhelpful with helpful. Unfortunately, there's a fad right now that claims that all regulation is always bad, and people who seek to remove all of it.

· Norbert (not verified) · 2 years ago

Just noticed that the Tesla numbers in the graph seem far too low, especially since there are already more than 7,000 reservations for Model S, and production for 2013 is scheduled to have a capacity of 20,000. Using such small numbers would require an explanation, at least.

· john EV fan (not verified) · 2 years ago

@ EVNow. Thanks for providing the Japan sales figures for the Nissan Leaf in the My Nissan Leaf forum. I recently ran across the sales figures for EV sales for the first six months of 2011 in Europe. Sales are broken down by OEM, and by make and model for 15 different EU countries. This website is in French but you can use the Google translator for the French text if interested.

http://pro.largus.fr/s_informer/psa-et-mitsubishi-dominent-le-marche-du-...

· jim1961 (not verified) · 2 years ago

I don't understand why the Obama administration, the DOE, and clean tech advocates are not talking about the NUMEROUS successes in clean energy. The solar PV industry is experiencing explosive growth and costs are coming down. Within 5 years solar PV will be able to compete with coal without subsidies.

· Chris C. (not verified) · 2 years ago

That graph makes no sense at all. Putting aside that it seems just randomly dropped into the article, much of it doesn't even pass the sniff test. Huh?

New to EVs? Start here

  1. What Is An Electric Car?
    Before we get going, let's establish basic definitions.
  2. A Quick Guide to Plug-in Hybrids
    Some plug-in cars have back-up engines to extend driving range.
  3. Electric Cars Pros and Cons
    EVs are a great solution for most people. But not everybody.
  4. Seven Things To Know About Buying a Plug-In Car
    A few simple tips before you visit the dealership.
  5. Federal and Local Incentives for Plug-in Hybrids and Electric Cars
    Take advantage of credits and rebates to reduce EV costs.
  6. Eight Factors Determining Total Cost of Ownership of an Electric Car
    EVs get bad rap as expensive. Until you look at TCO.
  7. Quick Guide to Buying Your First Home EV Charger
    You'll want a home charger. Here's how to buy the right one.
  8. Electric Car Utility Rate Plans: Top Five Rules
    With the right utility plan, electric fuel can be dirt cheap.
  9. The Ultimate Guide to Electric Car Charging Networks
    If you plan to charge in public, you'll want to sign up for charging network membership (or two).
  10. Eight Rules of Electric Vehicle Charging Etiquette
    Thou shalt charge only when necessary. And other rules to live by.