Can electric vehicles save Detroit’s decimated auto industry – and by extension – the US economy? That is the question on the minds of a shaken automotive community and states that have relied on a car culture to fuel their economic engines.

 That culture revolves around car companies, suppliers, auto dealers and varied spin-offs, accounting for nearly 7% of total US employment. Advanced technology in a green America is a central part of president Barack Obama’s economic revitalisation plan for an ailing US and global economy. By the spring, the Obama administration had loosened the spigot by pouring federal money into advanced battery manufacturing and clean energy.

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 In one of the government’s biggest efforts at shaping manufacturing policy, the US Department of Energy (DOE) solicited applications for $2.4bn in funding aimed at turning the US into a battery manufacturing stronghold.

 By its deadline, the department had received 165 applications. Announcements of winners were due to be made at the end of July, according to the DOE at the recent Advanced Automotive Battery Conference in Long Beach, California.

 States including Michigan, Kentucky, Indiana, Massachusetts and California submitted hefty proposals in alliance with their battery making partners. These states hope to lure production plants that will boost employment and help reduce greenhouse gases and reliance on foreign oil.

 Drawn to Michigan

 “Incentives and tax credits (state and federal) have allowed us to reel in the brightest and best companies to Michigan. By locating in tax-free renaissance zones, they will be able to treat their refundable tax credits as cost-share ventures,” says Doug Parks, senior vice-president of business development for the Michigan Economic Development Corporation, who accompanies Michigan governor Jennifer Granholm on overseas missions (see In Focus below).

 As a result of government focus, electric-driven vehicles, which rely on advanced batteries, are quickly showing up in auto maker portfolios.

GM leads the way

 So far, no private company has stepped up to the plate faster than General Motors (GM) in making the new crop of hybrid electric vehicles a reality. The world’s first hybrid plug-in, the Chevrolet Volt, will be produced in November, ahead of schedule.

 GM has pumped more than $1bn into the Volt and alternative energy product development since 2006. Most transplant auto makers are also developing electric vehicles, including Mercedes-Benz, BMW, American Honda, Audi and Toyota. But GM is getting the most attention and the Volt launch is no small feat, given GM’s own economic woes. The company exited bankruptcy court protection in July after just 40 days, but is still facing difficulties.

Dedication to the cause

 Despite such setbacks and a harsh economic climate, “GM has made a significant commitment to the Volt”, says Bob Kruse, GM’s executive director of global vehicle engineering, hybrids, electric vehicles and batteries.

 “The overall electric hybridisation effort is a commitment that offers a significant reputation advantage to GM,” he observes. He refers to the contest between GM, Toyota, and to a lesser degree Ford, for leadership in the hybrid and green space. “Our commitment is sound, firm and resolute; and we are expending the necessary resources.”

 The electric hybrid Volt represents “the first complete EV [electric vehicle] integration with significant accomplishments and is an indicator of GM’s future product direction”, adds Mr Kruse.

 The company aims to produce hundreds of thousands of Volts, but has not released final production figures. Long waiting lists supposedly exist for the car, which is expected to cost between $35,000 and $40,000.

 A $2500 to $7500 US tax credit is also available for buyers of clean energy vehicles such as the Volt, depending on battery size.

 Volt’s lithium-ion battery starts with 16 kilowatts of energy. For the first 40 miles, or 64 kilometres, the car runs on battery power and energy is displaced off the grid; once depleted, the engine kicks in automatically. The driver does not have to decide to engage either system.

 After the electric range is depleted, the gas engine will allow the car to run for hundreds of additional miles. A specific combined mileage total for battery and the gas engine is not yet available.

 GM arrived at the 40-mile electric ‘sweet spot’ based on research showing 78% of US drivers drive 40 miles or less a day, Mr Kruse explains. “We wanted an EV for the mass market. In order to do this, we had to deal with range anxiety. If you put in a 200-mile battery pack someone has to pay for it.”

Winning over the public

 Still, GM has a marketing battle on its hands as it seeks to assure jittery consumers worried about electric and gas engine capability. The lithium-ion battery has its safety critics, who say the technology is unproven in large vehicles. Some consumers are also bristling at buying cars from ‘Government Motors’, since the government now has a 60% stake in GM. The Canadian government has a 13% stake and the United Auto Workers union has 18%.

 “The objectives of future Volt systems are to lower cost, increase volume and decrease the battery size while providing the same or better range and power. Our R&D work is being done globally,” says GM spokesman Brian Corbett.

 Last year, GM selected LG Chem, a world-leading South Korean lithium-ion battery manufacturer, and its subsidiary Compact Power Inc, to produce Volt battery packs. LG Chem got the nod after GM conducted a rigorous cell assessment process with 20 battery cell producers.

 The company has also developed five testing labs in New York and Germany, and at its Warren Tech Center campus in Michigan. A lab in California also focuses on electronic controls and motors. When its 1000-square-metre battery lab at Warren is fully operational, GM will provide testing capabilities for global advanced battery makers.

 Waiting for the pay-off

 But when will all this new technology benefit the beleaguered auto industry – and the country? That is anyone’s guess. GM sees long term as two to three years away.

 Brett Smith, analyst at the Center for Automotive Research, is less optimistic. He pegs the pay-off at eight to 10 years: “It’s not an economically viable solution right now. The cost of expanding the battery range to get real extended range is enormous.”

IN FOCUS

MICHIGAN'S HUNT FOR BUSINESS

 Germany and Belgium were the targets in July when Michigan governor Jennifer Granholm jetted to Europe’s top battery tech companies, touting Michigan’s investment potential.

 After her two-day foray, Belgium’s PowerCell said it would search for a west Michigan location for battery pack manufacturing, pending approval of state and local incentives.

 “We are working hard to become the renewable energy capital of the world, and we are targeting high-tech companies across the globe that can help us claim that title,” said Ms Granholm. “No other state is making the kind of investments we are in growing green technologies and industries.”

 In April, four global companies – Johnson Controls-Saft Advanced Power Solutions LLC, LG Chem and subsidiary Compact Power Inc, KD Advanced Battery Group LLC and A123Systems Inc – began investing more than $1.7bn on advanced battery technology in Michigan.

 Ms Granholm and her entourage have conducted eight overseas investment missions since 2004, previously courting Germany, Austria, Japan, Sweden and the Middle East. That has resulted in 45 companies investing nearly $1bn in new Michigan facilities.

 No state has more at stake than economically battered Michigan, which recorded 15.6% unemployment in June, against a national average of 9%. The loss of lucrative auto jobs has hammered the state.

 Battery technology is so hot that Michigan alone has packaged $700m in credits into advanced battery funds, and another $150m-plus in traditional incentives, according to Doug Parks, senior vice-president of business development at Michigan Economic Development Corporation. There is also a $2500 state tax credit if companies manufacture in Michigan.