Volts for Clunkers

Source: Coneee, flickr.com, used under creative commons.

Source: Coneee, flickr.com, used under creative commons.

In the past week, there has been a lot of talk about the US federal government’s “Cash for Clunkers” program.  By most accounts, the program has been quite popular.  Indeed, the program’s original $1 billion in funding was exhausted in about two weeks, prompting Congress to vote another $2 billion for the program this past week.

Under the program, consumers can trade-in an old car which gets less than 18 MPG towards the purchase of a new car.  The consumer gets a credit equal to the scrap value of the car, plus $3,500 to $4,500.  The car dealership then takes the traded-in car, pours solvent into the engine to ruin the lubricating oil, and runs it until the engine seizes.  The car is then junked for scrap.  More than 230,000 cars have been traded in under the program so far.

Insight:  In junking the clunker cars, we are about to throw a whole bunch of babies out the bath water.  It consumes a tremendous about of  natural resources to produce an automobile.  So, while it is good to get a quarter million 18-MPG or less motors off of the road, it does not make sense to crush all of those cars to leave them to rust in a junk yard.  In fact, it is a bit of an environmental nightmare.

I suggest that the Cash for Clunkers Program consider a plan which permits rolling-up the clunkers, removing their seized engines, and converting the cars to electric vehciles.

Internal combustion engines have had their day, but sooner or later they will have to give way to a more efficient system.  Because of the ability to quickly replenish the vehicle’s energy supply with cheap oil, internal combustion engines are convenient, but they are truly wasteful. Internal combustion engines are perpetually trying to tear themselves apart from the inside and turn most of their chemical and kinetic energy to heat.

So, in light of not having to produce more steal and generate more waste in the production, the electrification of existing vehicles makes some sense. To electrify the cars, requires removing the internal combustion engine and the fuel system and replacing them with an electric motor and battery system.  Pretty much everything else in the cars stays.  The conversion to electric is not all that hard to do.  In fact, DIYers are already doing conversions in their garages – takes about 40 to 100 hours and good set of tools.  Nearly all electric cars are already conversions.  Even the macdaddy of electric vehicles – the Telsa Roadster – is just a pumped up Lotus Elise with better aerodynamics and giant cordless phone battery.  And, despite the fact that the clunkers used cars, they are still attractive for conversion.  Since an electric motor has a single moving part, a well-done electric conversion can be expected to last for over 1 million miles.  Further, used cars have already gone through a break-in period so there is a lot less friction in the bearings and drivetrains.

As a threshold problem, one would need to determine statistically which makes and models are being traded in as clunkers.  Further, one would have to determine, from an engineering stand point, which of the most makes and models could be converted to electric cars.  Finally, a business case would have to be completed in order to determine whether conversions of these vehicles could be done at minimum viable scale.

We can do this.  After all, we already own GM and it is idling factories and laying-off workers.

The electrified clunkers could then be sold a low cost to be used as daily commuter cars.  This would have a multiplier effect for both the economic and environmental dimensions of the program.

NB:  I do not argue that electric cars are an environmental panacea.  First, the electricity used to charge the cars has to be generated in a carbon-neutral way. Second, more than 90% the alloys need to make high efficiency electric motors comes from China.  This would have the effect of changing geopolitical power from oil-exporting countries to a single nation.  However, the present situation is unsustainable.

  • rudy

    Ken, I’m not sure what you’re advocating here. Conversion of existing cars to electric makes no sense. It’s beyond cost prohibitive to make conversion kits for the myriad of cars out today, not to say anything about immature technology, minimal electrical infrastructure to support recharging, and absolutely no technical expertise to maintain these hacked together retrofits. Not to mention you’d blessing ‘electric’ as the winner well in advance of any marketplace competition to determine if it, or hydrogren, or biofuels, etc. are the right way to go. Cash for clunkers is an auto/union subsidy that thankfully only has cost $3 billion and will hopefully end soon.

  • http://kennethrcarter.com kennethrcarter

    Rudy, thanks for your comments. You raise two interesting points, one about scale economics and one about industrial policy. Let me begin by saying that the thrust of my argument is the government consider ways to reduce the size of the junk pile it is going to create through the Cash for Clunkers program.

    To your point regarding scale, I simply find it not credible that “[i]t’s beyond cost prohibitive” to convert existing cars. There are any number of firms already doing this profitably at very small scales. (To name a few: EVPorsche.com; Zero Emissions Motorcar Co.; Ecotech Autoworks; and Electric Auto Conversions – oh and Tesla Motors). Further, I am not suggesting making a kit for every clunker. Rather, we should examine the possibility at there are enough of the same of certain models of cars coming in through the program to have this make sense from an engineering and business stand point. Above all, the numbers have to work out. Given that there is lots of idle industrial capacity and the conversion firm would be getting the vehicles essentially for free, the problem warrants a close look now. Granted, recycled, retrofitted electric cars are likely to cost more than an equivalent ICE-powered vehicle. However, the more expensive electric car might make economic sense because the more expensive vehicle has a faction of the operating cost and a 3- to 4-fold increase in useful life. This is a relatively simple CapEx versus OpEx trade-off. Tipping this trade-off with subsidies might be an excellent a way to help endogenize the cost of harmful greenhouse gasses. Pollution imposes a significant cost on all of us, but it only benefits any one of us slightly to stop. Thus, it makes sense to subsidize the cost of the vehicle with fewer negative externalities.

    Your second point about industrial policy, begs the question whether the government should be picking a standard, i.e., electric, biofuel, or hydrogen. The answer to this question is a bit less obvious. I am prepared for the possibility that I am wrong about electric. Perhaps it makes sense to recycle the clunkers with biofuel or hydrogen motors. I chose electric, because to my informed-laymen’s perspective it makes the most sense. Biofuel is not carbon neutral and presents the moral dilemma of putting food and fuel production in direct competition. Second, I do not like the idea of driving around with a tank full of the most explosive gas known to man. It, however, does not make sense to sit around and wait for the technologies to mature. In network industries, a huge upfront, sunk investment in network infrastructure must be made and the network must achieve a critical mass of adoption before the network becomes self-sustaining. In these industries some form of external subsidy is need to get to the self-sustaining point. This subsidy can come in the form of government support, venture financing, or enthusiast/hobbyists’ efforts. This is especially true in the presence of high externalities and diffuse benefits of adoption. Supporting electric vehicles would simulate a significant amount of fixed capital investment the infrastructure necessary to support them. Here,. That said, such a program might have to limit the distribution of recycled vehicles to a particular city, such as San Francisco where the commercial ventures Better Place are building the infrastructure.

    The Volts for Clunkers program presents the best possibility to extract the most benefit for society from a subsidy, given as you suggest, to a special interest group.

  • Rudy

    Ken,
    Brief reply since it’s 8am on a Saturday…

    - Tesla is not profitable, a quick search will reveal the financial struggles and in-fighting going on at the firm. I just looked up the cost of an EVPorsche solution ($48k!); I stick by my statement that it is beyond cost-prohibitive. Even if scale brings the cost down in 1/2, no way I’d ever condone the government dropping $24k a pop to turn some suburban SUV into soccer mom’s dream green car for free.

    - Electric is not carbon neutral, either. You have to make electricity, and for a large scale you have a choice of coal or nuclear (if you start talking about wind and solar, then I know you’ve been drinking too much beer over in Germany with the greenies). Coal is per se not carbon neutral. Nuclear is great, I own a ton of uranium mining company stocks (CCJ, RTP, BHP) that have enriched my account (pun intended!). I personally believe nuclear is the only way to go BUT you have to deal with enviro nutters who hate the concept of nuclear, silly treaties the US adheres to which prevents us from recycling nuclear waste like the Euros, etc. So, while I think nuclear will one day be the main source of electrical energy world wide (starting in China and moving from there), it’s not a viable, carbon-neutral solution in the US for the foreseeable future.

    - Biofuels can be created w/ non-food stock. Used cooking oils allows for a local / regional scale way to do so. Algae is being developed as another.

    - You’d rather be driving a car that can electrocute you in event of an accident and that is carrying hundreds of pounds of toxic chemicals? First responders have to take all sorts of additional precautions do deal with the risks created when hybrids get in accidents. Yes, hydrogen may present some problems, but from an operational perspective it’s a very elegant and high performance solution. If astronauts in the 60′s were willing to strap themselves on massive rockets filled with explosive material, all controlled by systems less powerful than my Citizen watch, then I’m willing to man the f*** up and drive a hydrogen powered car :)

  • http://kennethrcarter.com kennethrcarter

    Rudy, I think you make my argument that electric cars are not a panacea. I think they are a preferred solution, but it is possible that we should be dropping Elsbett diesel motors into these clunkers.FN1 It is unlikely that single solution will emerge.

    I did not mean to suggest that Tesla is profitable. Indeed, it has taken bail out money. I meant that it is converting Lotus cars to EVs. I stand corrected.

    Your comment about EV Porsche and scale is not correct. Economic scale is non-linear, so simply halving the cost of a performance conversion is not a right figure. EV Porsche is converting handfuls of cars per year, not the tens of thousands which I am suggesting. At tens of thousands of units, the cost would be far lower. As a point of fact, a DIY conversion kid for a Ranger pickup truck costs between $3,000 to $6,000, plus the batteries. This is probably a better order of magnitude for a large (but not massive) scale conversion. This cost would also, as you suggest, decline over the long-run.

    Here in Germany, we receive just under 15% of our electrical generation from ‘renewable’ sources, wind, photovoltaic, biomass, etc.FN2 This figure has tripled over the past decade. Coal fired electricity is by no means ‘clean’, but a single coal plant can have advantages over thousands of internal combustion engines. First, it is easier to implement and upgrade environmental controls. Second, the combustion (and pollution) can take place outside of city centers, which would lead to increase air quality in population centers. Nuclear power is an effective solution, but comes with low-probability, high-consequence risk. Witness Chernobyl and Three Mile Island. And while they emit no greenhouse gasses, nuclear power plants do emit a significant amount of waste heat.

    As for safety concerns, perhaps we should let the market chose whether consumers want to be electrocuted or incinerated in the event of a crash. Cars are simply dangerous. You make an excellent point here. However, every car on the road today has at least one battery. Batteries need to be hardened in order to protect in the event of a crash. There is no fluid which goes into an automobile which is not toxic. If you are going to man up, and ride around in a Saturn V-powered car, I suggest you first get one of these: http://en.wikipedia.org/wiki/Apollo_spacecraft#Launch_Escape_System_.28LES.29.

    Finally, please no name calling on my blog, as it diminishes your arguments. You are free, however, to spell-out the word “fuck.”

    FN1 http://www.elsbett.com/us/elsbett-conversion-technology/fundamentals.html
    FN2 http://www.erneuerbare-energien.de/inhalt/42211/42210/

  • http://kennethrcarter.com kennethrcarter