Why the electric car could kill Australian manufacturing: Kohler

Yesterday’s announcement of an electric car trial by the WA government means that at least some politicians in Australia are at last taking seriously what is shaping up as the next great industrial revolution. But unless something changes on the east coast, electric cars will be a disaster for Australian manufacturing. At this stage it looks like no electric cars will be made here – Ford, GM, Toyota and Mitsubishi are all gearing up rapidly to make them somewhere else.

Yesterday the man in charge of the Perth trial, Professor Thomas Brauni, said: “It’s quite likely that you have a significant percentage of all cars being electric in 10-20 years time”.

If he’s only half right, Australia has a big problem. Manufacturing industry rests on the car industry and is already in trouble because China’s demand for raw materials is pushing the currency higher. If Australia doesn’t make electric cars, and there is a big switch from petrol to electricity over the next decade or two, manufacturing in this country will shut down.

In my view the switch from petrol to electric vehicles could be faster and more complete than even the fanatics currently think.

That’s because they’re fast, quiet and with lithium ion battery prices now down to around $15,000 and falling, they are becoming viable without government subsidies – especially for big fleets.

And the importance of resale value in the decision to buy a new car will mean that individual consumers will soon look to future-proof their next purchase from a collapse in resale value.

China is pushing hard into the business through BYD Auto, the company that’s 10 per cent owned by Warren Buffett, and which started selling the first mass-produced electric car in December 2008. It plans to become the world’s biggest electric car manufacturer.

Many American and European cities have already moved beyond trials. In San Francisco new buildings are required to be wired for charging cars and many US cities are quickly pushing ahead with charging stations. Likewise in Europe, where Peugeot has just announced a deal with Mitsubishi to sell electric cars under the Peugeot and Citroen brands.

Virtually every global car manufacturer will be launching an electric car this year or next year. None will be made in Australia, apart from a Hyundai Getz conversion called the Blade Electron, produced by an Adelaide company.

All this is going to put enormous strain on the electricity, lithium and copper industries, but they will be forced to respond, creating powerful booms in each of them – especially gas and wind-powered electricity (after all, there’s not much point powering electric cars with brown coal if you want to cut carbon emissions).

And now there is to be a tiny trial in Perth, funded with $229,000 from the Australian Research Council. It involves 10 government fleet cars being run on electricity from 2010 to 2012, and the data to be collected and processed by a team led by Professor Brauni from the University of WA.

It’s not much, and it comes as people are already happily driving electric cars around the streets of many US cities, but it’s at least something. CO2 Smart, the recharging company managing the trial says the aim is to test Australia’s fully integrated recharging network and test the economics of an electric fleet versus a petrol-driven one.

The other company that’s moving quickly to install recharging stations around the world is Shai Agassi’s Better Place, run in Australia by former Victorian MP and internet entrepreneur Evan Thornley. It’s going to start with a charging station rollout in Israel later this year, and expects to be installing them commercially in Australia late next year.

In thinking about what’s likely to happen with electric cars, it’s worth bearing in mind that in 1899 there were far more of them sold in the US than gasoline cars: 1575 electric vehicles and 936 gasoline ones (plus 1681 steam cars).

At the turn of the century it looked like, of the three technologies, electric vehicles would win and that gasoline cars would die out. The manufacturers of electric cars had easy access to parts from electric cable cars, and Thomas Edison was promising that the problem of the limited battery capacity would be solved (it wasn’t).

The Electric Vehicle Company won a crucial patent battle against the petrol car companies, and in 1899 an electric car became the first to reach 100mph.

But thereafter production of gasoline cars began to pull away from electric cars (although streetcars remained electric because they don’t need batteries).

The main reason for this appears to be that the gasoline car producers developed mass production techniques while the electric car industry did not, remaining a vertically integrated monopoly run by the streetcar magnate, WC Whitney. Electric cars, as a result, were expensive and increasingly uncompetitive.

The first mass-produced petrol car, the Oldsmobile Curved Dash, appeared in 1901 and cost $650 – half the price of an electric car. It was immediately successful, and the following year the leading maker of steam cars, Locomobile, switched entirely to gasoline cars.

And then, of course, along came Henry Ford with the Model T in 1908 at $825, after which the price of a Model T fell every year, while the speed increased.

The development of starting-lightning ignition (SLI) in 1912, which meant women could drive gasoline cars because a crank was no longer needed to start them, was the coup de grace for electric cars. By 1920 the manufacturers were all bankrupt.

Then in the 1970s, the oil crisis resulted in a flurry of support for electric cars, especially in France, Japan and the US. But battery technology simply was not far enough advanced then to drive modern vehicles over long enough distances, and all those projects stalled.

In 1990 electric cars had a sort of “third coming” with General Motors’ launch of the EV1, which was eventually withdrawn from the market in 1999.

The 2006 film Who Killed The Electric Car? documented how the oil industry, supported by George W Bush and former oil company executive Dick Cheney, successfully campaigned against the EV1 and got them all taken off the road and crushed.

But the fourth coming of the electric car in 2010-11 looks unstoppable – a tsunami that will eventually engulf the oil industry.

Unless something is done to develop a place for Australia in this new revolution, it will engulf Australian manufacturing as well.

This article first appeared on Business Spectator.