Jump Starting Electric Car Production

Jump Starting Electric Car Production

Plans for new plants in the works.

Will electric cars ever get up to speed in the United States? Several moves over the past summer point toward progress in that direction. Two manufacturers have announced plans to build new production facilities in the United States, while General Motors Corp. says the Chevy Volt is on track to hit the market by 2010.

If all goes as planned, thousands of jobs could be created by the recent activities, including up to 4,000 in Kentucky where Integrity Manufacturing LLC plans to build electric cars for Santa Rosa, Calif.-based ZAP, according to Kentucky's Economic Development department. Changes in the U.S. economy coupled with high fuel prices and government-provided incentives are the main drivers for much of this activity.

For ZAP, which stands for Zero Air Pollution, the falling dollar and higher labor rates in China -- where ZAP currently produces vehicles -- has made the United States a more attractive location to produce its electric three-wheeled, low-speed sedan called the Xebra, says Alex Campbell, ZAP's director of communications. The vehicles are designed for roadways with posted speed limits of 45 mph or less.

Tesla Motors' electric Roadster sports car zips around a racetrack. The company will build a new sedan more modestly priced than the $100,000 Roadster in California beginning in late 2010.
Meanwhile, Integrity Manufacturing is taking advantage of a tax incentive package offered by the state of Kentucky worth up to $48 million to build the ZAP vehicles. The plant will be built in Franklin, Ky., at an estimated cost of $84 million.

Government-provided incentives also played a key role in attracting Tesla Motors Inc. to its planned site in California. Tesla initially said it would build a manufacturing plant in Albuquerque, N.M., but that changed when California approved a program in June that exempts zero-emission vehicle manufacturers from paying sales taxes when they invest in new manufacturing equipment. Tesla also will be eligible for at least $1 million in employee training funds from the state.

Tesla expects to begin production on four-door, five-passenger sedans at the California facility in 2010. The new plant will result in the transfer of some production jobs from the U.K., where the company has partnered with Lotus Cars to build its high-end Roadster model, according to a Tesla spokesperson. The total number of jobs that will be created at the undetermined location will largely depend on how many employees will move, she says.

ZAP's three-wheeled Xebra moves through production in a Chinese plant.
The prospect of job growth and increased manufacturing output in the United States may seem promising, but also may be overhyped, according to David Cole, chairman of the Center for Automotive Research. "They're kind of putting the cart before the horse in some sense because the battery is the critical technology," Cole says. "Battery development is coming along, but it's not there yet."

The challenge for electric-car manufacturers is being able to produce batteries in high volumes at a reasonable cost, Cole notes. In addition, smaller manufacturers such as Tesla and ZAP will likely need to partner with larger OEMs to make mass production a reality, he adds. Tesla and ZAP partner Integrity haven't yet formed any major alliances with U.S. OEMs but they have sought the experience of auto industry veterans. Integrity has met with automotive companies and experienced industry personnel who are interested in playing a role in the project, according to Integrity CEO Randall Waldman. And in July, Mike Donoughe, a former Chrysler vice president, joined Tesla as executive vice president of vehicle engineering and manufacturing.

Another potential obstacle for electric-car producers is resistance from traditional manufacturers who view the tax breaks and incentives they're receiving as unfair. While Gov. Arnold Schwarzenegger hailed the tax credit that Tesla is receiving as "great news for California, our economy and our environment," the state's manufacturing association wasn't as pleased.

"We should recognize the economic footprint that every manufacturer brings to California," says Gino DiCaro, vice president of communications for the California Manufacturers & Technology Association. "We don't quite understand why the governor would sign a sales tax exemption for one company and not the other."

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