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1033Proposal: Prepay for Plug-Ins to Save & Transform the Auto Industry

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  • Felix Kramer
    Dec 1, 2008
    • 0 Attachment
      INTRO: "How Prepaying for Plug-In Cars Can Save and Transform the
      Auto Industry" is CalCars' proposal for federal actions in
      December-January to aid the auto industry. We hope that the concept
      and perhaps the specifics of this proposal can be incorporated into
      Congress's response to the "sustainable plans" the carmakers will be
      bringing to Washington DC. We're continuing to circulate this
      proposal to non-governmental organizations for possible
      co-sponsorship, and to people in the auto industry, Congress and in
      the Presidential transition team. It is followed by notes and
      background. We're publishing it on CalCars-News and distributing it
      at the Electric Drive Transportation Association (EDTA) Conference
      December 2-4 in Washington, DC.

      (Shortly after it goes out on email, this posting will also be
      viewable at http://www.calcars.org/news-archive.html -- there you can
      add CalCars-News to your RSS feed.)

      HOW PREPAYING FOR PLUG-IN CARS CAN SAVE AND TRANSFORM THE AUTO INDUSTRY

      Congress and the President-Elect have asked Detroit's automakers to
      come back with a plan. What if that plan, and automakers'
      credibility, could be based in large part on delivering the
      fuel-efficient low-emissions plug-in cars people want, using today's
      technology and today's infrastructure?

      We propose a way to give carmakers the cash they need to keep going
      -- while making sure they devote maximum effort to rapidly transform
      their companies and their product lines. We build on the breakthrough
      $7,500+ plug-in tax credits enacted in October -- when the federal
      government quantified the public benefits of displacing petroleum
      with cleaner, cheaper, domestic electricity.

      Our "end of business as usual" proposal is a multiple win: for car
      buyers, communities whose plants will stay open, automakers, energy
      security, and efforts to slow global warming. Here's our plan,
      followed by some additional explanations:

      A FEDERAL "PREPAID PLUG-INS PLAN" FOR A 21ST CENTURY CAR INDUSTRY
      would give carmakers real targets and quick funds. Here's how it can work:

      * CARMAKERS PRE-SELL PLUG-INS. They're encouraged to accept
      $10,000/vehicle deposits on highway-capable PHEVs and EVs with at
      least 4kWh battery capacity (the minimum for existing tax credits),
      to be delivered ASAP and NO LATER THAN YEAR-END 2012. The sooner they
      issue PRELIMINARY specifications and maximum prices, the sooner they
      become eligible to collect prepayments. Any carmaker that wants to
      receive loan guarantees beginning in January 2009 must commit by
      year-end 2008 to have at least one eligible plug-in vehicle for sale
      by the end of 2010 in volumes greater than 10,000.

      * INDIVIDUAL CAR BUYERS get a 100% refundable federal tax credit on
      their $10K prepayments.

      * FLEET BUYERS get 100% refundable federal tax credits. (Public
      fleets receive 100% grants.)

      * U.S. GOVERNMENT The level of loans guarantees to carmakers is based
      on the volume of prepayments received by each carmaker. Government
      also provides bonus payments to automakers for every plug-in vehicle
      delivered by year-end 2012 -- large incentives in 2010, declining in
      later years. Deposits with carmakers that don't deliver by 2012
      become debt to U.S.

      * CONVERSIONS are included in tax incentives to consumers and
      automakers for safe and reliable plug-in retrofits of existing
      internal combustion engine vehicles.

      THE PROGRAM AND THE MATH: We aim to enlist five million
      pre-purchasers. At an average of $10,000, this will generate $50
      billion for carmakers. Buyers will get the money back in less than a
      year via tax credits. Credits for deposits made by 4/15/09 can be
      counted for the 2008 tax year.

      OUR IMMEDIATE GOAL: To get buy-in on this concept -- or some variant
      of it -- so it's on the agenda of automakers, Congress and the
      incoming administration. This can happen if ANY ONE OF THESE PARTIES
      steps up in the next few weeks.

      NOTES:

      This is an outgrowth of the "fleet moratorium" idea by Steve Marshall
      of the Cascadia Institute and Denis Hayes of the Bullitt Foundation
      plus CalCars (see the second half of "Can Fleets Help Rescue Auto
      Industry? Four Actions Could Make a Difference" at CalCars-News). It
      also reflects strategic thinking by Craig Lewis, VP of Government
      Relations at GreenVolts and formative member of Clean Tech for
      Obama. Please consider endorsing it on behalf of your company or
      organization; send us comments or request a PDF version; and by all
      means forward the proposal.

      ISSUES TO BE RESOLVED:

      * How does this connect to the $7,500 already available to the first
      250,000 purchasers?
      * We need an adjustment mechanism for buyers of vehicles whose
      specifications/price change significantly from when they were prepaid
      to when they become available.
      * This program can be oriented to automakers that most need support
      if the incentives they receive include small levels of government equity.
      * A possible parallel program that would expedite the initiative is a
      federal "feebate." This revenue-neutral measure will incentivize
      high-MPG vehicles in multiple vehicle classes and disincentivize
      gas-guzzlers, while having no impact on most mid-range MPG cars.

      BACKGROUND:

      WHY ARE CAR SALES FALLING? Not just because of the economic crisis.
      The more Americans hear that better cars are on the way, the more
      individuals and fleets will be reluctant to commit to inefficient
      vehicles whose resale value may fall quickly because they run only on
      price-volatile, polluting fossil fuels. We can harness these impulses.

      WHAT ARE TIMING ISSUES FOR CARMAKERS TO SURVIVE LONG ENOUGH TO
      EVOLVE? The low-carbon, high-MPG plug-in hybrids (PHEVs) and electric
      vehicles (EVs) they want to sell are two to four long years away from
      mass production. General Motors says it plans to electrify its whole
      fleet, beginning with the Volt and the Vue in 2010-2011. Chrysler CEO
      Robert Nardelli says choices must be made -- so he's focusing on
      electricity. Chrysler plans to build one of three "production-intent"
      plug-in prototypes. Ford has PHEV prototypes of its Escape hybrid;
      Bill Ford has talked with President-Elect Obama about support on
      electrification. But Ford Motor Company plans no plug-in production
      until 2015. At this rate, vehicles won't arrive soon enough to save
      the auto industry -- let alone U.S. industrial leadership or the climate.

      WHY NOT ENLIST THE AMERICAN PUBLIC'S BUYING POWER? We're inspired by
      how Americans rose to past challenges: We raised $17 billion Liberty
      Bonds in two years in World War I. And 85 million Americans bought
      $185 billion in War Bonds during World War II. Especially since
      dollars back then were worth over ten times more than now, our
      proposal is small in comparison.

      WHO WILL PUT DOWN $10K IN ADVANCE? The proposal challenges automakers
      to explain, market, and promote plug-ins as energetically -- and
      urgently -- as they have other vehicles. Plug-in advocates will pitch
      in. It requires having cash on hand, but telling buyers they'll get
      the prepayment back in a tax credit within months will help. Auto
      industry supporters are prime candidates.

      FLEETS ARE ALREADY CONSIDERING PURCHASES: The November 14, 2008 Wall
      Street Journal reports, Hey, Auto Industry, Need a Jump? Utilities
      Consider Buying Electric Cars "to put weight behind development and,
      perhaps, persuade Congress to give the auto industry the assistance
      it needs." (Find the story at CalCars-News). Auto rental/car sharing
      companies are other likely candidates.

      HOW DO CONVERSIONS FIT INTO THE PICTURE? Retrofits will speed plug-in
      market penetration beyond new cars; even "partially electrified"
      vehicles will significantly reduce fossil fuel use. They will provide
      revenues to carmakers for vehicles they've already sold. And they
      will create local green retrofitter/installer jobs. Both independent
      companies and carmakers partnering with third party QVMs (Qualified
      Vehicle Modifiers) can participate in conversion businesses.

      -- -- -- -- -- -- -- -- -- -- -- --
      Felix Kramer fkramer@...
      Founder California Cars Initiative
      http://www.calcars.org
      http://www.calcars.org/news-archive.html
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