GM and Toyota's Race to Build Electric Cars

Toyota is being cautious with the technology, but GM is full-speed-ahead for a 2010 launch of its Volt. To the victor will go the spoils

By David Welch

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To hear Toyota Motor (TM) managers tell it, plug-in hybrids, electric cars, and the lithium ion batteries that will make them work aren't quite ready for showrooms, and they're cautious about following some rivals to market in 2010. But rival General Motors (GM) says the company will have its ballyhooed Chevrolet Volt, and its lithium ion batteries, ready for sale as promised (BusinessWeek.com, 9/16/08) in 2010.

If GM pulls it off, the struggling automaker will stage a real coup. The Volt would have better fuel economy than Toyota's Prius (BusinessWeek.com, 6/6/08) and prove that American knowhow can finally trump Japanese technological prowess. If GM fails, Toyota is right again, and the Japanese juggernaut keeps the green mantle and important bragging rights as the industry's technology leader.

Their two differing views are more than just posturing for the motoring press. The two companies are shaping their strategies for developing and selling more advanced hybrids and electric cars. Depending on who is right, an era of highly efficient and emission-free cars might be just around the corner or will have to wait until deeper into next decade. "This is a brave new world," says one senior GM engineer working on the Volt. "There's no question we're taking some risks."

The MPG Math

Assuming the technology works, the Volt and plug-in hybrids will be a big step forward from the 46-mile-per-gallon Prius. The Volt will go 40 miles on electric drive before a 1.4-liter four-cylinder engine kicks in to charge the battery. So an owner who only goes 40 miles a day may rarely use gasoline. One who goes, say, 50 miles a day would use roughly a quarter of a gallon of gas daily before going home to recharge the car's lithium ion battery by plugging it in. Do the math. That's 200 mpg for that trip.

Plug-in hybrids aren't quite that efficient, but the concept is similar. They have more battery power and can run on electric drive longer than today's Prius, whose gasoline motor kicks in once the car hits 15 or 20 mph. Toyota's plug-in Prius demonstration car goes 10 miles just on electric drive right now.

But Toyota says it's not eager to get the car to showrooms too quickly. At a media event in Portland, Ore., on Sept. 23, Toyota executives said that plug-in hybrids, extended-range electric cars like the Volt, and electric cars like the one that Nissan (NSANY) plans to sell in 2010 still have many challenges to overcome. The tallest hurdle is the lithium ion batteries. Toyota will sell a plug-in hybrid version of its popular Prius in 2010, but only in batches of cars to corporate fleets.

Toyota wants to use those corporate fleet customers as guinea pigs before flooding showrooms with the cars. Why so nervous? Toyota says it doesn't have enough data on cost, consumer reaction to plug-in hybrids, or durability of the needed lithium ion batteries to go confidently to showrooms yet. "There's no science to all of this because we're betting where batteries will be, where consumers will be, and where gasoline prices will be in three years," says Bill Reinert, national manager for advanced technologies at Toyota Motor Sales USA. "That's why we're doing test (fleets) in 2010."

Production Problems

Toyota may have a point. Lithium ion batteries work in test cars at GM and Nissan. Silicon Valley's Tesla Motors has sold about 30 electric roadsters that use lithium ion batteries. But mass producing them and selling the cars at retail is another issue. "Manufacturing lithium ion batteries is not a big deal if you only want to make a few cars," says James N. Hall, principal of 2953 Analytics, a Detroit consulting firm. "But mass producing large cells is a problem. No one has done it before."

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