Electric, Hybrid, and Eco-Friendly Cars

Electric vehicles are set to snag consumers a larger tax credit. If all goes according to plan, the EV tax credit will grow from $7,500 to $12,500 under President Biden’s Build Back Better initiative.

The credit is part of a larger $555 billion fund that Biden has designated to tackle climate change, and the White House feels it needs the middle class’ buy-in on EVs to make that happen. In its estimation, the best way to do that is to “deliver substantial consumer rebates and ensure middle class families save money as they shift to clean energy and electrification.”

In an announcement, Biden’s team added that there’s also another carrot. Officials noted that buying an EV “will save the average American family hundreds of dollars per year in energy costs.”

Tesla, Honda, and Toyota vs. Detroit

For an EV to be eligible, the White House said it must be made in the U.S. and built by union workers. Those two elements are essential if a consumer wants the whole $12,500. Without those two components, the tax credit rolls back to $7,500. 

The “made by union workers” aspect is a thorn in the side of Tesla and foreign-owned automakers like Honda and Toyota. In the past, those companies have argued that Biden is favoring Detroit automakers by giving them an unfair advantage.

While buying an EV from a union-backed source may lead to more savings, consumers who buy a non-union manufactured EV are not at a total loss. While they won’t get the full $12,500 as things stand now, the proposal would allow Tesla, Honda, and Toyota EV buyers to receive an additional $500 for electric vehicles that are made with batteries built in the U.S.

Chalk one up for Tesla. The automaker just got its single largest order of electric vehicles (EV) ever thanks to rental car company Hertz. 

The company has spent $4.2 billion on an initial order of 100,000 Teslas that it will add to its fleet of vehicles. The company hopes to take delivery of the Teslas by the end of 2022, when it says it will have a ready supply of EV charging systems across its global network. 

The move is a considerable shift from what consumers will currently find at Hertz lots. Once all the Teslas are in place, they’ll comprise more than 20% of the company’s global fleet. If all goes well, the move could also be just what Hertz needs to solidify its return from the brink of bankruptcy.

Hertz will also lean heavily on the branding power of perennial Super Bowl champion Tom Brady to showcase the “fast, seamless and more accessible” upsides of EV rentals.

What consumers can expect

In its announcement, Hertz said it is installing thousands of chargers throughout its 8,500-location network. The company didn’t say exactly how many of those charging stations will be in the U.S. alone, but it did say customers who rent a Tesla Model 3 will have access to 3,000 Tesla supercharging stations throughout both the U.S. and Europe.

Customers can also expect a different game plan when they rent a Tesla from Hertz. In a move away from the old-style process, the company says the EV rental experience will be “a premium and differentiated” one that includes digitized guidance to educate customers about the electric vehicle to get them on their way quickly. The company said an expedited EV rental booking process using the Hertz mobile app is also around the corner.

Electric vehicles have come of age

If there’s any doubt that EVs are quickly becoming mainstream and might catch gas-powered vehicle owners off guard, the numbers certainly look promising. Between 2020 and 2026, the size of the global electric vehicle market is expected to quadruple and reach an estimated global market size of $725 billion. 

Hertz has been waiting for this moment to happen. It was the first U.S. car rental company to introduce EVs to its rental fleet in 2011.

"Electric vehicles are now mainstream, and we've only just begun to see rising global demand and interest," said Hertz interim CEO Mark Fields. "The new Hertz is going to lead the way as a mobility company, starting with the largest EV rental fleet in North America and a commitment to grow our EV fleet and provide the best rental and recharging experience for leisure and business customers around the world."

Because of a recent shortage, sales of new cars are lower than last year and significantly lower than in 2019. But a report from Kelley Blue Book (KBB) shows that sales of electrified vehicles (EV), including plug-ins, hybrids, and plug-in hybrids, are increasing at a record pace.

In the third quarter of this year, the overall new-vehicle market dropped by more than 13% compared to 2020. At the same time, sales of EVs surged by more than 60% and accounted for 10.4% of total vehicle sales, an all-time high. 

Tesla and Toyota lead the EV pack

Sales of vehicles with hybrid engines that use a gasoline engine to recharge the battery while driving were more than double the number of purely electric vehicles sold during the period. When it comes to electrified vehicles, Tesla and Toyota dominate U.S. sales. Tesla is the best-selling plug-in EV, while Toyota is a leader in cars with hybrid engines.

General Motors and Ford may quickly catch up, however. Both automakers have launched ambitious EV plans and GM is scheduled to introduce an electric version of the Hummer before the end of the year.

Ford has already released an EV version of its iconic Mustang and has begun deliveries of its compact pickup truck, the Maverick, which has a hybrid engine. The automaker’s all-electric F-150 Lightning pickup begins production in early 2022.

“Toyota has long dominated the market when it comes to hybrid powertrains, and its leadership today is unquestionable,” KBB said in a press release. “Through the first nine months of 2021, more than 24% of combined Toyota and Lexus sales have been hybrid vehicles. More than 60% of all hybrid-electric vehicles sold industry-wide in Q3 came from Toyota Motor Company, a position nearly as dominant as Tesla.”

Used car prices still going up

Meanwhile, the sticker prices on used cars continue to rise. After a big gain in September, an industry report found that prices continued to rise during the first two weeks of October.

The Manheim Used Vehicle Value Index rose 8.3% over the month of September. At mid-month, the average value of a used car or truck was 37% higher than in October 2020, and is well into record territory. 

And that’s just what dealers are paying for used cars at auction. Consumers generally pay much more, depending on local market conditions.

Cox Automotive, which publishes the report, expects demand for used cars and trucks to remain intense since the new car shortage isn’t expected to end any time soon.

Facing government mandates, automakers have committed to an electric vehicle future, despite the fact that consumers have yet to fully embrace these vehicles. But industry executives remain hopeful that consumers will eventually come around.

The CEO of Pendragon, a major car dealer group, agrees that consumers remain hesitant about EVs but sees signs of increased EV adoption. On CNBC this week Bill Berman said he is a big fan of EVs but understands why some people aren’t.

“People’s hesitancy ... around electric is multifaceted,” Berman said. “First off, it’s unknown — no one’s ever driven an electric car so there’s a lot of uncertainty that goes along with that. There’s range anxiety which most consumers call out. Even though … most consumers drive less than 50 miles a day, knowing that you can’t easily refuel your vehicle creates hesitancy.”

Doris, a Nissan Leaf owner from Hastings, Florida, has been living with what she describes as limited range in her EV. 

Range is going down

“Purchased with 7,000 miles on it December of 2012,” Doris wrote in a ConsumerAffairs review. “Had about 70 miles range driving in Florida. Now has 80,000 miles, had the battery repaired under warranty in 2016. It has iffy 50 miles range. Really have to observe speed and estimated range.”

It’s worth noting that Doris’ review suggests she still likes EVs but would like to have something with more range.

Increased sales since 2011

While car dealers would undoubtedly like to see consumers buy more EVs, the numbers have moved sharply higher since 2011. The Department of Energy reports sales increased from around 17,000 in 2011 to 361,315 in 2018. But sales dipped slightly in 2019.

J.D. Power’s 2020 Mobility Confidence Index Study flashed a caution sign to the auto industry. It warned that manufacturers are plowing ahead producing cars that, so far, most car buyers have not asked for.

Despite improvements in technology and expanding charging infrastructure, the survey found that even consumers who have previously owned an electric vehicle aren’t always interested in buying another one. They cited the limited driving range, the high maintenance cost, and the purchase price as their main objections.

Berman said he believes improvements in charging stations hold a key to overcoming hesitancy among consumers. But he notes there are challenges in getting there because most homes aren't equipped for rapid charging.

“It’s kind of the proverbial ‘chicken and egg’ but as more electric vehicles are sold and more infrastructure is put in — whether it’s in North America, Europe, or the U.K. — I think adoption rates will rise,” he said.

President Biden has announced a new goal of having electric vehicles account for half of all auto sales in the United States by 2030.  Biden signed an executive order on Thursday morning focused on accelerating the adoption of EVs.

Although compliance with the new national sales target won’t be mandatory, Ford, GM, and Stellantis (parent company of Chrysler) have all said they support the administration’s aspiration..

"Today, Ford, GM and Stellantis announce their shared aspiration to achieve sales of 40-50% of annual U.S. volumes  of electric vehicles (battery electric, fuel cell and plug-in hybrid vehicles) by 2030 in order to move the nation closer to a zero-emissions future consistent with Paris climate goals," the automakers said in a joint statement. "We look forward to working with the Biden Administration, Congress and state and local governments to enact policies that will enable these ambitious objectives."

Officials from the auto companies are set to attend an event at the White House later today to speak on the matter.

Promoting EV adoption

Administration officials said making strides towards increasing the number of EVs on the road will serve as a job stimulator for American manufacturing, which will support the president’s "Build Back Better Agenda.” 

“A strong vision from President Biden, along with these significant investments, will help ensure lots of high-paying manufacturing jobs here in America to produce zero-emitting vehicles—vehicles that will then save their owners thousands of dollars on gas,” said Fred Krupp, the president of the Environmental Defense Fund. 

Earlier this summer, analysts at IHS Markit said electric vehicles were poised to account for around 25% to 30% of new vehicle sales by 2030. They said that number would grow to 45% to 50% by 2035. President Biden's executive order is expected to encourage the auto industry and government to promote legislation and push for the widespread adoption of electrified vehicles. 

“California applauds the Biden Administration’s move to boldly reduce climate pollution from cars, inspired by California’s nation-leading framework," California Governor Gavin Newsom said in a statement. "The climate emergency demands no less."

In a filing with the U.S. Environmental Protection Agency (EPA), Tesla defended itself against accusations of violating environmental regulations. 

Regulators in the U.S. have accused the electric automaker of failing to prove that it’s complying with the federal emissions standards for hazardous air pollutants. The EPA has specifically requested more information about how the company handles the “surface coating” process for vehicles at its paint facility in Fremont, California. 

In 2019, Tesla employees told CNBC that the Fremont plant had sometimes conducted paint retouching in an open-air tent without full automation. Employees said they were exposed to extreme cold and smoke-filled air in 2018, a time when wildfires were an issue. 

Meanwhile, German officials have accused the company of failing to take back and properly dispose of old customer batteries. In Germany, there’s a law requiring automakers selling electric cars to take back batteries and dispose of them in an environmentally sustainable way.

In the Wednesday filing, Tesla said it “has responded to all information requests from the EPA and refutes the allegations.” The company said it does not expect any “material adverse impact” on its business to stem from its talks with the EPA on this matter.

In response to the accusations from German officials, Tesla said it has “continued to take back battery packs.” It added that the issue was “primarily relating to administrative requirements.” 

A month after President Biden moved to replace the federal government’s 650,000 unit gas-powered fleet for electric vehicles, the U.S. Postal Service (USPS) says it can’t afford to make that change. 

That’s a pretty big stone in the path of Biden’s initiative since the Postal Service has nearly a third of the total federal 650,000 vehicle population.

Optimism replaced by outrage

All seemed good when Postmaster General Louis DeJoy announced that he had inked a deal to replace many of USPS’ older, gas-powered vehicles. He said a recent $482 million contract would allow the agency "to order electric powertrain vehicles as well as traditional internal combustion engine vehicles.” 

“This is great news because we are committed to move forward a more environmentally sustainable mix of vehicles in our fleet," DeJoy added.

DeJoy was applauded by clean energy groups for the move. Gina Coplon-Newfield, director of the Sierra Club's Clean Transportation For All campaign, says postal delivery trucks are the "perfect use case" for electric vehicles.

"They don't travel far distances on any given day. They sit idle overnight when they can charge," she told NPR. "And they travel through neighborhoods exposing people to air pollution. So shifting to a 100 percent electric USPS fleet should really be a no brainer."

However, the hoorahs sent DeJoy’s way may have been in haste. He later explained to lawmakers that only 10 percent of the agency’s new vehicles would be electric due to financial constraints. Coplon-Newfield told NPR that the move simply isn’t good enough. 

"Electrifying just 10 percent of the U.S. fleet, as the postmaster, DeJoy, has suggested, is really shortsighted and not acceptable," she said.

Congress steps in

Members of Congress then entered the fray after finding out that DeJoy passed over Ohio electric truck manufacturer Workhorse for Oshkosh Corporation, a Wisconsin company that builds defense, fire and emergency, and commercial vehicles and access equipment.

A group of congressional members, including U.S. Senator Sherrod Brown (D-OH), U.S. Representatives Tim Ryan (D-OH) and Marcy Kaptur (D-OH), were irked by DeJoy’s deal with Oshkosh. Their collective opinion was that it was in “stark contrast to Biden’s Executive Order on Tackling the Climate Crisis at Home and Abroad and his public calls to transform the federal vehicular fleet to electric vehicles.” In turn, they asked Biden to review the contract award that DeJoy signed.

“Furthermore, this contract is not only an investment in America workers and our domestic manufacturing sector, but it is an opportunity for our nation to regain its role as a leader in clean technology manufacturing. This contract will have consequences for decades to come and, as such, we have serious concerns it could be a wasted opportunity to address the climate crisis and the reindustrialization of our manufacturing sector,” the lawmakers wrote.

With sales of electric vehicles (EV) expected to double in 2021, the U.S. government is attempting to reform an automotive incentive program by offering a $7,000 tax credit to consumers who purchase an EV. 

The program -- part of the proposed Growing Renewable Energy and Efficiency Now (GREEN) Act -- allows each participating automaker to make the incentive available to 200,000 car buyers, more than three times the allotment of the original incentive program brought about by the U.S. Energy Policy Act of 2005. 

Releveling the playing field

Tesla had already hit the 200,000 threshold back in 2018, followed by GM, but in Electrek’s estimation, the program was flawed and in need of serious rehab. 

Because GM and Tesla hit the threshold before the recent spike in sales, they became less competitive against foreign automakers that hadn’t hit their threshold. If all goes according to plan, Tesla and GM would regain access to tax credits.

“With the Democrats taking the White House and the Senate in the latest election in the US, we have been expecting that they would bring back reforms to the EV incentives in order to fix the situation,”said Electrek’s Fred Lambert.

Lambert says this specific reform has been proposed before and, in his estimation, could be much more favorable for the consumer and the manufacturer alike. 

“I could see better implementations, like removing the cap per manufacturer and instead having a total industry cap in order to incentivize automakers to bring EVs to the U.S. faster, but it is certainly better than nothing,” he said.

“However, it is not ideal for those companies in the short term since now buyers are going to be expecting to have access to that credit in the near future, and they might postpone buying until then since it doesn’t look like the new $7,000 tax credit is going to be retroactive. That could be a problem for Tesla in the coming months.”

Even though sales of electric vehicles (EV) have been tepid so far, at least one industry source believes 2021 will be the year the technology goes mainstream.

Automotive publisher Edmunds predicts electric vehicle sales will reach their highest level on record this year after making up just 1.9 percent of retail sales last year. Edmunds experts predict that percentage could nearly double this year.

"After years of speculation and empty promises, 2021 is actually shaping up to be a pivotal year for growth in the EV sector," said Jessica Caldwell, Edmunds' executive director of insights. "We're not only about to see a massive leap in the number of EVs available in the market; we're also going to see a more diverse lineup of electric vehicles that better reflect current consumer preferences.”

That’s because so far, most electric vehicles have been sedans. Americans, however, have a strong preference for trucks and SUVs. And it doesn’t hurt that governments are encouraging drivers to go electric.

Push from Washington

“Given that the new presidential administration has pledged its support for electrification, the U.S. is likely to see incentive programs targeted at fostering the growth of this technology further," Caldwell said.

Tesla gets most of the attention among EV carmakers, but Edmunds reports there are lots of other choices. It expects there to be 30 EV models from 21 brands on the market this year, compared to 17 vehicles from 12 brands in 2020. 

What may be more important, there will be a greater diversity of EV models. Car shoppers will be able to choose between 11 cars, 13 SUVs, and six trucks in 2021. Last year’s lineup included only 10 cars and seven SUVs.

Ford and General Motors are in the midst of a pivot to EVs. Last week, GM announced that it would phase out all of its gasoline-powered vehicles by 2035. 

‘Like forked lightning’

Later this year, Ford will introduce an EV version of its iconic Mustang but in an SUV configuration. It says dealers are already taking orders.

“At the first-ever Detroit auto show, Henry Ford said he was working on something that would strike like forked lightning,” Bill Ford, executive chairman of Ford Motor Company said in December. “That was the Model T. Today, the Ford Motor Company is proud to unveil a car that strikes like forked lightning all over again. The all-new, all-electric Mustang Mach-E. It’s fast. It’s fun. It’s freedom. For a new generation of Mustang owners.”

Ford also is introducing an EV version of its F-150 pickup truck, one of America’s best-selling vehicles.

Cox Automotive recently reported research indicating that two in five pickup truck shoppers are considering buying an electric truck within the next two years. The study showed that younger truck buyers are more likely to be open to an electric pickup truck.

Apple’s automotive project, which has started and stopped numerous times in the last six years, is reportedly hitting the accelerator again. 

Reuters, quoting “people familiar with the matter,” reports that the iPhone maker plans to leverage its “breakthrough battery technology” to launch an electric vehicle (EV) in 2024. Apple declined to comment on the story.

The report said Apple will rely on its new battery design that the sources say could “radically” reduce the cost of batteries while increasing the vehicle’s range. Vehicle range has been one of the limiting factors for EVs so far.

The report says Apple would target its vehicle at the consumer market and likely partner with an established manufacturer to assemble the vehicles. According to Reuters, former Tesla executive Doug Field has jump-started the program, code-named Project Titian.

The report did not say what consumers would have to pay for an Apple car, but an EV that is also self-driving would be at the upper end of the automotive price range. Reuters said Apple would turn to outside vendors for key parts of the autonomous system, including lidar sensors. 

However, the company might not have to look very far to find that kind of support. Apple’s iPhone 12 Pro and iPad Pro models both contain lidar sensors.

New battery design

The real breakthrough, according to the report, is in the battery technology. Sources have told Reuters that Apple would deploy a “monocell” design that increases efficiency by freeing up space inside the battery pack, eliminating the pouches and modules that hold battery materials.

Potentially, that means the car could travel farther between charges. The Tesla Model X range is currently among the industry’s best, traveling between 341 and 371 miles on a single charging session.

Reuters quotes one person familiar with the project as describing the battery technology as something completely different than what’s available now.

“Like the first time you saw the iPhone,” the person said.

Electric cars were once a novelty. Now they’re the future, with nearly every automaker racing to get new electric vehicles on the market.

But the change in emphasis has more to do with government mandates than consumer preferences. In fact, Subaru CEO Tomomi Nakamura recently shocked a gathering of automotive journalists when he declared that American consumers aren’t very interested in buying an electric vehicle, with the exception of a Tesla.

Nakamura said Subaru has already discovered how difficult it is to market an electric car to American consumers. In 2018, it sold an average of just 300 cars a month when it introduced a plug-in hybrid of the Subaru Crosstrek.

“We think the U.S. market is really difficult,” he said.

Government pressure

If consumer demand isn’t driving automakers to make electric vehicles a priority, then what is? Most likely, it’s rising government fuel economy standards. Manufacturers can still sell gas-guzzlers, but their total fleet of vehicles must meet increasingly ambitious miles-per-gallon targets. 

Since a plug-in electric vehicle uses no gasoline, the more the company can sell, the higher its MPG average goes.

The Edison Electric Institute reports consumers are embracing electric vehicles in rapidly growing numbers. It has published a chart showing the number of electric cars on the road increased from just a few thousand vehicles in 2011 to nearly 1.2 million in April 2019.

While that’s impressive, total light-vehicle sales in the U.S. last year totaled just over 17 million vehicles, and Tesla, by far the largest seller of electric vehicles, sold an estimated 179,000 units.

Headwinds

Electric vehicle sales currently face two significant headwinds to widespread consumer acceptance -- range and cost.

In measuring the average range of an electric vehicle, Kelley Blue Books ranks the Tesla Model S as having the longest range on a charge -- 370 miles. The average is around 250 miles. That’s fine for in-town commuting but problematic if you’re driving halfway across the country.

Subaru executives cite cost as perhaps a bigger impediment to consumer acceptance. The average transaction price of new cars in the U.S. last year was nearly $39,000. Electric vehicles tend to cost much more.

But while electric vehicles cost more, their sticker price is going down while gas-powered vehicles are getting more expensive. Data analyzed by Cox Automotive shows that electric vehicle prices fell from $64,300 to $55,600 earlier this year, a 13.4 percent decline over the previous year.

The Trump administration is expected to roll back some of the Obama administration’s toughest auto emissions standards while California is insisting they be met. At least four auto manufacturers have decided to fall in line with California.

California is one of a handful of states that have opposed the administration's lower standards and vowed to maintain tough emissions standards on cars and trucks in their states. That posed a dilemma for carmakers since their products might be barred from some lucrative markets if they failed to meet those states’ emissions standards.

So Ford, Honda, BMW, and Volkswagen negotiated with California regulators who agreed to slightly lower their standards if the automakers would commit to meeting them instead of national standards proposed by the Trump administration.

Even though it will be more costly for carmakers to meet the tougher standards, they say doing so provides needed regulatory certainty. It also means they don’t have to build two versions of each model -- one that meets the lower national standard and the other that must meet the higher California standard.

An eventual Democratic administration would likely impose the California standards on a national basis anyway, requiring the car companies to make the expensive engineering changes at a later date.

Compromise

The four automakers were able to persuade California regulators to slightly lower their emissions standards in return for the companies agreeing to adopt them for all their vehicles.

Under the agreed-to set of rules the four companies’ vehicles would have to achieve 51 miles per gallon fuel economy by 2026 instead of 54.5 miles per gallon by 2025, called for in the Obama administration regulations.

The Trump administration is expected to stick with a standard requiring cars to achieve a 37 miles per gallon fuel economy rating. 

30 percent of the market

The four carmakers striking a deal with California make up about 30 percent of the U.S. auto market. California Gov. Gavin Newsom said he believes more carmakers will join the agreement in the future.

At least one auto executive told The New York Times that the deal appears attractive because of California’s concessions. The executive said the Obama administration’s standards pose problems for automakers since they sell so many SUVs.

A manufacturer’s fuel economy rating is based on the mileage achieved by all the vehicles it sells. That’s a primary reason nearly all carmakers are committing to producing electric vehicles since they have very high fuel economy ratings.

As self-driving cars continue to make headlines, researchers have now found a new environmental implication.

According to researchers from the University of Michigan, consumers are estimated to drive more miles with autonomous vehicles, thereby reducing the estimated fuel savings that many anticipated with the advent of self-driving cars.

“The core message of the paper is that the induced travel of self-driving cars presents a stiff challenge to policy goals for reduction in energy use,” said researcher Samuel Stolper. “Thus, much higher energy efficiency targets are required for self-driving cars.”

Predicting future car use

To see how self-driving cars would influence future driving behaviors, the researchers analyzed fuel cost, time cost, and United States travel survey data.

The main finding from the study indicated that self-driving cars will free up time for consumers while they’re in the car, which is likely to increase the amount of time they’re in the car. Currently, driving eats up time that could be spent being more productive; however, self-driving cars would eliminate that sole focus that is required of traditional cars.

The researchers believe that many previous studies have focused solely on how consumers would save money on gas with self-driving cars, but they say these same studies haven’t taken into account the environmental impact that they could have. The team says that the convenience factor of self-driving cars will not only have cars banking more miles, but it can potentially not benefit the environment at all.

“Backfire -- a net rise in energy consumption -- is a distinct possibility if we don’t develop better efficiencies, policies, and applications,” said researcher Morteza Taiebat.

The researchers warn that the implications to the environment could be much harsher than previously expected, and they say legislative changes need to be made to help prevent air pollution around the globe.

In a matter of years, you may be seeing a lot more electric Volkswagen vehicles on the road. In fact, by the end of the next decade you may be hard-pressed to find a non-electric model made by the automaker.

The Seattle Times reports that VW Group – which owns a number of car brands including Audi, Bentley, Lamborghini, Porsche, and Volkswagen – has committed to an all-electric vehicle lineup by 2030. The announcement was made just before the Frankfurt Motor Show on Monday by VW Group CEO Matthias Mueller, who said that automakers must respond to the push for electric vehicles.

“We have got the message and we will deliver. The transformation in our industry is unstoppable. And we will lead that transformation,” he said.

A costly move to electric vehicles

The proclamation follows a similar one made by China over the weekend, which announced that it would be following the United Kingdom and France in phasing out fossil-fuel powered vehicles. Reuters reports that European automakers are starting to unite in an effort to move away from the traditional combustion engine, which has long been tied to air pollution.

For VW’s part, the decision to move to electrification makes some sense considering the disastrous “clean diesel” scandal that it recently went through. However, the decision could still cost the company dearly.

Experts say that phasing out combustion engines by 2030 could lead to 600,000 lost jobs in Germany alone. Mueller said that VW will be looking to spend an additional 50 billion euros to source battery cells to meet its own vehicle production needs by 2025.

Price increases and shrinking demand

Despite growing public sentiment, electric vehicles have struggled to pick up steam in the global market. With the exception of Tesla, whose shares jumped 6% on Monday following China’s weekend announcement, electric vehicle makers have had trouble penetrating the market. Currently, electric car sales account for less than 1% of global car sales.

Fiat Chrysler CEO Sergio Marchinonne has been outspoken in his aversion to electrification, which he says was based purely on cost estimates and an expected reduction in demand.

“There’s going to be a huge increase in prices in 2021-22 if effective electrification becomes as widespread as people expect,” he said. “That, based on everything I know in terms of economics, will cause a shrinkage of demand.”

Though oil and gasoline facilities in the Gulf of Mexico escaped major damage from Hurricane Rita, disruptions in oil production and supply exist, according to industry analysts. Of greatest concern to short-term needs is disruption of gasoline supplies from Gulf refineries.

On Monday, the American Petroleum Institute reported:
• As of September 26, 23.4 percent of the nations refinery capacity was off-line. Another 3 percent of U.S. capacity was operating under reduced runs. Most of the refineries in the hurricanes path were still assessing their facilities for possible damage to determine when they can be brought back on line.
• The following refineries were reported as shut down, with no information yet as to when they might restart, or on the extent of damage incurred, if any: Valero (Texas City), Astra (Pasadena), Valero (Houston), Lyondell-Citgo (Houston), Calcasieu (Lake Charles) and Total Petrochemical (Port Arthur).
• Refineries reporting having no power are Motiva in Port Arthur and ExxonMobil in Beaumont.
• The ExxonMobil refinery in Baytown, the ConocoPhillips refinery in Sweeney and the Marathon Petroleum refinery in Texas City were asking employees to report to work to start up the facilities.
• The Shell refinery in Deer Park suffered no significant damage and expects to be running by Wednesday or Thursday.
• The Valero refinery in Port Arthur reports flooding and a lack of electricity, and it expects to be running in two to four weeks.
• Refineries reporting no significant damage but offering no estimate on when they might restart are the BP Texas City facility and the Citgo Lake Charles plant.
• The Citgo Corpus Christi refinery is running at normal operations while the Flint Hills Resources and the Valero facilities were returning to normal operations but running at reduced capacities. The Valero Three Rivers (near San Antonio) refinery is operating at slightly reduced runs and returning to normal operations.
• There are still 4 Katrina refineries down, representing a little more than 5 percent of U.S. refining capacity (ConocoPhillips-Belle Chasse; ExxonMobil-Chalmette; Murphy Oil-Meraux; and Chevron-Pascagoula).

Pipelines, another critical component of the energy infrastructure, were also impacted by Hurricane Rita. The Capline pipeline, which connects the Louisiana Offshore Oil Port and the Strategic Petroleum Reserve and Patoka, Illinois, is operating at about 75 percent capacity, according to the Association of Oil Pipelines. But the Centennial Pipeline, originating in Beaumont, Texas and terminating in Creal Springs, Illinois, remains completely shut down.

As of Monday, the status of other pipelines in the region was mixed:
• Colonial Pipeline: Operating. Colonial has restarted its origin pipeline segments in Houston and Pasadena and continues to have full operating capacity from Krotz Springs, LA, eastward. This will enable the pipeline system to achieve 42 percent of its normal mainline operational capacity from Houston. It plans to increase its capacity to 54 percent Monday and 73 percent Tuesday.
• Explorer Pipeline: Partial operations. Limited service resumed early Monday morning after an integrity assessment and an orderly restart. Limited service has been restored from the companys Pasadena and Houston facilities, which provide two-thirds of the companys normal volumes. The companys origin facility at Lake Charles has not yet been assessed and the origin facility at Port Arthur is not yet ready to resume operations. Explorer operates a 1,400-mile system that transports some 573,000 b/d of gasoline, diesel fuel and jet fuel from the Gulf Coast to the Midwest.
• Longhorn Pipeline: Closed. A 700-mile pipeline, Longhorn can transport up to 72,000 b/d of refined products. The pipeline transports gasoline and diesel from Gulf Coast refineries to communities in West Texas and the El Paso gateway market. From there, some fuel is sent to Phoenix, Tucson and Albuquerque.
• LOOP: Partial operation. The port stopped offloading tankers Thursday but it is continuing to deliver crude to customers. LOOP is the U.S. port capable of off-loading deep draft tankers known as Ultra Large Crude Carriers (ULCC) and Very Large Crude Carriers (VLCC).
• Magellan Pipeline: Operating, with portions closed. Magellan is a refined products system consisting of 8,500 miles of pipeline providing transportation, storage and distribution services for refined petroleum products and liquefied petroleum gases in 13 Midwestern states. The system in Texas and southern Oklahoma is idle because of lack of supply from Houston. All other refinery origins on the Magellan system are operational and are expected to maintain normal supplies to mid-west markets.
• Marathon Pipeline: Portions closed. Marathon shut down its Texas City to Pasadena system as of late Wednesday. The remainder of the onshore system is operational.
• Plantation: Operating. Plantation is a refined products system consisting of 3,100 miles of pipeline transporting 595,000 b/d. The line originates in Baton Rouge and terminates in the Washington, DC area.
• Seaway Pipeline: Closed. Seaway operates a 500-mile system that transports 350,000 b/d from the Texas Coast to Cushing, OK.
• TEPPCO Products Pipeline: Closed. All TEPPCO refined products and liquid propane gas terminals have been shut down. TEPPCO operates a 4,600-mile system that transports 330,000 b/d of refined products from Beaumont to New York. It consists of two main lines that have been shut down. TEPPCO's 16-inch line from El Dorado, KS north is available to run on a very limited basis for conventional refined products but will depend on local sources for its supply.

The Gulf of Mexico provides 29 percent of domestic oil production and 19 percent of domestic natural gas production. As of Monday, September 26, the combined shut-ins associated with Hurricanes Katrina and Rita were: 100 percent of oil production from the Gulf (1.53 million barrels per day) and 78.4 percent of daily natural gas production (7.84 billion cubic feet per day).