The Race For The Electric Car

Competition To Build A Viable Electric Car Heats Up, As Silicon Valley Gets Into The Game

CBS

October 5, 2008

The price of oil is up, gas guzzling cars are out, and a race for a fuel-free, practical electric car is on.

It includes the usual suspects: Detroit, Japan, and Germany. But as correspondent Lesley Stahl reports, a surprising newcomer with no experience at building cars has entered the race: Silicon Valley.

The jury is still out on whether electric cars can ever be really practical, but the computer geeks in California are betting that their inventiveness can beat out Detroit's cumbersome bureaucracy in producing a viable e-car.

One of the reasons electric cars have never taken off has been battery technology. A few years ago, someone wondered: why not use the batteries they put in laptop computers called lithium-ion batteries? That's when the environmentally-conscious hi-tech industry in California jumped in.

The first all-electric sports car is called the "Roadster" and is made by Tesla Motors, a small start-up in Northern California.

The chairman of Tesla, Elon Musk, says the Roadster can accelerate from zero to 60 in four seconds. It is propelled by over 6,000 finger-sized lap top batteries, and not a single drop of oil.

Musk made his fortune by inventing PayPal, the online banking service. He launched Tesla five years ago, with no experience at all in the car business. Now he has over 1,000 orders for the Roadster from people like George Clooney and Gov. Schwarzenegger. They can afford it.

Musk says the Roadster sells for $109,000, and tells Stahl, with a smile, that the car is "a deal." "And our car's twice the efficiency of a Prius. So a Prius is a gas-guzzling hog by comparison with our cars," he says.

Musk says the Roadster can go over 200 miles before you have to plug it in to any ordinary wall outlet. It can take anywhere from four to 30 hours for a full charge.

"It’s very easy. It’s like plugging in a hairdryer. It’s so simple," Musk explains.

From the beginning, Musk wanted to prove that innovative and nimble Silicon Valley could build a better green car than lumbering, bureaucratic Detroit.

"Out of Detroit everybody thinks that Detroit is dumb," comments Bob Lutz, the vice chairman of General Motors.

"Or they think you’re hide-bound," Stahl remarks.

"Yeah. Same thing," Lutz says.

Lutz is the man in charge of developing GM's new products, and he says he owes Tesla and its Roadster a debt of gratitude. "If a small Silicon Valley start up believes that they can do a commercially viable electric car, are we going to sit here at General Motors and say, 'Well, a guy in California can do it, but we can't?' Well, that didn't sound very good."

Lutz admits that's embarrassing.

And so, the race was on, with Lutz overseeing the research and development of the Chevy Volt, which is a four-door family electric car.

The Volt is not purely electric - it's called a "plug-in hybrid." It'll drive on battery power alone for 40 miles; go beyond that, and a small gasoline engine kicks in to recharge the battery while you keep driving.

"Seventy eight percent of trips in the United States are under 40 miles a day," Lutz tells Stahl. "If all those people had Volts, you would have 78 percent of Americans basically never using another drop of gasoline."

Everything about the Volt, he says, works like a conventional car, except there's no noise. "There's one thing we can do, for people who miss the sound of the engines, we sell them a CD…with various engine sounds. So you'll be able to pick a Ferrari V12 or, you know, Le Mans Corvette," Lutz explains.

GM is already touting the car in TV ads, even though they don't yet have a working prototype. "The real trick on the car is software. The car needs to know where home plate is. So if you, for some reason, have gone from work instead of directly home, you've gone shopping, and you're starting to run out of battery on the way home, the computer will tell the gas engine, 'Look, he's five miles from home, only run for three minutes, because he only needs enough to get home,'" Lutz explains.

What about safety? In 2006, Dell was forced to issue the biggest recall in electronics history when its lithium-ion batteries burst into flames. Lutz says GM has solved that problem with its batteries, but they need a lot more testing to check how durable and reliable they are in extreme weather and real-road conditions. Still, Lutz insists the Volts will be in dealerships by 2010.

"We've spoken to people who say, 'Lutz is crazy.' … they cannot do this by then. It's just not going to happen," Stahl says.

"Right. We'll see. Somebody's going to have egg on their face," Lutz replies.

It was GM with egg on its face in the late 1990s for killing off its first electric cars, the EV1s, and then crushing them into scrap metal, which fueled theories that GM had conspired with the oil industry to get rid of the electric car.

"I think even our lawyers now would admit that perhaps crushing them was not the smartest thing in the world to do. I get e-mails that say, 'I hope you enjoy the billions that you got from the oil companies, you swine,'" Lutz says.

It's that history and his record of promoting SUVs and the Hummer that make people wonder about Lutz's role in developing GM's new green cars.

Speaking about his own personal carbon footprint, Lutz acknowledges he and his wife own two helicopters and two jets.

"You have a terrible reputation with environmentalists, as you well know," Stahl points out.

"Well, actually some of them like me but go ahead…," Lutz replies.

"Well they don't like what you said about global warming," Stahl says. "Do you want to repeat what you said about global warming?"

"Of course not, because this is a family network," Lutz says.

"You don't think there's global warming? Is that really true?" Stahl asks.

"I'm not going to get into this. Because…," Lutz replies.

"Because you got into so much trouble when you said it the first time?" Stahl asks.

"That could be right. Yeah," Lutz admits.

What Lutz said in January is, "man-made global warming is a crock of s…t." So he's no environmentalist. But he is a realist. Gone are gas guzzlers. To save GM, he knows he has to come up with gas efficient cars. But Detroit is broke, while in California things are buzzing.

The venture capitalists, who funded the information superhighway, are now pouring money into the actual highway, backing at least 30 small start-up companies.

Ray Lane is a senior partner at Kleiner Perkins, the venture capital firm that helped start Google and Amazon. Now, he's investing in three electric car start-ups.

"When I first started talking about the possibility of investing in automobiles, my partners thought I was crazy," Lane says. "We're not out of the woods yet, okay? I haven't proved I'm not crazy yet."

One of his startups is Fisker Automotive, the maker of the "Karma," a four-door plug-in hybrid like the Volt, with some added gee-whiz features.

For example, the car has a solar roof. "So this will generate electricity. It will not generate enough to drive the battery though, like the engine does," Lane explains. "It will drive enough electricity so you can be maybe cool the car while it's in the parking lot."

Some of the other start-ups in California are less conventional, like the all-electric, three-well Aptera, due out this Christmas. But one issue with all these cars is that much of the electricity to power them would come from burning coal, which produces greenhouse gases. So they're not necessarily the perfect green solution.

"Four years ago we had the hydrogen car. Three years ago there was ethanol. And now it's the electric car," Stahl remarks. "In each case, there were such problems with them that everybody's focus moved onto the next thing. Isn't that going to happen again with these electric cars?"

"It could. I mean…that is what Silicon Valley is all about," Lane says. "A good entrepreneur that fails, we will pick that person up, fund them again to do something new if it's a good idea."

"Is there any thinking with all these 30 little Henry Fords that we're going to crush Detroit?" Stahl asks.

"Some, " Lane says. "There was a company, it’s pretty well known, Tesla, for a long time believed that what would be their advantage is they had no car people. No Detroit people. 'We're going to build a vehicle company exactly like we would build computer company. So it’s, when you have your car repaired, it’s going to be like going into your Apple Store. We'll give you a latte; you watch your car being repaired.' These are real statements. So they've certainly found out you cannot build a car company without car people."

"There's, sort of, this feeling of, especially in Silicon Valley, that people in the automobile business aren't very smart," Lutz tells Stahl. "And then, they get into it, and they find out, 'Holy Mackerel. Look at all this government regulation. Look at what everything costs.' And then once they're into it, 'Hey, this isn't an easy business after all.' And I think that's about the point where Tesla is right now."

"But these startups out in California don't have the union problems, the health care costs, the labor issues. These startups don't have boardrooms. They don't have nervous shareholders," Stahl points out.

"Yeah, but they have no experience in the car business," says Lutz, who thinks that outweighs everything.

It is true that Tesla is now hiring lots of people with Detroit on their resumes. Their next project is development of a four-door family sedan that will compete with the Chevy Volt.

Asked if he thinks this was going to be easier than it turned out to be, Elon Musk tells Stahl, "Yes, I probably thought it would be a little easier."

"How much more has the project cost than you thought it was going to cost so far? Twice as much? Three times as much?" Stahl asks.

"Probably twice as much, I think. Ish. Thereabouts," Musk says.

He says he put in about $55 million of his own money into the company. "It’s a little more than I expected."

No one has figured out how to make an electric car cheap. Tesla plans to sell its four-door sedan for $60,000; Lutz at GM wants the Volt to be more of an everyman car.

"I started out very optimistically and said 'I think we can sell this thing for $20,000.' And that turned out to have been, like, one of those 'I wish I hadn't said that.' And then we started hoping for well below 30. And now we're trying to keep it south of 40," Lutz says.

"$40,000 is not an everyman car by any stretch," Stahl remarks.

"That's true," he agrees.

To get buyers, GM will have to sell the car at a loss, which is bad news for a company already burning a billion dollars in cash every month. "I'll tell you what, we can afford a tiny little loss on a car. But we can't afford a $20,000 loss per car. That's just not on," Lutz tells Stahl.

That’s because GM is in financial straits. Bob Lutz is trying not only to produce a moneymaker, but also prove with the Chevy Volt that his company and his town are still the address for innovative cars.

"So, a lot about General Motors' reputation and image is riding on this? To say the least?" Stahl asks.

"That is probably an understatement," Lutz admits.

"So basically in your mind, it has to succeed?" Stahl asks.

Says Lutz, laughing, "Of course, it does. For what it's worth, I stake my reputation on it."

Copyright 2008