By Christopher Butler

Environmentalists dream of the day when drivers trade in their gasoline-fueled cars for those powered solely by electricity.

Most consumers, however, lack an overwhelming desire to own an electric-powered vehicle. Most electric-powered cars cost more than traditional vehicles and can only travel 100 miles before they must be recharged. Less than 10 percent of the public will drive such vehicles in 2020, evidence shows.

Outgoing Tennessee Gov. Phil Bredesen and U.S. Sen. Lamar Alexander think differently.

They believe electric-powered vehicles will succeed in the free market during the next 10 years. Bredesen also believes that Tennessee consumers will feel far more compelled to buy an electric vehicle if the government intervenes in that free market.

Rather than give Tennessee residents an incentive to purchase any electric vehicle of their choice, however, Bredesen and members of his administration have chosen to use government money to promote one type of electric vehicle at the expense of the others.

Bredesen announced this fall that the state will give a rebate to the first 1,000 Tennessee residents who buy the electric Nissan Leaf. Those cars are already manufactured in Japan, but Nissan employees at the plant in Smyrna will start producing them in 2012. 

One Tennessee businessman is upset that Bredesen overlooked his electric car company and has already written the governor to express his disappointment.

Additionally, by promoting electric cars, Tennessee officials might jeopardize the amount of revenue they receive from a gasoline tax that funds road maintenance throughout the state.  

 A $2,500 REBATE

Tennessee resident Josh Womack makes his living converting gasoline-powered vehicles into ones that are powered solely by electricity. He then sells those cars at his Franklin-based business.

Womack is an environmentalist, and he is also one who believes in free-market principles.  

“There is no Golden Idol of Al Gore in my store. We are a sustainable-minded company. We believe that the root word of conservative is conserve. We have to more effectively use what we have in order to keep commodity prices lower,” Womack said.

Naturally, Womack and his employees were very interested in attending the Tennessee Valley Authorities’ Fuel Solutions Forum in Nashville this past September. The forum presented an opportunity for people to discuss how best to promote electric cars and encourage more consumers to buy them.

Forum organizers displayed two new vehicles powered solely by electricity — the Chevrolet Volt and the Nissan Leaf. In addition to building the Leaf in Smyrna, Nissan officials are also planning for an adjacent facility where employees will manufacture the batteries needed to power the Leaf, said Katherine Zachary, Nissan spokeswoman.

Nissan officials announced earlier this year that the battery facility will employ up to 1,300 Tennessee residents.

Alexander spoke at the forum, as did Bredesen.

Womack will never forget one particular detail about Bredesen’s speech.

“The governor got up and released a statement saying ‘We’re going to offer a $2,500 rebate to the first 1,000 customers (in Tennessee) of the Nissan Leaf.’

“Of course, I’m sitting there with a colleague of mine, in the midst of a couple of hundred people. We just looked across the table from one another and said ‘Well, that must be nice. The governor just said I’m going to give taxpayer money to one specific company.’ We just assumed at the time that he doesn’t know about our company, and that was fine. The governor had made an omission not done by malfeasance, but it was an omission because he just didn’t know about us or what we are into,” Womack said.

The state will pay for the rebate, using fines that the U.S. Department of Energy levied against oil companies who overcharged consumers in a Petroleum Violation Escrow (PVE) fund. Government officials can only use that revenue to pay for energy-related programs, said Mark Drury, spokesman for the Tennessee Department of Economic and Community Development, in an e-mail to Tennessee Watchdog. 

One week after the forum ended, Womack wrote a letter to Bredesen’s office asking that the governor also make Womack’s electric vehicle conversion business eligible for the $2,500 tax rebate.

Two months have passed, and Womack is still waiting for a response from the governor’s office. Michael Drescher, Bredesen’s communications director, acknowledges his office received the letter, but he also acknowledges that no one has responded to it.   

The lack of a response disappointed Womack.

“If you are going to offer this, then we think it only fair to offer it to some of our customers who want to get an electric car that is made here (in Tennessee). I hope the governor’s office looks at redoing this program or expanding it. I hope they give us an opportunity to offer it to our customers. In some cases we can convert some cars cheaper,” Womack said.

Tennessee residents who purchase the Nissan Leaf will receive a federal tax credit of $7,500. That means the first 1,000 Tennessee customers who combine their state rebates with the federal rebate will receive a $10,000 deduction off a car that normally costs around $34,000.  

“If I converted a vehicle that’s comparable in size to the Leaf, then the consumer of that vehicle will pay $18,000 – almost half the original cost of the Nissan Leaf. If we had the federal credit and the state credit (combined) then my costs to convert that car would be $8,000. If I had comparable access to that taxpayer investment, then I could put a lot more electric vehicles on the road today. I could hire more employees too,” Womack said.

 “Whether to have subsidies and incentives for electric cars are up for good debate. But if we are going to incentivize, then let’s give the market the opportunity to compete. Why is the governor picking just one manufacturer and wanting to divert $2.5 million in taxpayer money? Let me compete. If the government is going to meddle and incentivize, then meddle and incentivize fairly.”

Womack also wonders why the state didn’t extend the rebate to the new Chevrolet Volt (the Chevrolet company is not manufacturing that vehicle in Tennessee).

Until now, Tennessee officials, whether under Bredesen or any other governor, have never given a tax credit or rebate to state residents who purchase a specific type of motorized vehicle, Drury said.

The rebate is available to the Nissan Leaf because Nissan officials are participating in the EV Project, which the Arizona-based ECOtality North America is spearheading to deploy more electric vehicles throughout the country. According to their website, ECOtality North America is a company that develops advanced transportation systems.

“At this point, ECOtality has determined that the Nissan LEAF is the only vehicle which qualifies for the Tennessee rebate program,” Drury said.

David Smith, spokesman for Gov.-elect Bill Haslam, had no comment on whether the incoming governor would extend the rebate program to other types of electric cars.

 THERE IS NO DEMAND

Whether electric cars can do well in a free market system is debatable.

According to an August 2010 report from the Consumer Electronics Association (CEA), consumers are concerned about how many miles they can travel before they have to recharge an electric car (most electric cars can only travel 100 miles on a full battery). 

Additionally, someone can argue that state officials are investing government money in a technology that lacks consumer demand.

J.D. Power and Associates, a California-based global marketing information services company, reported earlier this year that combined global sales of Hybrid Electric Vehicles (HEV’s, which use a combination of gasoline and electricity) and Battery Electric Vehicles (BEV’s) are expected to total 5.2 million units in 2020 (just 7.3 percent of the 70.9 million passenger vehicles forecasted to be sold worldwide that year). This year, sales for those vehicles are forecasted to total 954,500 vehicles, or 2.2 percent of the 44.7 million vehicles that automotive dealers expect to sell by the end of 2010. The report also said it will be difficult to convince large numbers of consumers to switch to electric-powered vehicles.

“While considerable interest exists among governments, media and environmentalists in promoting HEVs and BEVs, consumers will ultimately decide whether these vehicles are commercially successful or not,” said John Humphrey, senior vice president of automotive operations at J.D. Power and Associates.

“Based on our research of consumer attitudes toward these technologies—and barring significant changes to public policy, including tax incentives and higher fuel economy standards — we don’t anticipate a mass migration to green vehicles in the coming decade.”

Tennessee officials, including Bredesen and Alexander, insist the market for electric cars will grow during the next decade, Drury said.

“Like any nascent industry, the market for electric vehicles will begin slowly and grow as more consumers gain experience with the vehicles, battery technologies improve and as the price of oil continues to rise. Interest in electric vehicles has proven to be strong in Tennessee and like many other states, will continue to grow.”

Those same government officials also believe a large segment of the public would buy the electric cars without any government rebate, Drury said.

Others in the governor’s own administration see a different kind of impact.

Assuming a large segment of the public did purchase electric cars, it might impact the amount of revenue that the Tennessee Department of Transportation (TDOT) receives, via a state gasoline tax of 21.4 cents per gallon.

The tax yields about $659 million per year for the state’s road maintenance needs, said Julie Oaks, TDOT spokeswoman.

“Without that money, we’d be able to build fewer projects, or would have to look for other funding options in order to continue improving our system at the same level we are today,” Oaks said.