Fleets Likely to Spur Clunker, Guzzler Conversions to Plug Ins

[David A. Kates]

With the potential end of the CARS "cash for clunkers" program on Monday, dealerships will be figuring out what to do with the hundreds of thousands of gas-guzzling vehicles now in their possession. Plug-in hybrid and electric vehicle proponents see an opportunity to transform clunkers into some of the cleanest vehicles on the roads.

Fleet owners, like municipalities and utilities, are particularly interested in electric vehicles because they have no tailpipe emissions, require virtually no maintenance and use no gasoline. (Fleet vehicles usually travel short distances, so an EV's 100-mile range is often sufficient.) Yet fleets have hundreds--sometimes thousands--of SUVs and trucks that they want to keep on the roads for their working lives of 8-15 years.

Because of this, Felix Kramer, the founder of CalCars, or the California Cars Initiative, calls fleets the "low-hanging fruit" of the conversion market.


Rapid Electric Vehicles, a one year-old company based in Vancouver, British Columbia, hopes to supply fleets with electric drivetrain kits and train their technicians how to install the components in their Ford Escape, Ranger and F-150 vehicles starting next year.

REV CEO and founder Jay Giraud now sees an untapped resource in buying up cheap traded-in trucks and SUVs that would otherwise end up at the scrapyard and crusher.

"I know many utilities and municipalities that would buy them up so fast, especially because it would be a lot cheaper to buy up that vehicle than change one that's three years old that they still have three to four years of payments on it," Giraud said. "The whole idea of reusing/recycling would be very, very attractive for them."


The Big Picture

Advocates of PHEVs and EVs, like CalCars and Giraud, see conversions as a better way to get these cars on the roads than selling new vehicles. According to an analysis by CalCars, conversions could help plug-ins be adopted 10 years quicker than just relying on brand new plug-ins, thus meeting our oil consumption and carbon dioxide reduction goals that much sooner. New plug-ins and conversions could outnumber internal combustion vehicles on the roads in just 15 years versus 25 years for new plug-ins alone.

Also, vehicles have significant "embedded" energy, or the energy (and emissions) needed to manufacture the automobile. "On average, building one vehicle requires 30,000-50,000 kilowatt-hours of energy," CalCars said. "That's over three times the electricity an average natural gas-heated U.S. household uses in an entire year." A new PHEV must be driven about 40,000 miles before the vehicle saves enough energy to make up for the energy needed to manufacture it; a converted vehicle has to be driven just 8,000 miles to make up for the energy needed to do the conversion and build the components, CalCars found.

CalCars and other organizations are hoping tens of thousands of green jobs will be created in a burgeoning conversion industry.


Challenges

But all sides agree that widespread adoption of conversions has serious challenges.

Critics like Ron Cogan believe the cost of batteries will be a huge barrier for both new and converted plug-ins.

"If truly affordable, well-engineered, efficient, and safe plug-in hybrid conversions become available then that would provide a great option for people who wish to extend the life, and value, of their existing vehicles," Cogan said. "I just don't see signs of that happening."

REV will sell its electric drive kits, along with installation training, for $49,000. (Fleet owners, on average, spend $50,000 to $100,000 during the 10-year life of each vehicle on maintenance, parts, fuel and carbon credits. The conversion would pay for itself in about five to seven years at today's gas prices, according to Giraud.)

The company hopes to reduce the kit to $30,000 by the end of next year if it gets enough volume. (In the future, to keep costs down, REV plans to lease complete electric vehicles--with batteries and charging stations--based on the average number of miles the fleet customer travels. REV would try to match what the municipality or utility already pays each month in fuel, maintenance and carbon credits for their gasoline vehicles.)

PHEV conversions generally cost $10,000 to $30,000, based on whether you're converting a gas-electric hybrid and the size of vehicle.

Felix Kramer believes conversions won't be cost effective until 100,000 units are reached, as the volume will cause batteries and other components to reduce in price. There are approximately 63 million fleet passenger vehicles (of one ton or less) on North America's roads, and about 10 million of these are in good enough condition to convert, Giraud said.

Kramer also would like to see the $7,500 federal tax credits for new PHEVs and EVs extended to conversions. Currently, conversions are allowed a 10 percent tax credit, up to $4,000.

Some analysts have called for the $7,500 tax credit to be added to the $4,500 "cash for clunkers" incentive for converting gas guzzlers. A $12,000 combined incentive could give a major push to the industry. But conversion companies must be able to reduce their prices enough--before government incentives run out--to stay afloat, according to Cogan.

Other major obstacles are warranties and regulation of conversions.

The plug-in hybrid technology company, GRRReen, investigated the business opportunity of converting gas guzzlers to PHEVs with two prototypes. They found the warranty and regulatory issues too daunting, and decided instead to focus their research and development on plug-in batteries, according to Tom Stacey, the company's vice president for marketing.

REV will warranty the electrical components in its kits for two years. Installing the company's conversion kit will not void the manufacturer's warranty, according to Giraud, because the vehicle's systems are being replaced instead of modified.
Standards for regulating the safety of conversions would most likely have to be set by a national laboratory, Giraud said.

Conversions in the individual consumer market will probably prove more difficult. Converters will likely act similar to auto mechanics and specialize in particular makes and even models.

REV, for instance, developed its electric drive modules to fit perfectly and install quickly in three Ford SUV models.

"You can't take what we built and just drop it into a Chevy Tahoe or anything else for that matter without some major modifications, a great deal of engineering and lots and lots of time," Giraud said. "So it's not practical, it's not feasible, to convert anything under the sun."

The bright spot of the "cash for clunkers" trade-ins is their uniformity. According to one tally earlier this month, six of the top 10 most traded-in vehicles were 1994-1999 Ford Explorers (which get 14-18 mpg). Another tally included the Ford F-Series and Ranger, Chevy Silverado, Jeep Grand Cherokee and Dodge Ram. Fleets purchase these vehicles in large numbers, and conversion kits could be specially designed for the SUVs.