Get ready for the next Solyndra. Sure, you’ve heard those words before. Over the past few months, several companies that had federal backing — Beacon Power, Range Fuels, and Ener1 — all failed. And another one is almost surely on the way. Here’s my prediction: Within 18 months, A123 Systems, the battery maker that got a $249 million grant from the Department of Energy, will be bankrupt.
My prediction doesn’t have anything to do with the explosion that occurred on Wednesday at a GM laboratory near Detroit, sending one worker to the hospital. The explosion occurred while the worker was testing a battery made by A123. That news came on the heels of the announcement last month that A123 would have to spend $55 million to replace defective battery packs it sold to Fisker Automotive, the car company that is using a U.S. government loan to make high-performance $100,000 vehicles in Finland. But predicting A123’s failure doesn’t depend on the latest news, or require any special analytical skills or inside market knowledge. It requires only a quick look at the company’s financials.
More on that in a moment. First, though, the broader and more essential point to be made — yet again — is that the Obama administration made a huge mistake in backing the electric-vehicle industry. The administration has handed out $2.4 billion in grants to the electric-vehicle sector, as well as nearly $2.6 billion in loans. And it did so despite the EV sector’s dismal history, which is a century of failure tailgating failure.
The failure can be seen by looking at sales. Even though gasoline prices are painfully high, consumers are staying away from electric cars in droves. During the first quarter, Nissan sold just 1,800 copies of its much-ballyhooed all-electric Leaf. And yet the automaker continues to insist that it will sell 20,000 Leafs in the U.S. this year. Meanwhile, sales of another overhyped “green” car, the Chevy Volt hybrid, have been so disappointing that GM has had to idle production at its Detroit-Hamtramck assembly plant twice this year.
Compare the sales of the Volt (2,289 vehicles sold in March) with those of more traditional vehicles. In March alone, Toyota sold 27,711 Priuses, and the Japanese automaker expects sales of the popular hybrid-electric car to remain strong. Meanwhile, March sales of the venerable Toyota Corolla — which gets about 34 miles per gallon on the highway, nearly the same as the Volt — totaled 28,289. Oh, and the sticker price on the Corolla — about $16,000 — is less than half that of the Volt, which sells for about $40,000.
Those are our tax dollars at work for an ideologue. This saddens me as my company is a supplier to them.