GE's Big Electric Car Order Is Winner on Many Fronts
By Michelle Krebs November 11, 2010
General Electric Co.'s plan to buy 25,000 electrified vehicles by 2015, with half being General Motors' Chevrolet Volt is one of those win-win-win deals.
It's a high-profile, ringing endorsement for GM precisely a week before it begins selling its new stock on the open market again, and gets the new Volt off to a fast sales start.
GE's order also a boost to the fledgling electrified vehicle industry. And it's a win for GE on a number of fronts.
GE, the world's largest fleet operator, confirmed details today of its electrified vehicle purchase, which had been rumored earlier and reported by Edmunds' Green Car Advisor. The electric-drive vehicle purchase will account for at least half of GE's 30,000 vehicle fleet; that includes vehicles customers who lease through GE Capital. GE did not reveal financial terms.
Of the 25,000-vehicle order, 12,000 will be for the Chevrolet Volt, on sale in December. The order helps the Volt dart out of the starting gates - and also helps GM's overall sales, especially important for its Chevrolet brand that is expected to generate 70 percent of the automaker's total volume. GM has said a $350 a month lease will be offered on the Volt.
GE said it will add other vehicles as manufacturers expand their electric vehicle portfolios; and its own portfolio will use a mix of "electric vehicle technologies." Though GE didn't identify any other manufacturers from which it would be purchase vehicles, the upcoming, all-electric Nissan Leaf likely will be in the mix as well.
Last week at Detroit's Automotive Press Association, Carlos Tavares, chairman of Nissan Americas, was quizzed about the then rumored GE purchase. He said he couldn't say if the Leaf would be part of the GE buy but that Nissan was interested.The purchase gives the electric vehicle industry a boost with some initial volume. Higher volume of the expensive technology should prompt the price to drop.
GE's purchase, which may be copied by other companies, will help manufacturers like GM and Nissan offset the vast investments they have made in these expensive pioneering technologies. Automakers are unlikely to make money on new technologies out of the starting gate, but a big purchase like this helps accelerate their return on investment.
The captured fleet specifically with a company like GE, which is at the forefront of energy alternatives like wind turbines, advanced batteries and components for electric vehicles, allows manufacturers to study how the vehicles are used and how they behave, producing valuable learnings for future generations of the vehicles. A corporate fleet further solves the nagging issue of charging stations by the purchaser installing charging stations on their premise and eventually driving the build-out of the public car-charging infrastructure.
"It's heartening to see that a major company - albeit one with a corporate interest in promoting electric-drive vehicles - has decided to replace many of its gasoline-powered fleet cars in hopes of leading by example," said John O'Dell, editor of Edmunds Green Car Advisor.
Indeed, GE has a vested interest in the electric-drive vehicle business. GE's power-plant equipment generates one-third of the world's electricity, and the need for vehicle-charging stations may spur demand for more power from its utility customers.
GE is a major player in the electric vehicle components market, it makes and markets its own line of EV chargers and recently announced a partnership with California-based Better Place to offer financing for battery purchases for Better Place's battery exchange stations.
GE also is the major shareholder of battery maker A123 Systems of Massachusetts and has interests in smart-grid and power transmission technologies as well as the wind and solar energy industries.
GE CEO Jeffrey Immelt said today his company is in a "strong position" to help 65,000 leasing customers convert to electric vehicles. He sees the electric-car market contributing as $500 million in sales to GE's coffers in the next three years.
"Wide-scale adoption of electric vehicles will also drive clean-energy innovation, strengthen energy security and deliver economic value," Immelt said in the statement.
Photo by GM
GM's chief marketer Joel Ewanick slides behind the wheel of a 2011 Chevrolet Volt for a promotional trip from Detroit to Los Angeles.
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