Sunday, June 15, 2008

The Toyota Gamble

Even if you are a long time member of the UAW, I think you have to give Toyota credit for having a prescient view of the market. They make calculated decisions, and more often than not, they come out smelling like a rose. That doesn't mean that they don't make mistakes-their expansion of Tundra production in the U.S. is beginning to look like a big one. More often than not, their choices work out to their advantage, though, so the fact that they are following GM into the plug-in realm is very significant:

Toyota, rightly or wrongly, is widely considered the greenest automaker, and the company hopes to solidify its hold on the title and move beyond oil through a sweeping plan to produce cleaner, more efficient cars -- beginning with a plug-in hybrid it will produce by 2010.

It's no secret Toyota's been working on a plug-in hybrid to compete against the forthcoming Chevrolet Volt, but Wednesday's announcement sets a firm deadline and makes it clear Toyota has no plans of ceding the green mantle to General Motors. It also underscores how quickly the race to build a viable mass-market electric car is heating up.

Here's the catch. Electricity is not all that different from oil or any other energy source. Supply and demand set the price. So let's consider the electricity production market. Wind and solar are a long, long way off from being significant contributors to our electricity supply because they are just not cost effective. Coal and hydro power are cost effective, but they are stymied at every corner by environmentalists. That leaves one source of abundant, cost effective electricity to meet the explosive demand that popular plug ins would create: Nuclear. Unless the U.S. is willing to start fast tracking new nuclear plants, political pressure from the environmental groups be damned, plug ins will run into the same cost of operation problems that internal combustion engine vehicles already face, only the costs will spread to household and business expenses.

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