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GM Considering Leasing the Batteries for the Volt

4 September 2007

Drive. Nick Reilly, the President of General Motors Asia Pacific, said that GM is looking at leasing batteries for the Volt to customers, rather than asking them to pay a prohibitive price for the new technology.

“People won’t buy a full car. They will buy a car and rent or lease the battery and the cost of leasing the battery will be the same as, or less than, the cost they’re paying today for petrol. So the motoring costs of an electric vehicle don’t necessarily have to be much higher than the cost of today’s vehicles,” he said.

Mr Reilly said the leasing approach could speed up the adoption of hybrid vehicles. “Before we were saying it will be an awfully long time before we can get the costs down so people can afford it, but actually if you offset the fuel costs, people can afford it,” he said.

Reilly made the comments in Australia, where he is in meetings associated with the APEC summit.

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The lease option would only make sense if it's a lease to buy option. That way your money doesn't get burned away like it does normally with gasoline.

As I mentioned in the other Volt post from today, hopefully the "safe" lithium ion cells will catch up to conventional LiIon in terms of price/kWh. That way the battery won't cost any more than US$10,000 in the first place.

Leasing batteries? What a silly idea. Is GM not confident enough that it can make the Volt with li-ion and sell it for a reasonable price?

This is a common mode of operation in the airplane business where the airlines lease the power plants. Initially, I think a company should sell the whole car, and battery, with a normal warranty. When the warranty runs out, perhaps the customer could be offered an option to lease the battery pack. Believe me, fixing a high voltage battery pack is not a DIY project for untrained people. Getting across high voltage D.C. while trying to replace a cell means immediate electrocution.

Additionally, if upgrades or modifications are needed or available, the lease should also cover that cost. Let's face it, batteries have a life and no one wants to pay big bucks to replace them. I have read stories about how Toyota NiMH battery packs run about 2 to 3 thousand to replace and those are rather small. I can imagine what a large Li Ion would cost. When the price of large format batteries comes down, then it won't hurt so much to replace them and there won't be a need to lease them.

So what if a customer buys a vehicle but chooses not to lease? Silly accounting shenanigans by GM.

Makes a lot of sense to me. I expect the customer would have the option to buy outright if he or she chooses. I hope they also offer the opportunity to lease a larger capacity battery than the one they've proposed.

@ AES: Why would you want to own the battery at the end? It would likely be nearing the end of its cycle life and certainly would have a reduced capacity. The idea behind leasing is that when your battery starts to fade you'd get a brand new one.

This is the best idea that GM could have come up with!

I know of another EV company that has made the same type of [obvious] conclusion and asked many people [ala focus group] to judge the battery leasing/renting concept and virtually everyone agreed that it is a fantastic idea.

Unless batteries come down in pricing to a very low affodrable price, who wants to "own" a battery that eventually will die and which needs to be disposed of and hopefully recycled?

I don't!

Fred

You would want to own at least a portion of the battery at the end so that you could get some sort of return on your investment. Same reason it's smarter to pay a mort gage on a house or condo rather than just throw it away by renting an apartment.

If the batteries live up to their claim of 7000+ cycles, that's over 250,000 miles driven, so if you returned the pack well before then for either reuse or recycling, it wouldn't be useless.

But as I said before, hopefully we won't have to deal with this leasing BS to begin with.

You can bet on leasing, whether it is the entire vehicle or the battery pack. The US auto industry is built around it. What you see as a vehicle, is to them a means of selling financial paper. They have (in most years when they made money) always made more on the finance side than the production side. The good news is that due to a need to sell more financial instruments, we will actually see an electric production car.

I've always thought traditional car leasing was for people with more money than brains. Maybe in this case it makes sense but it's hard to know when there are no numbers out yet. It would be nice to know more details about the battery as well.
It's all just guessing until we can get some actual information.

Ah I see what you mean. I think that level of technology is still a little way away.

I certainly don't see it as BS though. It will bring series hybrids and EVs within reach of a far larger audience who would otherwise be unable to afford the capital costs. I'd expect GM would offer some sort of buyout option if necessary. Otherwise it could impinge on residual values.

Pertaining to the discussion as to whether leasing the batteries is a good idea or not, I am just wondering if leasing the batteries to own is a good idea? Say you lease to own your battery pack for 5 years, and then at the end of that duration, you own a spent battery pack--are you going to want the old battery pack, or even be able to use the spent pack? I suppose it could be recycled to a degree, but I just don't know who would want a used pack with questionable life in it. It would seem that leasing and trading in for new at the end of the lease might be the way to work this. Thoughts?

I think you could sell the spent battery to be recycled. It's a lot easier to get lithium from a spent battery than to dig it out of the ground. Or at least, I imagine it would be.
There's no way of knowing what percentage of the original cost could regained through selling it because there are no numbers on how much it will cost new or how long it will last or how much it will be worth when it's down to whatever capacity makes it ready to swap out.

The most interesting part of this short article was the quote from the auto executive, stating that motoring costs with an electric vehicle need not be *much* higher than the costs associated with a conventional vehicle. Considering how cheap electricity is relative to gasoline, this implies very substantial capital costs, which are obviously associated with the battery.

One reason why leasing makes sense all around is because the battery pack may be very expensive but have too long a life. The ordinary car is held by its first owner for about three to five years, in most cases, and has a total lifespan in the fleet of almost ten years, with increasing yearly maintenance costs towards the end of the lifespan (this last fact was the subject of a previous post here).

Traditional car financing loans often have a term of 3 to 5 years, which brings the monthly payment on the typical purchase price (up to $30,000 on average) within reach. An EV with battery pack might cost a lot more than that, and yet be a good long-term deal, because it may last a long time and have no expected significant maintenance needs over that lifespan. Yet the high upfront price will seem prohibitive to typical consumers, and will not translate into reasonable monthly payments given the typical length of financing.

In such a case, the options are to offer ten-year car loans, which would not comport with customer expectations, and post too much of a risk of "lock-in" to risk-averse private customers, or, on the other hand, to lease out the packs for shorter periods, reclaim them for quality check and whatever refurbishing might extend their lives further than normal, and then re-lease them to the next guy.

Alternatively, a battery lease could be a way to help GM subsidize an unprofitably expensive product, a way to retain control of the battery packs for "EV1" conspiratorial reasons, or, relatedly, a way for GM or the battery manufacturer to retain control of the batteries so they are not removed from the cars and used for other purposes. This could either be for liability reasons, protecting intellectual property reasons, or preventing competing uses of the battery packs from arising through the use of scavenged packs. Finally, they may want to reclaim the used packs simply to study them and see how they are holding up after a few years of real-world service.

I would like the option to buy, but the lease makes sense for your average non-EV-fanatic. Not only will the capital cost be daunting for most people but the lease will also allay any concern about battery lifetime and replacement cost.

these battery packs whilst not suitable for vehicular use at the end of their lifespan would still be useful as power storage units for homes. These could be used for charging from at night from solar cells, or for load levelling during peak periods.

it should not be considered the end of the line for these batteries, and may just end up being a good way to help people be able to afford significant storage of distributed power generation, hopefully from renewable sources.

A used li-ion car battery may still have substantial residual value, beyond mere salvage value (i.e., stripping out lithium metal for recycling). Even batteries operating at 50% of initial capacity could be used as a battery back-up for the electric grid itself. Obviously there are some engineering issues associated with daisy-chaining such batteries together, but these are not insurmountable, especially since in a back-up capacity, their environment would be much more stable than a car. So this is potentially a lucrative after-market for GM (or, potentially, Volt customers).

So my suggestion would be for GM to introduce a 3rd option: in addition to buying the car and battery outright (option 1) or buying the car and leasing the battery (option 2), option 3 would be for GM to give customers a credit for the li-ion battery, which they can use for purchase of their next GM electric vehicle. The credit would decline in value over time/remaining battery life (e.g., 50% decrease after 150,000 miles). That would encourage drivers to stick with GM over the long term, give them an incentive to trade-in for the latest model sooner, and give interested customers the satisfaction of owning their vehicle outright. Just a thought...

You have an interesting idea there Marc, with the 3rd option you mentioned above.

Does anyone know if the Lithium used in these batteries can be 100% recycled to be used, say over and over again in future new batteries? Or is the Lithium diminished after a given amount of use in battery applications?

The lease option is sensible in the sense [ugh] that the batteries are expensive and there isn't a large after market for those kinds of parts.

My concern would be if they only allowed the leasing: what happens if you buy the car and the lease runs out, and GM decides not to offer the batteries any more? Now you've got a car with no juice, and are forced to turn to third party apps which may be less reliable, more expensive, etc.

Battery leasing is a silly idea conjured up by execs who don't understand arithmetic or, more accurately, figure their customers don't understand arithmetic.

Here's the deal. GM figures a $398/month Volt can't compete against a $299/month Civic. They might be right; consumers tend to focus overwhelmingly on the monthly payment and ignore all else (see: ARM, subprime). So GM wants to market the Volt with a $299/month payment. Oh, and by the way Mr. Carbuyer, there's also a $99/month "battery lease" which simply offsets the $100+/month you'll no longer spend on gasoline. See, you come out ahead! Now, would you like our standard rust-proofing or the Ultra-Coat Supreme Comprehensive Protection Package?

It's a nice try, but probably doomed. The bad news is GM's need to trail-balloon such flakey schemes shows they're having real trouble on the cost front. It's not just the battery, it's all those electric accessories such as A/C compressors, power steering pumps, etc. They cost about the same as their mechanical cousins in high volume, but are killers on a startup program. Toyota simply bit the bullet on all that stuff for years with the Prius, but GM's beancounters are a different breed.

I am against leasing batteries. The reasons for buying a PHEV are: 1)lower green house gases, 2)reduce reliance on imported oil, and 3)reduce the cost of transportation by eliminating the high cost of gasoline. If I have to lease a battery with costs equivilant to what I would pay for gasoline on a monthly basis, that would eliminate one of the big motivators for buying a PHEV in the first place.

As a retired person who does not drive every day a monthly leasing option would not be feasible. I have tracked my fuel use over the past six months and I have only driven more than 30 miles per day once. I would reduce my trips to the gas station to once or twice a year.

If conversion companies can supply batteries, controllers, and installation for approximately $12,000 on an individual basis, surely a company as large as GM with anticipated sales in excess of 100,000 in the first few years of production should be able to bring the cost down to a reasonable level. I would be willing to pay $5,ooo to $7,000 for a battery with a 150,000 mile, 8 year warrantee. The next time I would expect to pay far less once economies of scale take hold.

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