Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, January 12, 1995                   TAG: 9501130018
SECTION: EDITORIAL                    PAGE: A15   EDITION: METRO 
SOURCE: JESSICA MATHEWS
DATELINE:                                 LENGTH: Long

AUTOMAKERS

Electric cars are the only near-term replacement for conventional engines that could dramatically cut both air pollution and oil demand. They also could crack the dominance of the established automakers over this huge industry.

No upstart can compete with the hundreds of billions of dollars that have been invested in the internal combustion engine. But an electric vehicle, while more sophisticated in some respects, is a much simpler device with hundreds of fewer moving parts. Small, new companies can compete on those terms. Many fervently believe, as one CEO predicted, that theirs will be ``the computer industry all over again'' with the Big Three playing the part of IBM.

Detroit wants to keep a technological competition between conventional and electric cars from even occurring, by keeping the struggle political. So it has been working to undo California's requirement that beginning in 1998, a rising fraction of new cars be ``zero emission vehicles'' and to prevent other states from following suit.

So far, against considerable pressure, California's Republican governor, Pete Wilson, has stuck to the plan, and the Environmental Protection Agency has just approved a petition from 12 Eastern states to impose it as well. Two of these states, New York and Massachusetts, have adopted the California standard by law.

But EPA is actually hoping that by approving the stiff standard for the Northeast, it will improve the chances of a compromise proposal to market a much cleaner - but not zero emissions - car nationally. In public, Detroit grumbles about that, too, but welcomes the option because it would keep electric cars at bay. EPA says that without the compromise Congress will weaken the Clean Air Act - adding another to the administration's growing list of pre-emptive surrenders to the Republicans. What's really going on is that having made much of its research partnership with Detroit on new-car technology, the administration is uncomfortably stuck with a partner that is dead set against making a leap into a new technological era.

With the pace of electric-car innovation picking up around the world, Detroit's traditional first line of defense against government mandates (``it can't be done'') is giving way to its second (``we can do it, but it will cost too much''). The Big Three price their electric vehicles at $100,000 and assert that by 1998 they will cost $12,000 to $20,000 more than comparable conventional cars and trucks. To make the electrics sell, Detroit claims, companies will have to heavily subsidize them, artificially lowering the price and raising that of conventional cars to compensate.

Much of this is balderdash. Auto companies' normal practice is to spread research and development costs across all models. General Motors did not load the $5 billion it spent developing the Saturn onto the new line or complain that its other models had to ``subsidize'' the new one. There's a stiffer test - in the marketplace - of critics' charges that Detroit's electric prices are inflated for the purpose of discouraging the new technology: Electric cars and pickups made by other American producers are for sale for $15,000 to $45,000. Peugeot says it plans to market electric cars in 1995 for less than $11,000.

The key question is what the price of electric cars will be in 1998 when the market niche guaranteed by California and by mandated government purchases of electric vehicles will provide many companies with annual sales of about 5,000 units. A new study from Tufts University concludes that even these small economies of scale will drop the price of today's technology by 35 percent to 45 percent, making the cost of owning and operating an electric car competitive with a conventional one. Technological improvements, which have been rapid in recent months, will bring electric car prices even further down and push performance up.

In short, the risks of California's technology-forcing gamble, which seemed overly daring to many a year or two ago, do not now appear to be primarily technological. The greater dangers are more administrative and managerial: that the infrastructure won't be ready to service electric-car drivers, or that the early deadline could lock in inferior technology.

There are solutions to these problems. The one irretrievable mistake the United States could make as the struggle between Detroit and the California standard drags on, as it will, would be to allow it to become a parochial, ideological struggle over the merits and demerits of government regulation and to forget that this is a high-stakes global competition.

Companies in Europe and Japan, where high gasoline prices and a surplus of electricity make the competition with conventional cars much easier, are hard at work. If electric vehicles succeed (and it is still a sizable if), the benefits to the countries whose national automotive industries capture the lead in this marketplace will be enormous. It would be a travesty if this country, still the world's technological superpower, weren't one of the winners.

\ Jessica Mathews is a senior fellow at the Council on Foreign Relations.

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