The White House is at this moment trying to save America's auto industry and the tens of thousands of jobs that depend on it. Although nobody knows what the bailout is expected to cost, it's going to be huge—on the order of $100 billion. Spending this kind of money on a salvage operation will not work: business as usual will ultimately result in failure as usual. Incremental technological improvements will not help because foreign competitors will simply match them, as they have been doing for decades.
Instead, the $100 billion should be used in a bold move to transform the auto industry. What's needed is a big push, similar to the Manhattan and Apollo projects, to turn the U.S. auto industry into a world leader in electric cars and sustainable vehicles, and set the stage for a phasing out of internal-combustion-engine cars.
Fifty years ago we were engaged in a space race with the Soviet Union. Today perhaps we are embarking on a "car race" with the Chinese and other industrial powers—a race to be the first to perfect Car 2.0. According to recent press reports, China is pushing electric and green vehicles, with the goal of overtaking carmakers overseas and dominating the global market.
The four-year Manhattan Project, begun in 1942, cost "merely" $25 billion in 2009 dollars, but with that funding, the nation developed the first atomic bomb. Project Apollo, begun with President John F. Kennedy's 1961 speech, cost a total of $125 billion (in today's dollars) over 10 years. During both of these efforts we invented important technology we didn't even know to ask for.
With this much funding, it should be possible to trigger the innovation and economies of scale to drive the price of electric cars below that of internal-combustion cars. Electric cars would be cheaper to buy and much cheaper to operate—especially when oil prices rise again, as they inevitably will. The United States wouldn't be held hostage to high fossil-fuel prices. This would strengthen the economy by arresting the massive continuing flow of oil funds offshore, which would amount to an ongoing economic stimulus. And a clean car would find exports around the world.
It's not really that difficult to make the really useful, affordable, desirable electric cars that people worldwide yearn for. The U.S. already has good electric cars. The greatest challenge to universal desirability may be the battery: we need to improve price, range, power and refueling time. The next generation of batteries must be cheaper, more powerful, quicker charging. This is a challenge, but incredibly easier than inventing, from scratch, atomic power or manned space flight.
Even without advanced batteries, it's possible to move forward. Strategies such as battery-swapping stations overcome perceived range and charging-time constraints. Batteries could be charged directly at generation plants during off-peak times and physically distributing them to local swapping stations (gasoline is often shipped halfway around the world). Or privately generated solar or wind can charge vehicle batteries.
The program doesn't stop with the cars. An electric fleet shifts the burden of power generation from gasoline to the electricity grid. Much of this power could be made available for free—provided cars are charged at off-peak times when power is otherwise simply grounded and wasted. The grid should evolve to take on solar, wind and other clean methods of generation. Even dirty generation is easier to cleanup centrally than in millions of individual vehicles. Liquid hydrogen and fuel cells might be developed for future vehicles.
How exactly do we translate money into viable product innovation? There's the Stick, the Carrot and the Seed. Seeds include ventures to create innovation. Rather than assembling the nation's best scientists under government command, a la the Manhattan project, it would be better to invest a sliver of the bailout money—no more than a few percent—in venture-capital-like fashion to fund research into batteries and alterative-vehicles technology.
Carrots can be legislated to help bootstrap these new technologies. For example, Washington could mandate that the federal fleet of cars becomes electric or sustainable. A tax subsidy for purchasers, both individuals and fleet buyers, of new sustainable U.S. vehicles is another possibility.
Sticks are tough in a poor economy but nonetheless often effective. They should include stringent emissions standards and other regulations to encourage alternative vehicles; taxes on gasoline and fossil vehicles; reduction and perhaps elimination of petroleum subsidies and depletion allowances, which presently subsidize otherwise uneconomic extraction of our remaining precious natural resources.
We are already very close. In the mid-1990s, when GM experimented with its EV1 electric car, Californians loved them. Alas, GM wasted that opportunity. Now, the United States is prepared to spend $100 billion on a grand technology enterprise. Wisely used, a bailout could be a golden opportunity.
Addison Fischer is founder of Verisign Inc. He is on the board of the Jane Goodall Institute, is co-owner of Duquesne Capital Management and is chairman of Planet Heritage Foundation.