Plug-in Hybrid Cars Zooming Ahead

Automakers are speeding ultra-high-mileage plug-in cars to market to beat looming federal emissions mandates.

Get ready to see the USA in your plug-in Chevrolet -- or your Saturn, Ford, Toyota or Mercedes.

General Motors and Toyota will get their souped-up hybrids into showrooms first,

Within a decade, plug-in cars will account for around 20% of all new U.S. vehicle sales, largely replacing their lower mileage gasoline-electric hybrid forebears. By 2025, that share will be about 30%.

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Automakers have little choice but to go electric. They're already being forced to boost fleets' average fuel efficiency to 35 mpg by 2020, a 40% jump. The auto companies also don't want to be caught flat-footed by enactment of carbon dioxide (CO2) emissions restrictions by Congress. Lawmakers are inching toward them and may enact such restrictions as soon as next year. Although carbon caps will be phased in over several years, Detroit carmakers and their foreign cousins fret that their vehicles will have to exceed 35 mpg fuel efficiency in order to slash CO2 tailpipe emissions.

Automakers are under the gun from states, too. California's zero-emissions vehicle program mandates nearly 60,000 plug-in cars be sold in the state between 2012 and 2014. Connecticut, Massachusetts, Maine, Maryland, New Jersey, New Mexico, Oregon, Rhode Island and Vermont have adopted similar requirements, and other states will follow.

Technical breakthroughs will help automakers get plug-ins on the road faster than anticipated even a year ago. "After years of work and false starts, the lithium ion battery is about to move beyond the development stage into commercialization. That will enable vehicles to be recharged at home during the night, or elsewhere during the daytime," says David Cole, chairman of the Center for Automotive Research, an auto industry consulting firm. Early models will be able to travel up to about 40 miles on the battery charge alone. That's not much of a drawback -- more than 80% of motorists drive less than that in a day, Cole says.

Infrastructure is revving up, too, with companies such as Coulomb Technologies set to install curbside and garage recharging posts. Motorists will be able to buy volts with a pre-paid card, says Paul Scott, a cofounder of Plug In America, a lobbying group.

Early buyers may suffer sticker shock, though, with prices of $40,000 or so for a plug-in, including $10,000 for the lithium ion battery. Within a few years, as volume picks up and the cost to make lithium ion cells declines, the price of the battery will slip 25%, and in less than a decade, battery cost should drop below $1000.

Because plug-in vehicles involve a whole lot more than replacing a fuel tank and gasoline-powered engine with a battery and an electric engine, widespread adoption of electric cars should spawn an economic boomlet. In addition to the lithium ion batteries, plug-in vehicles will need whole new systems -- including computer components and software -- to control braking, turning, acceleration and so on, replacing the mechanically linked drive trains, transmissions, steering and braking systems of today's gasoline-powered vehicles. The battery market alone is expected to hit $30 billion by 2020. Best positioned to take advantage: Early electric controls, transmission and advanced timing system leaders BorgWarner, Continental, Johnson Controls and TRW. But start-ups are sure to muscle in on the business.

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Associate Editor, The Kiplinger Letter