And America Loses The Innovation Race Again

The long-awaited very first mass market plug-in hybrid vehicle will come from... China.

BYD presented the vehicle, known as the F3DM, in a ceremony in the southern city of Shenzhen…. The vehicle can run up to 100 kilometers (62 miles) on its electric engine, and when it runs low on power shifts to a back up gasoline engine. Its battery can fully charge in nine hours from a regular electrical outlet, or much faster at BYD’s own charging stations, the company said in a statement.

The car will sell for 149,800 yuan ($22,000), about the same as many Chinese-made mid-sized cars, it said.

This is a company that Warren Buffett bought a 10% stake in recently. BYD (short for Build Your Dream) was a large battery maker that only moved into the auto market a few years ago. And now, they're on track to potentially beat the Chevy Volt to market - for half the price. I don't know if they'd sell stateside, but just selling them in China would have a dramatic effect on greenhouse gas emissions if they became popular, even if all of that electricity used plugging in the vehicles comes from coal.

Meanwhile, it's very clear why a Chinese company, or any company other than an American one, has the opportunity to do this - aside from the competitive marketplace for batteries, their industries aren't overburdened with legacy costs, a dynamic peculiar to our free-market for-profit health care system.

The Big Three are also not responsible for the broken U.S. health care system. If we paid the same amount for health care as Canada, G.M. would have accumulated an additional $22 billion in profits over the last decade.

That would be the savings if we assumed that General Motor's health care expenditures were reduced by roughly 48 percent to be in line with expenses in Canada. Of course, not all the savings in this counterfactual would have gone to profits. Some of it would have gone to workers in the form of higher wages or to consumers in the form of lower car prices.

On the other hand, G.M. is also picking up the tab for many spouses and dependent children. It would not have to pay these health care expenses in a Canadian type system. So the $22 billion figure is probably not a bad first approximation of the additional money that G.M. might have today if the United States had a more efficient health care system.

Even with these additional profits G.M. and the other domestic manufacturers would still face serious problems. They have made some bad choices in betting their future on SUVs and other low-mileage vehicles. They also have lagged foreign manufacturers in producing high quality, reliable cars.

But the real reason that Big Three are on their deathbeds right now is the economic crisis created by the Wall Street crew and their friends in Washington. It will be tragic if the people of the Michigan, Indiana, and Ohio are made to suffer through a depression because of the failed financial dealings of the Wall Street crew.

There is a failure of innovation, sure, but that's because of the constraints of doing business in an employer-based health care system. We have to do what we can right now to save the auto industry, but the biggest long-term goal would be to give them the breathing space to innovate.

Incidentally, there have been some excellent developments in this country with plug-in electric hybrid school buses.