On Nov. 11, 2010, General Electric (NYS: GE) announced a grand plan to spend $1 billion buying electric cars for its workforce. Part of a strategy to first nurture, then dominate, the market for plug-in car batteries and electric charging stations, GE would march in the vanguard of the electric revolution, converting half of its global corporate car fleet to electric power and buying 25,000 electric cars over five years -- "the largest single EV commitment ever."

And now it's starting to happen.

0 to 25,000 in how many seconds?
A few months ago, I took GE to task for taking a go-slow approach to its commitment. More than a year after promising to buy e-cars in bulk, sales reports out of General Motors (NYS: GM) and Nissan clearly showed that GE was putting very little money where its mouth was. (Indeed, while at the time GE refused to disclose exact numbers of e-cars purchased, the company later admitted that over the whole of 2011, the company had bought a mere 300 electric cars.) But about a month after that column ran, a strange thing happened. All of a sudden, GE got serious about putting e-cars in its fleet.


Announcing a switch from "pilot phase" to "full scale deployment," GE's health care division confirmed that in 2012, every single sedan it purchases for employee use will be a Chevy Volt. All of 'em.

As for employees who currently drive minivans or SUVs, GEHC says that whenever their job duties don't absolutely require the use of larger vehicles, they should drive Volts instead. And even the folks (mainly field engineers) who get special dispensation now, should begin planning to switch to electric soon because larger "EV's are expected in future years." Indeed, Tesla (NAS: TSLA) unveiled its Model X SUV in February and is also helping Toyota (NYS: TM) build an electric RAV4. Meanwhile, Ford (NYS: F) greenlighted its C-Max electric minivan for 2013.

We want volunteers. Hmm... you, you, and you!
GEHC is so committed to this project, in fact, that according to official GEHC documents:

  • Employees wanting to drive other cars will need to get special exemptions from management.
  • Those employees who charge their Volts at home will be reimbursed for the added cost to their electric bills.
  • Those who don't want to drive a Volt, but drive a personal vehicle instead, will get no reimbursement for use of that vehicle.

And the logic behind all this? As GE CEO Jeff Immelt explains: "By electrifying our own fleet, we will accelerate the adoption curve, drive scale, and move electric vehicles from anticipation to action."

GE is also presumably planning to make back the added expense of EVs by saving on gas. Estimates based on the Volt's performance suggest that powering a car with electricity can cost as little as 20% of the cost of running it on gas -- call it $400 annually versus $2,000. Over 10 years, that's more than $15,000 in savings. That's plenty to pay for the added cost of an EV.

Can I get a "friends and family" discount?
Actually, though, GE just might find a way to pay itself back faster than that. According to Immelt,"for every $1 invested in electric vehicles, GE has $0.10 cents of content." This suggests that GE has enough tech inside the Volt already -- patents, parts, or otherwise -- that buying these electric vehicles isn't actually as expensive for GE as for another company. Part of the money GE spends on each Volt somehow finds its way back into the corporate coffers.

The route can sometimes be circuitous, though. For example, GE owns a 10% stake in car-battery-maker A123 Systems, which provides batteries to... General Motors. (Not to the Volt, yet; that contract went to South Korea's LG Chem. But A123 does have the contract to power GM's upcoming electric Chevy Spark). But Immelt's thesis does hold water regardless.

Over time, as more and more companies "go electric," more and more GE tech will find its way into the vehicles -- driving sales for GE and, in the process, reducing the cost of buying EVs for GE's corporate fleet. And the company will make even more money from the infrastructure that must be built to sustain these vehicles, most notably, by selling more WattStation charging towers.

Foolish takeaway
Jeff Immelt is convinced that electric is the future of cars, and a great way for GE to make money. Now, he's finally moving forward with his billion-dollar bet on the industry. The only real surprise here is that it took him so long to get started.

At the time this article was published The Motley Fool owns shares of Ford Motor. Motley Fool newsletter services have recommended buying shares of General Motors, Tesla Motors, and Ford Motor. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor, but Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


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alscotti57

thats great.. the more suck........uh consumers buy these electric vehicles the more the price of gas goes down. cant wait

May 12 2012 at 11:13 AM Report abuse rate up rate down Reply