BOSTON (Reuters) - General Electric Co plans to buy 25,000 electric vehicles from makers including General Motors Co over the next five years, in a move it said could spark demand for the charging equipment it sells.
The largest U.S. conglomerate aims to swap out half its fleet of 30,000 cars -- used by sales people and technicians, for instance -- with electric vehicles and to start shifting customers who lease fleets of vehicles over as well.
GE, which over the past five years has made a major push into green businesses, said on Thursday it hopes the move will speed acceptance of electric cars by getting more of them on road more quickly and prompting investment in the equipment that users will need to charge them.
The company, which earlier this year unveiled a car charger it calls the WattStation and owns a stake in battery maker A123 Systems, estimated that it could generate $500 million in electric vehicle-related revenue over the next three years.
“It really helps prime the pump,” said Bill Vlasic, senior editor with Edmunds Auto Observer. “Now the GMs and the Nissans and whoever is involved can go to their suppliers, who are taking a gamble on this, and say to them, ‘Hey guys, we know we have a firm commitment for ‘X’ thousands of these vehicles,’ and it really helps everybody up and down the supply chain to feel more confident.”
GE plans to buy 12,000 vehicles from GM, including its forthcoming Chevrolet Volt, as well as from other makers as they launch electric cars. Nissan Motor Co is rolling out an electric car this year, called the Leaf.
The Fairfield, Connecticut-based company called its plan the largest commitment yet by any buyer of electric vehicles. The volume could help manufacturers of cars and batteries to drive their costs down more quickly, observers said.
GE plans to buy cars both for its own use and to lease out as corporate fleets to smaller companies through GE Capital.
“By electrifying our own fleet, we will accelerate the adoption curve, drive scale and move electric vehicles from anticipation to action,” said GE Chief Executive Jeff Immelt.
The high-powered batteries used in electric vehicles make them a pricey initial proposition -- the Volt, which also has a gasoline engine to extend its range, carries a $41,000 sticker price. But corporate users tend to focus on the long-term costs of operating a vehicle, rather than just the purchase price.
By drawing power from the electric grid, plug-in vehicles like the Volt or Leaf could operate more cheaply than gasoline-powered cars.
These cars represent the next generation of vehicle electrification, following on gasoline-electric hybrids such as Toyota Motor Corp’s Prius.
Businesses that use large fleets of vehicles have been embracing these technologies as a way to cut fuel costs, as well as lower their emissions of carbon dioxide, a greenhouse gas associated with climate change.
United Parcel Service Inc and FedEx Corp, for instance, have both been phasing hybrids into their fleets of delivery trucks.
“Fleets are a natural place for electric vehicles to start out because you have a finite range and you’ll be coming back to the car park at the end of the day,” said John Segrich, portfolio manager of the Gabelli SRI Green Fund.
Having large numbers of plug-ins in operation could also help validate manufacturers’ projections of how long their vehicles will be able to travel on a single charge. GM estimates the Volt will travel 40 miles on a single charge, while Nissan says the Leaf will run for 100 miles on a charge.
Reporting by Scott Malone, editing by Dave Zimmerman