Source: CNBC
DETROIT - U.S. automakers say they're on track to increase the number of vehicles that can run on fuel-saving ethanol, even as the ethanol industry falters and other technologies like electric vehicles capture the public's attention.
Most gasoline in the U.S. contains a low percentage of ethanol, which is a kind of alcohol made from corn, sugar and other substances. But only some vehicles can run on either gasoline or E85, a blend of 85 percent ethanol and 15 percent fuel. There are around 8 million flex-fuel vehicles on the road right now. Regular gasoline vehicles can't run on E85.
Although not as efficient as gasoline, E85 reduces dependence on oil because of the low percentage of gas it contains. It's typically cheaper than gas because of federal subsidies of around $6 billion per year.
Automakers benefit, too, because they get federal fuel economy credits for making flex-fuel vehicles.
General Motors Co., Ford Motor Co. and Chrysler Group LLC say they expect to meet a 2006 pledge to double their production of flex-fuel vehicles by the end of this year. In 2006, they produced 700,000 vehicles, so that means making more than 1.4 million flex-fuel vehicles by the end of this year.
U.S. automakers also expect to meet a goal of making half their vehicle production flex-fuel by 2012, up from around 30 percent now. But they warn that they could pull back if there aren't enough gas stations with ethanol pumps.
Availability of ethanol varies widely. There are more than 2,000 U.S. gas stations with E85 pumps or blender pumps that allow drivers to specify the percentage of ethanol they want in their fuel. But that's less than one in five gas stations in the country, and the vast majority are in the Midwest.
"We haven't changed the commitment because we really do believe that biofuels need to be a piece of it," Ford spokeswoman Jennifer Moore says. "But it may turn out to be a more regional solution."
Ethanol lobbying group Growth Energy says the number of stations with ethanol pumps grew 11 percent last year, but that was far slower than the triple-digit growth they saw earlier in the decade. Sales slumped last year in Minnesota, which has the most ethanol-equipped gas stations in the country, as low gas prices narrowed the cost advantage enjoyed by E85.
When prices are low, buyers are more likely to choose regular gasoline because it's more efficient. GM spokesman Alan Adler says E85 needs to be 20 to 25 percent cheaper than gasoline to make up for the fact that you have to fill up more often.
E85 is now around 20 percent cheaper nationwide, at $2.17 per gallon versus $2.72 per gallon for gasoline, according to E85prices.com. But in some states, the difference is as little as 16 percent.
The ethanol industry also has been hurt by high corn prices, low wholesale ethanol prices and the overall economy. Several major producers have gone bankrupt, and the industry is uncertain as it waits for the federal government to decide whether to renew its incentives at the end of this year.
Last week, Growth Energy called for a gradual end to the government payments that oil producers get for blending ethanol. The group wants the money used to install blender pumps at gas stations. It also wants the auto industry to make all its vehicles flex-fuel capable, although it didn't give a timeline.
"It doesn't matter how quickly automakers move if there are no blender pumps," says Growth Energy spokeswoman Stephanie Dreyer.
A rival ethanol group, the Renewable Fuels Association, doesn't support that plan and wants to keep the incentives in place.
