What will it take to expand E85 use?

Again from Autoweek

In spite of GM's "Live Green, Go Yellow" advertising blitz last year, retailers - and subsequently consumers - have been slow to adopt ethanol fuels.
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By LESLIE J. ALLEN | AUTOMOTIVE NEWS

If it were just a matter of patriotism and environmentalism, E85 might be flowing through the tanks of every flexible-fuel vehicle in the United States. But the Detroit 3 - the auto industry's biggest ethanol supporters - have yet to make E85 appeal to driver's wallets.

Last week President Bush called for greater use of ethanol to make the nation less dependent on foreign oil. E85 is a blend of 15 percent gasoline and 85 percent ethanol. But flexible-fuel vehicles get 25 to 30 percent lower mileage when they run on E85 then when they operate on gasoline.

That's a huge marketing problem. How do you promote a fuel that won't get drivers as far down the road?

E85 must be priced about 20 percent below gasoline, said Curt Magleby, Ford Motor Co.'s director of U.S. state and local government relations.

Back to gas

Appeals to patriotism and environmentalism may work for a while, Magleby said. But consumers who lack a financial incentive to buy E85 are likely to return to gasoline.

"Without public perception of balue, we will never be able to sell E85 effectively," Magleby told Automotive News. "It's all about pricing, and that's the American way."

Agreeing with that assessment is General Motors, the most visible cheerleader for E85. "We don't want people paying more" for E85 than for gasoline, says Mary Beth Stanek, GM's director of environment and energy.

Many U.S. filling stations already charge lower prices for E85 - sometimes 35 or 40 cents a gallon less than gasoline. Some retailers are willing to take a financial hit on E85 to build business.

Others charge less because they have special purchasing agreements with fuel producers. And in some states, taxes on E85 are lower than those on gasoline.

The federal government gives retailers a one-time tax credit of as much as $30,000 to install ethanol pumps. Some states provide additional credits.

Not their job

Automakers have limited ability to promote ethanol use. They sell cars and trucks. It's up to ethanol producers and retailers to promote the fuel.

But oil companies don't install ethanol pumps. That's the task of filling station owners and regional convenience-store chains.

In turn, they work with small ethanol producers that hope to get in on the ground floor of a growth market.

"When the vision of the (energy) producers starts to shift - once they see profit potential and profit opportunity - they're the ones who have to market this," said Ford's Magleby.

GM made a big splash with its "Live Green, Go Yellow" advertising campaign for flex-fuel vehicles. But automakers' ethanol marketing consists largely of helping local retailers and government publicize the availability of E85 pumps.

The price of ethanol will drop when it's mass produced and widely available, says Reginald Modlin, the Chrysler group's director of environmental affairs.

"Then we can talk to the marketplace about 'Drive for less, use ethanol'," Modlin says. "We have to somehow convince the marketplace, consumers and policymakers that we have to stop talking about miles per gallon as a strict measure of the value of this."

What would be a more appropriate yardstick for fuel economy? Consumers could calculate their fuel use by the cost per mile rather than miles per gallon.

Looking for a bargain

If E85's price per gallon is at least 20 percent cheaper than gasoline, flex-fuel vehicles start to look like a bargain.

Will motorists buy that logic? Keep your eye on Minnesota. That state has the most ethanol pumps in the nation - nearly 300. Robert Moffitt, a spokesman for the American Lung Association of Minnesota, says he thinks consumers will buy E85 despite the lower mileage it gets.

Many vehicle buyers are concerned about curbing emissions of carbon dioxide and rducing dependence on Mideast oil, Moffitt says. They also want better horsepower, and E85 has higher octane than regular gasoline, he notes.

"You can't tow a boat with a Prius," Moffitt says. "But you can with an E85 pickup."