The recent White House report analyzing General Motors' restructuring plan caused controversy because it questioned the short term prospects of the upcoming plug-in Chevrolet Volt.

While plug-in vehicle enthusiasts may be up in arms, the statements were not signs of a philosophical shift by the administration, but were a realistic assessment of the difficult road ahead for electrified vehicles.

The Obama administration's assessment of General Motors' viability was very critical and called for more drastic restructuring of the company. The references to the Volt were limited to a few sentences of the five page document, and they centered on plug-in hybrid's (or extended range vehicle, as GM prefers to call it) ability to contribute to GM's financial health in the short term.

Per the White House report:

"Additionally, while the Chevy Volt holds promise, it will likely be too expensive to be commercially successful in the short-term.... GM is at least one generation behind Toyota on advanced, “green” powertrain development. In an attempt to leapfrog Toyota, GM has devoted significant resources to the Chevy Volt. While the Volt holds promise, it is currently projected to be much more expensive than its gasoline-fueled peers and will likely need substantial reductions in manufacturing cost in order to become commercially viable."

The strongest statement there is the negative comparison to Toyota's electric drive technology, which may or may not have merit. However, the underlying meaning of its statement can be summarized like this: The Volt is part of the first generation of plug-in hybrid vehicles (PHEVs), which like many first generation technologies (see the Toyota Prius) won't turn a profit initially. Don't bet on a new category of vehicle to turn around your fortunes in the next three years; you've got to do more."

Analysts have not been saying that the Volt -- or any of the plug-in vehicles -- will be profit centers for the auto companies right away. The federal government realizes this, and that's why it is offering a $7,500 incentive to consumers, as well as substantial stimulus money towards making the grid more PHEV friendly.

The Obama administration believes in the long term necessity and prospects of plug-in vehicles. They are offering financial support because they recognize that the cost of batteries as well as other system components must come down substantially for the vehicles to be commercially successful.

So why all the furor over this sober assessment that is consistent with the government's historical financial support of many emerging environmentally-beneficial technologies? Wouldn't Obama's pledge of 1 million PHEVs on the road by 2015 be more at risk if the government believed that GM and Detroit could quickly make the vehicles profitable on their own and didn't provide considerable financial support?

Several folks including Felix Kramer at CalCars have taken issue with the administration hiring the Boston Consulting Group (BCG) to provide advice to its Automotive Task Force. In reading through the group's previous statements, they clearly are not bullish on all-electric vehicles (EVs), but are neutral on plug-in/extended range vehicles.

BCG projects that the reduction in the cost of batteries will be too slow and the cost of charging station infrastructure too high to make all-electric vehicles cost effective within the next decade. The rate of improvement in battery efficiency can be argued because the lithium ion technology could be made more efficient, or surpassed by another technology. Considerable resources are being thrown at the battery problem, but it will likely take a long time for 300 mile range EV to be affordable for most consumers.

The cost of a charging infrastructure for EVs is much higher than what is needed for PHEVs because EVs cannot afford to run out of charge anywhere. Given their more limited range and lack of secondary power source, EV charging stations must be as ubiquitous as today's gas stations, which won't come cheap. PHEVs will primarily be charged at residential locations and can always tap the gas tank as necessary, so the need for public charging is much less.

BCG projects that by 2020, EVs will only make up 1 percent of the U.S. market. BCG considers extended range vehicles like the Volt as a separate (and inferior) technology to plug-in hybrids, but still netting about 3 percent of the market in its most likely scenario.

PHEVs are projected to make up around 8 percent of the market in 2020, or 1.5 million vehicles sold per year. The combined market share of 11 percent would dwarf the current market for hybrid-electric vehicles. It took ten years of selling hybrids to reach last year's milestone of 315,000, so forecasting sales of 2 million per year within a decade is not being dismissive of these vehicles.