The Electric Car’s Same Old Problem

OP-ED: Automakers are struggling to make money off mainstream electric cars. But many consumers won’t buy in until they’re given an incentive to accept less.

One unwritten rule of product design says that if you’ve given your customer a popular feature, don’t dare take it away.

Therein lies the problem with the mainstream electric car. Today’s cay buyers have been spoiled. They assume that they should be able to take their cars on vacations, on weekend trips, or on treks to drop the kids off at college. Thanks, gasoline.

Electric car enthusiasts don’t like that argument. And to some degree, they’re right. On average, driving is mostly about short trips – to work, to the gym, to the grocery store. Unfortunately, modern consumers don’t buy cars based on their average needs. They buy for their exceptional needs.

Gasoline has taught them that. For all its faults, gasoline is still an amazing fuel. While battery makers burn the midnight oil trying to figure out how to reach a specific energy of 450 Wh/kg, gasoline already offers 12,000 Wh/kg. Even if you account for efficiency differences, the contrast is still enormous.

It doesn’t matter if consumers understand the concept of specific energy. They’ve absorbed the lesson as a matter of car-buying utility. One car offers them long, simple trips. The other car … well, it’s getting there.

That’s why the recent hand-wringing about the possible loss of tax credits for electric cars is unsurprising. The simple truth is that electric car manufacturers are still scuffling around, trying to figure out how to make money off small, mainstream EVs. They need those tax credits because they’re losing cash on every electric car they sell.

Auto executives don’t like talking about financial losses, of course, but if you listen hard enough you can easily get the gist of their electric car experiences. Volkswagen, which is doing penance by loudly proclaiming its commitment to electric cars, admitted to The Wall Street Journal recently that “small battery-driven vehicles won’t be cheaper than their diesel equivalents until 2030.” And GM exec Mark Reuss  told reporters that his company wants to be the first to produce “electric cars that people can afford at a profit.” Implied was the fact that GM and its competitors aren’t making a profit on EVs today.

Even Tesla, Inc. – which sells big, expensive EVs – is still struggling with the bottom line. Recently released numbers showed that Tesla lost $330 million in the first quarter of 2017. Those losses were 17% more than the first quarter of last year.

Tesla, Inc. lost $330 million in the first quarter of 2017. (Source: Tesla, Inc.)

No one was ever more forthright about this matter than Sergio Marchionne, the refreshingly honest chief executive of Fiat Chrysler Automobiles. Talking about his company’s all-electric Fiat 500e in 2014, he said , “I hope you don’t buy it because every time I sell one it costs me $14,000.”

Apparently, not much has changed since 2014. The numbers, maybe. But the principle lives on.

The electric car cognoscenti would, of course, correctly point out that EVs have a great deal to offer. They’re efficient; they handle well; their acceleration is amazing; and they’re beautiful, in some cases.

Comments

You misunderstood me. I'm saying that you could get a bum battery pack in swap that could leave an otherwise good car out of juice before the expected range of that pack was reached. As I have said in several previous posts, I am an advocate for an EV's overall potential for less maintenance due to far fewer moving parts.

The flaw in the battery swapping concept is that you never get back a battery as good as the one that you had previously. Exchange systems just don't work that way.

Mr. Ketel, Thank you for pointing this out. Pardon me for not explaining clearly how the battery swap would work. The batteries belong to the subscription company, not the car owner. It is the company that deals with deterioration, and replacement of worn out batteries and includes this in the swap price. In that sense the system resembles that used with compressed gas cylinders, or deposit bottles.

Understand how it's supposed to work, but ownership of the pack and associated responsibility for its integrity won't necessarily mitigate the risk of failure of an unknown pack. If implemented, companies offering pack swapping will have to always be on their "A" games because it won't take many negative experiences to spook customers away.

Mr. Dong, You are quite right. The battery companies will have to test and maintain their products to uphold high standards. This is true in many of today's industries. You are also correct that companies who fail to do so will lose customers, incur liability, and possibly go out of business, especially where safety is an issue. It may be necessary to have some public standards and supervision, as, for example, in the food business.

Any comparison between the cost of electric and oil vehicles must discuss government oil subsidies. American taxpayers fork out about $4.8 billion each year to oil companies (latest numbers I could find in a quick search). If that money were used to support energy with a future instead wasting it in the oil industry dead-end, we would make real progress in scientific discovery and help the environment at the same time.

Jeffrey - You and I may be coming at this from completely different perspectives and opinions, but perhaps we have some common ground of agreement to eliminate subsidies to both the petrochemical industry AND the electric energy, EV, solar panel, wind turbine industry. Agree, it is difficult to compare any of this when government money is involved and difficult to gauge where industry is going when "feel-good" government mandates and regulations come into play.

Drew, I agree to a point. I feel that government subsidies should benefit United States citizens, only. In the early years of oil exploration, it was determined that these subsidies were essential to find the oil we needed to progress as a nation. This is no longer the case. With overwhelming evidence of human-caused global warming, it would benefit the citizens of the U.S. (and the world) to fund alternative energy sources. The carbon in the ground needs to stay there.

For our current levels of energy storage technology and energy dispensing infrastructure, the best tradeoff available is the Chevy Volt. Over 40 miles of electric range for the "typical needs" commute along with 300 miles of "exceptional needs" gas range for that driving vacation to Yellowstone.

I've never been a GM fan so it pains me to say, that I agree. It's more or less a Hybrid that doesn't need the engine for the majority of it daily use. It really does seem like a good compromise

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