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

Nonsense. This is a solution (actually a subsidy scam) in search of a problem. If the problem is that fossil fuel use imposes some sort of social cost (amount is debatable), then the solution is to tax its use to offset it's cost. At a high enough cost, use will decline. Possibly there may be some substitution of electric propulsion for ICE propulsion. However, there are varied alternatives including more remote work, and denser development to allow more use of mass transit.

It can be quite hard to get folks to give up freedoms that they have enjoyed, especially when the cost is a lot more than they are used to paying. Presently the push toward autonomous cars along with electric propulsion makes the future look uncertain to many of us. The freedom to jump in our car and drive across the country if we choose is not to be abandoned easily. The much higher price for much less freedom is not a good selling point. Is that hard to understand???

I don't necessarily buy the "range anxiety" objection. The percentage of multiple car families is very large here in Canada, and I would assume even larger in the US. There is nothing stopping people having (at least) one ICE car and one EV. That is what my wife and I have - a RAM Ecodiesel for the farm errands and my daily commute (and I car pool), and a Chevy Volt (to be upgraded to a Bolt) for her commute and short trips about town.

As far as cost is concerned, I tend to crunch the numbers in a very simple way - monthly cost of ownership. The average Canadian replaces their car every 4 years (and so is always making car payments). Paying 8000 more for a car translates into about $130 / month extra. So - do you spend more than that in gas each month? If the answer is yes, then definitely you should buy an EV, and you will save money. In fact, you should add oil changes to that and the break even will happen at a lower mileag

If you trade cars that often because of wear and reliability concerns, realize the electrics have fewer wearable parts so they should have lower maintenance costs as well as longer lives. If you trade because you tire of your current driver, then you will always be in car payment cycle and fuel source will not help you with that.

EVs run without fuel? That's news to me. You still have to pay for electricity and the more popular EVs get the higher electricity rates will go, mainly because grid operators have not spent anything on grid maintenance in decades. The US grid is not built for that massive increase in consumption. Things get even worse when more folks install solar panels. The grid is designed for flow into just one direction.

Who cares about the grid? If you have solar panels with battery storage, Tesla's Powerwall for example, you store energy when the sun is shining. Use it to charge your vehicle at night.

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