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

Replace a car every 4 years? That is utterly wasteful! Maybe some need to because they essentially live in their cars, but anyone who has a normal commute to work ought to be fine with keeping a car for at least 10 years. I do not drive much (62k miles / 15 years) and only got a new car because my old one started to rust, needed new belts, bearings, breaks, etc

I drive mine until the wheels fall off, then I put them back on again and keep driving until they fall off again... in other words, I usually keep (and repair) vehicles at least fifteen to twenty years and well over 200,000 miles. But lots of people replace cars only because they want something newer or to keep up with the Joneses or because they worry about potential problems as the car ages. It's their prerogative.

How about a trailer unit with engine, gas tank, generator and extra baggage space? Put a tow hitch on the short range electric and provide a quick connect to the trailer for energy transfer and control. Leave the trailer parked for short runs. Hook it up for long trips. With a standardized interface you could rent out trailer units to electric owners who don't often need one.

Check out the options for the BMW i3. Has been available for a couple years, although I don't think it gives you extra luggage space and the range extension might not be long enough.

"You can’t ask consumers to give up a feature they already have, and then tell them they have to pay more for it. " ?? Why would they charge you more (or anything) for a feature that they don't provide?

It seems the best solutions is to standardize on the battery module and then pay for the battery with a subscription or mileage fee. The owner of the car would not even own the battery. They would be owned by a battery rental service. Then it doesn't matter if you exchange your new battery for an old one at the filling station, because you don't own the battery anyway.

As I said earlier, the risk is that the swapped battery packs you get need to meet usage and range expectations every time. If you own (and keep) a pack at least you know how well its been treated. This problem hopefully can be minimized in the future when better batteries become available.

The biggest issues with EVs is cost and limited choice. They cost more than gas cars and there is no affordable EV station wagon. Over the life span of an EV money is saved, but the banks don't do 15 year loans for cars...15 years is what I expect an EV to last without major repairs. The much higher purchase cost results into higher monthly payments. The initial savings are not big enough to compensate for this. There are barely any used EVs. Manufacturers need to fix the price issue.

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