Lee Hart wrote, in response to me: > > Do you really think that a single EV model will pull more than 50% of >> that niche market? > >He did say 100,000 in a decade, over which time 1.8 million cars in that >price range would have sold. That's 2% of the market, which sounds quite >attainable.
Actually, no. *I* said 100,000 in a decade, Peter didn't specify, but the initial implication was that this number could be sold or leased in a single year. He later said he thought 100,000 could be leased or sold within two or three years, which I still think is a very unlikely projection. But I agree with you that 100,000 in a decade, while optimistic, might even be attainable for the right company producing the right set of EVs. >We waited 6 months to get our Prius. > >Likewise for the EV1 and all the other auto company EVs. They were all >produced in very low numbers, and there were long waiting lists to get >them. You can't use low sales to imply lack of demand when the supply is >deliberately restricted. (Was Leonardo DaVinci an unsuccessful painter >because he only sold one Mona Lisa?) If the company is making an acceptable return on the vehicle, please explain why they are *deliberately* restricting supply (as opposed to, say, just making the wrong guess as to demand, or restricting their level of risk, or keeping the maintenance network manageable, or any of a hundred other economically reasonable things)? The auto makers' primary goal is to make money and show a good return for the investor. Their repeated decisions to cancel EV production is almost certainly motivated by that very goal, and this point of view is backed by the auto makers' own utterances. Therefore, if you are asserting that the supply of the Prius (or any of the EVs offered for sale or lease) was restricted for something other than a perfectly good economic reason, the burden is on you to prove the point. Long lines to purchase a product do not necessarily say much about the profitability of a product. Long lines do prove that there is a demand for the product as offered, but if the costs of R&D plus marketing plus manufacture plus maintenance etc., etc., outweigh the price charged, or simply produce an inadequate ROI, then the product is still not viable. The long lines may well be a public recognition that this is an exceptionally good bargain, and unlikely to be sustainable. (I'm not saying long lines prove that a product is unprofitable - far from it - I'm simply saying that they don't prove it *is* profitable, either. At best, long lines prove that there is potential in the marketplace.) So, unless you have a credible alternative explanation for why the supply is restricted, I feel pretty comfortable using those numbers as evidence of low demand for a viable product of this type. (DaVinci, of course, is a pure red herring.) One interesting point though: it is the flip side of this very issue that makes SUVs so incredibly prolific. SUVs are dirt cheap to produce and are therefore very high margin vehicles for the auto companies. Some of the reason for that is that SUVs began life as enclosed trucks - so there was virtually no R&D overhead, very little in the way of retooling was required, and the maintenance infrastructure was already in place. Also, because of this truck-related ancestry, governmental emissions and safety requirements are relaxed, making the SUVs a good deal less expensive to manufacture than an ordinary passenger car. The inherent high profitability of these vehicles means that the auto makers are able to put a much greater advertising budget toward this market sector and have ended up helping to create a built-in cultural bias toward the behemoths. EVs, on the other hand, have very high R&D costs associated with them - much higher than any ICE vehicle, because the latter is already standing on a large body of practical experience. They also have a high materials cost (particularly for advanced battery vehicles) and require a largely new process for manufacturing and assembly (at least of the drive components). They have a limited range and a battery pack that is expensive to replace, which presents a marketing obstacle. And finally, they require an entirely new set of skills for support personnel. In short, there are lots of reasons why EVs may not be especially profitable to produce, sell, and sustain. Add in the fact that gasoline itself is selling for close to its inflation-adjusted all-time low and there just isn't a lot of incentive for companies or customers to make the switch. For all these reasons, ten thousand new OEM EVs sold per year is a pretty optimistic goal. It *may* even be attainable, although I'm not holding my breath. 100,000 per year is an absolute pipe dream, in my opinion, in spite of the fact that even that number would represent less than one percent of the U.S. vehicle market. >The GM EV1 is a lot like their Corvette. It's a niche market car that >sells in low volumes, yet they've been selling it since 1956. I'd expect >the EV1 could sell in similar quantities. I don't see any evidence that >GM stockholders are ready to lynch management for wasting money on such >a tiny market niche. As I hope is evident from the explanation offered above, the costs associated with the Corvette are quite likely dramatically different. In addition, organized racing, which provided the foundation for the development of the Corvette and similar cars, is itself a profitable undertaking. Shareholders won't lynch management for doing anything that makes money. EVs can be developed to showcase environmental issues and to highlight oil dependence issues, but I know of no similar way to bootstrap the costs associated with EV development (notwithstanding the efforts at Woodburn). I'm not anti-EV at all. I just think expectations for them should be kept reasonable and should be based on economic realities rather than wishful thinking. -- -Adam Kuehn
