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.
May 22, 2017
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
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
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.
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.
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