By on June 13, 2013

If TTAC would headline “Doldrums in U.S. electric car sales could linger indefinitely,” we’d come under screeching attacks by electric propulsion proponents, screaming “bias,” “slow newsday,” and “faux news,” along with choice invectives that would overpower our bad word filter. Well, we are sorry to disturb the peace again, but before the screeching starts, be advised that it’s not our headline. The headline is from buttoned-down Reuters. The wire doubts EVs will become a serious factor anytime soon, despite rounds of aggressive pricing.

In May, we recommended to “prepare for a low intensity price war over electric vehicles.” By now, the war is in full swing, and it is fought with big artillery. Writes Reuters:

“With even more new EVs and hybrids on the way later this year, including the BMW i3 and the Cadillac ELR, manufacturers are stepping up discounts on their green cars.”

According to the wire, “General Motors Co is the latest company to offer aggressive pricing.” GM offers incentives of up to $5,000 on the Volt. The new Chevrolet Spark EV was announced at a bargain price of $27,495 before government incentives. Nissan lowered the entry price for its Made-in-the–USA Leaf from $35,200 to $28,800. Honda lowered the lease cost for its Fit EV from $389/month for 36 months with 12,000 miles/year to $259/month for 36 months with unlimited mileage, free service, and a free 240V charger thrown in.

There are curious stories about bargain basement leases and a shortage of cars.

Then, there are people like Beau Boeckmann, whose family owns Galpin Ford, Ford’s largest U.S. dealership with locations all over California and Arizona, supposedly a hotspot for EVs.

Galpin sold only “very, very few” of Ford’s plug-in hybrid and electric vehicles, Boeckmann told Reuters. Only 2 percent of the vehicles Galpin sold last month were plug-ins. The national average is even lower: Only 0.56 percent of all cars sold in America in May could be plugged in, Hybridcars says.

To Reuters’ bafflement, “both the Leaf and the Volt have been outsold this year by the Tesla Model S, a battery-powered luxury sedan that is more than twice the price of the Leaf and nearly double that of the Volt. Sales of the Model S through May were 8,850, making it the best-selling plug-in car in the United States despite a starting price of $70,890.” An analyst interviewed by Reuters thinks it’s a short-term phenomenon, and that the cars are bought “by the same set that will buy a Ferrari.” There aren’t too many of those.

The same analyst doesn’t see EVs “getting too far beyond a couple of percentage points” of market share between now and 2020. The man is an optimist, considering the fact that hybrids have been at it for well over a decade, and had to contend with much lesser obstacles, only to hover at around 3 percent market share today.

Barron’s thinks (and I agree) that the big test for Tesla comes when it exits its cushy supercar niche to go mainstream, something it has to do to fulfill the projections of hundreds of thousands Teslas that fuel its $100 stock price. “The high price of the Model S lets it pack enough battery capacity to overcome the range limitations that stifle sales of cheaper electric cars,” writes Barrons. Volume however comes at a price low enough to compete with the bargain basement offerings of other makers. Volume is created by people like you and me, with limited funds, people who buy a car to use it, not to show it at Cars & Coffee.

Tesla and its stockholders will soon face price range anxiety. To get in the general vicinity of the real world car buying demographic, Tesla must make a “Grand Canyon leap to reach its goal of cutting its car’s $90,000-plus sticker price in half,” Barrons says.

“The challenge is battery cost,” the paper continues. Analysts hope battery prices will drop by half, and that consumers will accept a driving range below 140 miles. However, says Barrons, “the U.S. government and industry researchers say the cost performance of batteries is coming down slower than hoped. At GM, Director of Global Battery Systems Bill Wallace believes that battery-capacity costs can improve by about 20% in the next few years.”

A mass market maker can afford a few quota cars sold at a loss. If all you have is EVs, EVs sold at a loss will kill you.

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40 Comments on “Reuters Sees EV Doldrums, Barrons Sees Tesla Hit A Brick Wall...”


  • avatar

    The one thing that bothers me about ALL EV is that you have to charge them with a plug. Unless their are security guards around or you’re in a private garage, there’s no certainty there won’t be vandalism of the equipment. I’d like to see Tesla develop some sort of induction charging so the vehicle and equipment can be secure.

    I’m into TESLA for long term investment. Bought my shares at $27.80. I’m 100% sure that with the introdution of the MODEL X and the Supercharger network, Tesla will be worth twice its value by January 2015. If Musk releases info of a truly affordable Consumer electric car by Jan2014, I’ll hold them even longer.

    • 0 avatar
      Scott_314

      I don’t see vandalism as a big problem. If anything Darwin’s law will teach people to leave a 240V, 100+ amp charger alone. Wireless charging for cars is pretty unlikely due to the power and equipment needs.

      Jealous of your $28 Tesla shares though.

      • 0 avatar

        There are no active high-voltage conductors in a J1772 EVSE cable when it is NOT plugged into a car, for safety reasons. I imagine the same is true for Tesla’s Superchargers, but that’s just a guess.

        To date I haven’t read many (okay, any) reports of vandalism. Not to say that it won’t or can’t happen – just that for whatever reason it hasn’t become a problem yet.

    • 0 avatar
      KixStart

      Does Tesla have a plan for getting revenue from the Supercharger network? It doesn’t seem to me like they do and the build-out of that network can’t be cheap.

      • 0 avatar
        gslippy

        I think they already offer a optional Supercharger service that you pay for up front when you buy the car.

      • 0 avatar

        * possible upsell to higher-model Tesla vehicles (Tesla says the supercharger network is free for Model S, hasn’t clarified whether true for future Tesla vehicles)
        * marketing expense
        * possible charge for non-Tesla vehicle access

        Tesla says a Supercharger station (let’s say 8 vehicles) costs $150k, $300k if also equipped with a large storage battery and solar panels.

        Assume the 120 kW charging station has an average utilization of 50% from 6 AM to 10 PM; it will then deliver around 1 MWh of energy per day, which at $0.11/kWh costs Tesla $110/day to operate. 300 stations covering the US by 2015 cost $12M/year to operate and approximately $45M to install.

        The solar stations may cost slightly less; panels over an 8 bay charging station should be around 6m x 25m, 150 W/m^2 = 22 kW nameplate, around 100 kWh of energy per day in areas where Tesla is likely to deploy the solar stations. So reduce the energy costs by 5-10%.

        $12M is not an insignificant amount of money, and paying to service the stations will also not be inexpensive. However, there’s some direct revenue coming in by way of the $2000 Supercharger upsell on the lower model vehicles (times say 20k vehicles/year = $40M) .. and perhaps more importantly, some people will buy Teslas with the Supercharger network in place where they would never consider a shorter range EV.

    • 0 avatar
      Dr. Kenneth Noisewater

      There’s presumably security cameras and occasional security drive-bys to tamp vandalism down, and with 200+mi batteries most owners will just charge at home for the convenience, unless there’s subsidized cheap public charging available.

      I suppose it does remain to be seen if Tesla can build a 3-series competitor in the $40-50k range with 60+kWh of battery (for >=200mi usable range), but I wouldn’t put it past Elon. Incidentally, rumor is that Tesla’s able to build their batteries at ~$200/kWh thanks to volume discounts, and in 3 years they may get that into the low $100ish/kWh (or even lower if they push for Chinese suppliers, though that could be a safety risk). A $10-12k powertrain is comparable to a diesel with an 8spd trans, exhaust, etc, and $6-8k for the battery plus a relative pittance for the motor(s) would make a $40-50k car feasible.

    • 0 avatar
      David Sacci

      The charge cord for the Tesla Model S locks into place when the car doors are locked; the charging equipment is secure.

  • avatar

    Sayeth Barrons: “No one yet knows what portion of Tesla’s initial buyers were “early adopters,” unrepresentative of ongoing demand.”

    That’s half of it. Those who followed stocks closely during the dot-com era will remember the phrase “crossing the chasm”, which refers to the move from one’s early-adopter enthusiast base to the mass market. It’s a fraught move that has killed many promising “disruptive” companies, and Tesla has yet to make it — and those with short memories (or young memories… a lot of Tesla investors seem to be twentysomethings for whom the dot-com days are just fuzzy history) are assuming that it will be a slam-dunk, but it’s not.

    The other half of it is… if Tesla proves that there really is a sustainable, sizable market for luxury BEVs, how do they preserve their fat margins when Audi or Cadillac or BMW (or any other big OEM) suddenly unveils a viable Model S competitor for $10k less? They don’t have the scale to fight that battle, but Tesla’s stock valuation (even at a more realistic $40 or so) depends on attaining the Porsche-like margins that Musk has promised.

    Love the car, love the company’s execution so far, but I don’t love the stock.

    • 0 avatar
      Summicron

      Now, this is an “analyst”.

      • 0 avatar
        Dr. Kenneth Noisewater

        could be worse, could be an “analrapist”..

        http://24.media.tumblr.com/tumblr_m5dafgrfEa1qla0nzo1_1280.jpg

        If Tesla is aiming to be the Electric BMW, then aiming at their margins vs. boutique Porsche makes more sense.. BMW is more like 12%? So they get volume with ~10% margin on their 3-series, but still make bank on their Model S (7-series) and split the difference a bit with their Model X (X5 but more space).. They could also sell a Model S GT coupe if you ask me, and make it a performance monster, if and when they get the volume model(s) done..

        (A Model S GT with 4 motors, torque vectoring, 100kWh battery, sticky asymmetrical tires that’re wide in the back, plenty of grip, sub-3s 0-60.. Quarter mile in the 10s-11s.. While carrying 3 passengers.. Now _THAT_ would shut a whole lot of people up.)

    • 0 avatar
      wumpus

      But which “big OEM”? Last I heard, Tesla reviews implied that the car wasn’t just “an impressive electric car” but a car that justified its high end price. Undercut the Tesla and they throw away their own bloated profits (if their drivetrain costs more than 10k more than Tesla’s, why haven’t they adopted the LSx drivetrain?). I expect a Cadillac volt clone, but I doubt it will eat too much of Tesla’s lunch. Of course, I’d google “electric genesis” several times before buying Tesla stock :).

      Still agree with the stock issue: I can’t see a Tesla being the “fashion lifestyle accessory” needed to really drive the branding profit bloat. There isn’t a whole lot in the car that can’t be copied from a disciplined car company in China (a “small [for now] OEM”).

  • avatar
    EquipmentJunkie

    Myself and about three of my co-workers are perfect candidates for either an EV or CNG vehicle. Sadly, neither option makes economic sense for us.

    EV Disciples often just do not get it…economics prevents many of us from experiencing electric motive Nirvana.

    • 0 avatar
      Scott_314

      Does buying any new car make economic sense? After all a 4-year old Buick that costs 8 grand will provide trouble free, cheap-insurance driving for a decade.

      Does buying an EV make economic sense compared to other $30K cars? Sure, if you like and are enthusiastic about the technology and can live with or don’t mind the limitations.

      • 0 avatar
        EquipmentJunkie

        New cars can make sense. I have purchased several new cars, but there are some significant issues with EVs like trade-in value, practicality, and travel range which are added to the purchase equation.
        I have an acquaintance who has won national awards with his electric vehicle modifications of older vehicles. Even at $10K, those machines are electric novelties with some significant disadvantages over the $8K Buick that you reference…but he doesn’t see those disadvantages.
        I expected to see a lot more early adopters flock to the Volt and the Leaf due to the price point. It appears to be an uphill climb.

      • 0 avatar
        285exp

        I can drive a 4 year old Buick the 350 miles from my house to Atlanta in around 5 hours. I’d have to spend the night about halfway there to take a top of the line Tesla S, assuming I could find a 240V charging station to top it off at the hotel. There are no supercharger stations in these parts. Rich people in the non-flyover parts of the country can only buy so many of these things. And while enthusiasm about technology and ability to live with limitations may be necessary for current buyers of BEV’s, they still don’t make economic or practical sense for many people.

        • 0 avatar

          By next year Tesla plans to install Superchargers around Atlanta (but notably not in atlanta).

          http://www.teslamotors.com/supercharger

          350 miles in a Model S (assuming a full charge at the start and an overnight charge at the destination) would take 5 hours of driving time and approximately 30 minutes of charging time.

    • 0 avatar
      J.Emerson

      “Myself and about three of my co-workers are perfect candidates for either an EV or CNG vehicle. Sadly, neither option makes economic sense for us.”

      You say you’re a perfect candidate for it, but that it doesn’t make “economic sense.” So if economics is your only criteria for a vehicle purchase (why are you even here, if that’s the case?) then how are you a “perfect candidate” for something like a Leaf or a Volt? I’ll go out on a limb and guess that you could afford something like a Model S, but you’ve chosen not to because of “economics.” Who’s arguing that a Model S is an economically sensible choice? Who’s arguing that ANY luxury car is an economically sensible choice? Your statement doesn’t make sense.

      My guess is that you just don’t really like electric cars, which is fine, but it doesn’t give you the right to make faulty constructions to retroactively justify it.

      • 0 avatar
        Summicron

        Stop it. I keep thinking Michael Jackson is lecturing us.

        (Peripheral vision not so good w/o specs)

      • 0 avatar
        CJinSD

        I have a car that I drive about 5,000 miles a year. An electric car could do some of the things I use it for, like grocery shopping. On the other hand, it is also the car I generally grab when something unexpected causes me to drop everything and drive 150-350 miles. Economically, an electric car can’t be justified for me to use as my shopping car. Were I to get over the emphasis I place on driving enjoyment and forget the freedom of movement I’m accustomed to, I still couldn’t justify an electric car economically. $650 a year in fuel costs and $250 a year in maintenance(including amortizing high performance tires) doesn’t pay for much in the way of EVs. That’s before you throw in the cost and inconvenience of an occasional rental car and needing a dedicated parking space for charging. Even with automakers like Honda spreading their EV development and production costs among their other customers(thanks normal car buyers for paying for this mandate!) and the taxpayers picking up a huge chunk of the purchase or lease price, driving a Fit EV would still cost me more than driving my current car. That doesn’t say efficiency to me.

  • avatar
    Summicron

    “Analysts hope battery prices will drop by half, and that consumers will accept a driving range below 140 miles.”

    Analysts?
    Sound more like fanbois.

    • 0 avatar
      KixStart

      Yeah, analysts should not be hoping. That’s the province of fanbois. Although the EV Zealots are way beyond “hope” and have gone all the way to “faith.” Don’t cross “faith,” it ain’t pretty.

    • 0 avatar
      wumpus

      Last I checked, the price of a Tesla battery pack was about the same as the cost of all the gas a Corvette will drink in ~150,000miles (but you pay up front and lose the interest, and I don’t think I included the electricity). For a Volt to match the Prius assumes something like $4.00 gas and $1.00 electricity (assuming the volt is as efficient with electricity as the prius is with gas), something that just doesn’t sound likely (and Toyota owners would be upset with a measly 150k lifespan). I’m pretty sure the Volt can beat the other Chevys, but they have to get the rest of the car down to reasonable costs as well.

      The infrastructure needed isn’t going to be built for “break even ignoring interest costs”. Teslas are going to sell because they are great cars, but I can’t see volts and leafs selling without cheaper batteries (or the visible hand of government). Cheaper batteries mean volts and leafs make sense, and people will want both the cars and the chargers.

      On the other hand, the price sensative market (Black and Decker tools) are switching from NMH to Li-based stuff. My guess is that the price of batteries is steadily dropping, likely because Samsung and Apple are driving plenty of research into getting into their supply lines (or more likely a bunch of patents are expiring/expired recently, the price was pretty flat until recently).

    • 0 avatar
      stuki

      “Analysts”, like everyone else, is paid, at least indirectly, on a commission basis these days. Of course they’re hoping underlyings will vindicate the choice they made about what industry to “analyze.”

      To make it all a bit more palatable, 98% of it is nothing but a big crock anyway. Just a bunch of know-very-little-credentialled-way-beyond-their-meager-brains’ sitting around in a giant bullsh%&$ circle jerk bs’ing themselves and others into hoping the drivel they spout entitle them to a few more of the notes Benny B, Barry O and others of that ilk is handing out willy nilly to anyone willing to pretend there is somehow something more to the whole charade.

  • avatar
    gslippy

    “The same analyst doesn’t see EVs “getting too far beyond a couple of percentage points” of market share between now and 2020.”

    That would be a FOUR-FOLD increase in market share. How is that ‘doldrums’?

    TTA (electric) C is that there are only 2 real players – Nissan and Tesla. Citing Ford’s lackluster sales isn’t evidence of much. You may as well have talked to a lonely Mitsubishi dealer.

    Only crazy people predict EV domination. EV success is already happening, but only for the right products delivered by the smartest companies.

    • 0 avatar
      KixStart

      But it’s a four-fold increase from “practically nothing” to “not much at all.” And it’s a separate development process, too. Except for Toyota and Ford, which are in the game for cheap and low-risk. They’re probably going the smart way on this.

      • 0 avatar
        CJinSD

        Were the Energi cars cheap to produce? They carry a huge price premium over comparably equipped conventional Fusions. I suppose the intention if for OPM to cover at least half the difference. My local Ford dealer has 21 Fusion Energis in stock against 17 other Fusions. The 17 other Fusions include hybrids.

        • 0 avatar
          KixStart

          The C-Max Energi almost certainly cost very little to develop, so the fixed costs for the Energi product are low. If they can’t sell them at a profit, they can stop making them. As long as the C-Max line sells OK, the profitability will be there.

  • avatar
    mcs

    I have another theory about Tesla’s strategy. I think the expansion of the supercharger network combined with the addition of the Tesla quick-swap technology will give Tesla leverage to make deals with the larger OEMs to become sort of an Intel of the electric auto industry.

    Given the low volume of these things, it’s going to start making more sense to buy a Tesla skateboard sized to the OEMs specs and add it to an OEM built body. Development costs are lower because their shared across a wider base. The vehicle is also able to take advantage of the supercharger and quick-swap network.

    So, keep an eye on the growth of the supercharger network – especially with addition of the quick-swap technology. If he starts getting that sort of infrastructure in place, I think he’ll succeed.

    Once the cost of building a Tesla based car vs. staying in-house and competing against the Tesla infrastructure is compared, I think the choice will be easy. Mercedes is launching a Tesla based car in 2014, so it’s already starting to happen. Maybe Lexus will be next given Toyota’s investment?

  • avatar
    Scott_314

    I may be one of the local ‘proponents’ of EVs here, but I don’t recall ever saying or defending that sales will soon reach a significant market share. 10% by 2020? Doubtful.

    If I have ‘issues’ its only that most car-guys and auto-media tend to be anti-EV, anti-hybrid. I think it’s partly because we find it threatening. Hybrids and ‘saving fossil fuels’ suggest that the normal status-quo HEMI SRT V8 may not be the best for our future.

    What I’m saying is that in the cities today and outside of our circle, people are becoming anti-EVERY-car, truck and SUV. It’s bicycles and subways and trains and buses for all, and drivers should pay another $3 per mile for every mile we drive, charged straight to our credit cards, to pay for our roads, transit infrastructure, health care, and defense (because it’s all our fault).

    I just want to look forward. We enthusiasts can get behind EVs and make them a part of our life (with the SRT for weekends), or we can just keep fighting for the SRT and end up with a GPS tracker tied to our bank accounts.

  • avatar
    J.Emerson

    Grasping at straw (men). I’m not sure where you’re finding all these pie-in-the-sky “EV’s will attain market domination” predictions, but I don’t see them around here.

    • 0 avatar
      wumpus

      It’s a simple matter of flat oil production (http://www.indexmundi.com/energy.aspx?product=oil&graph=production) and increasing car ownership (BRIC nations). Electricity is already easily a better means to power things [torque and efficiency], but has limits on range (so far).

      I expect CNG to get past gasoline first (at least in the US) unless California burns it all for electricity. Total “domination” of using crude oil products in cars makes less sense every day.

      • 0 avatar
        CelticPete

        cept its pretty trivial to make natural gas cars – and we have tons of that in the US.. You can even make CNG that can take gasoline with a simple switch change. So you get the best of both worlds..

        If some disruptive company tries to do this – I could see Electric cars getting hammered.

  • avatar
    DeeDub

    “the cars are bought by the same set that will buy a Ferrari. There aren’t too many of those.”

    Ferrari sells about 7000 cars a year worldwide, Tesla sold almost 9000 in the US in the past 5 months, but it’s just Ferrari buyers that are buying Teslas. Okaaaay…..

    • 0 avatar
      285exp

      Ferrari is not trying to maximize volume, a large part of their appeal is that very few people can buy them or are allowed to. They could build and sell a lot more cars if they wanted to.

  • avatar
    TW4

    The article overemphasizes the role of demand while ignoring supply side incentives/mandates. CAFE compliance is a breeze if manufacturers can move EVs, PHEVs, FCVs, CNGVs b/c they carry CAFE multipliers (2.0 – 1.6) and they count as 0g carbon regardless of the cleanliness of the grid or the tailpipe (in the case of CNGVs). Manufacturers also get air conditioning credits for clean refrigerants and off-cycle credits for technologies like start-stop and active aero. All of these credits are bankable for up to 5 years, which means stuffing the channels with EVs can buy up to 5 years of compliance time for full-size trucks or other troubled segments.

    I’m not particularly enamored with EVs b/c I see conventional hybrids as a more effective way to phase-in battery technology, but the supply of EVs is not going anywhere nor are the sales incentive for manufacturers. Selling EVs at a small loss might be cheaper than spending additional funding to hybridize or re-engineer the entire car lineup. Manufacturers will find a way to move EVs.

  • avatar
    SunnyvaleCA

    Here in California, electrics and plug-in hybrids are allowed to use the carpool lanes without carpooling. I know several people who bought Leafs as an additional vehicle just for commuting. Out here in the land of tiny houses without basements most people use their garages as storage areas. So, charging can be a bit of an issue. My company provides free on-site charging for EVs. Sadly, this means EVs are adding to the peak load of the electrical grid.

    The plug in Prius is peculiar. I know people who bought it with absolutely no intention (or method) to plug it in–they live in apartments and commute to companies that don’t offer charging. The entire idea was to pay the extra $$$ (and have the taxpayers subsidize the extra $$$) just for the carpool lanes.

    If it means cheaper gas for me and fewer people using the regular commuting lanes I guess I’m all for it!

  • avatar
    SixDucks

    I agree as well, the test for Tesla comes when they go after the mainstream market.


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