Green Cars In The Reds

Bertel Schmitt
by Bertel Schmitt

When I was a very young and very green copywriter, Dr. Carl Hahn, at the time CEO of Continental Tires and later CEO of Volkswagen, said in an agency brief: “We lose 10 Deutschmarks on every tire we sell.”

“Then we better stop advertising them,” said I.

Hahn gave me a pained look. The look was followed by real and massive pain in my left foot, because my Creative Director had kicked me viciously.

“Ouch!” I said.

“You’ve got that right,” said Hahn.

That little story crossed my mind when I read in The Nikkei [sub] that “Mitsubishi Motors Corp.’s electric vehicles and other eco-friendly offerings are expected to begin contributing to the firm’s bottom line in two years.” This according to Mitsu’s Executive Vice President Hiizu Ichikawa. With its i-MiEV, Mitsubishi had been one of the first to offer a (well…) mass-produced EV. The cars are not necessarily flying off dealers’ lots.

“During the period covered by the current business plan, we hope to reach the point where they will no longer drag down our earnings,” Ichikawa said. The break-even level is of 60,000 to 70,000 units sold annually, and Mitsubishi hopes to get there in the fiscal year ending in March 2014. For this year, the optimistic plan calls for selling 25,000 units – at a loss.

Mitsubishi hopes to ignite sales by cutting prices and using a cheaper battery. Nissan goes to opposite route and raises prices for its Leaf.

This situation may explain why manufacturers with salable EVs are expanding production o0nly VEEERY carefully, and why manufacturers with EVs on PowerPoint charts or in prototype form are reluctant to crank them out in high numbers. Although, as the kick under the table still reminds me to this day, if you don’t have the gumption for high numbers, you’ll never get your investment back.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Pch101 Pch101 on Jul 24, 2011
    Tesla Motors showed its first profit in 2009 Tesla posted a net loss of almost $56 million in 2009, including a $52 million net loss on operations. It posted an even larger net loss in 2010 of $154 million, including a $146 million loss of operations. http://apps.shareholder.com/sec/viewerContent.aspx?companyid=ABEA-4CW8X0&docid=7772520#D10K_HTM_TX151489_24 I said “market on EV news” – are you saying there is no market for that? If so, let Yahoo Green!, Edmunds, this website, etc. know that because they seem to be marketing a lot of news about electrics. Apparently not much of a market, because nobody can make money on it, including Tesla with its aforementioned losses. I’m not a huge EV proponent, but I am a proponent of new technology. I like new technology, but companies can't be in the habit of throwing away large amounts of money on products that are doomed to be unprofitable.
  • Pch101 Pch101 on Jul 24, 2011
    Tesla Motors showed its first profit in 2009 Tesla posted a net loss of almost $56 million in 2009, including a $52 million net loss on operations. It posted an even larger net loss in 2010 of $154 million, including a $146 million loss on operations. (You'll find this in the 10-K. I tried to post a link, but the forum seems to have problems with it.) I said “market on EV news” – are you saying there is no market for that? If so, let Yahoo Green!, Edmunds, this website, etc. know that because they seem to be marketing a lot of news about electrics. Apparently not much of a market, because nobody can make money on it, including Tesla with its aforementioned losses. I’m not a huge EV proponent, but I am a proponent of new technology. I like new technology, but companies can't be in the habit of throwing away large amounts of money on products that are doomed to be unprofitable. I don't see any evidence that there is sufficient demand for these cars for them to become profitable, and they certainly aren't profitable now. Profits require volume, and they can't hit those targets.
    • See 1 previous
    • AaronT AaronT on Jul 24, 2011

      I was going from memory. Now that I Google it, I see you're right. They turned a $1M profit in July of 2009. But according to Yahoo Finance (can't link), they are currently showing a $30.7M profit as of latest quarter reports with only $3M in debt (over cash on hand). Even GM can't meet those numbers. I think we'll both agree, though, that most of the EV market is government-created via incentives, propaganda, and actual purchases (in the U.S. they account for the lion's share, federally and locally, of EV fleet purchases). All I was attempting to point out in my original post was that Mitsubishi failed to harness their PR potential and is now paying the price. Had they released their cars when first planned (MY 2010), they could have demanded the high price tag they originally started with and probably sold thousands of units to government entities alone. Instead, they puttered around with car sharing (Car2Go) and trial fleet schemes that got them nowhere. Nevermind how stupid the i looks to start with (not to mention its impracticality).

  • Ronin It's one thing to stay tried and true to loyal past customers; you'll ensure a stream of revenue from your installed base- maybe every several years or so.It's another to attract net-new customers, who are dazzled by so many other attractive offerings that have more cargo capacity than that high-floored 4-Runner bed, and are not so scrunched in scrunchy front seats.Like with the FJ Cruiser: don't bother to update it, thereby saving money while explaining customers like it that way, all the way into oblivion. Not recognizing some customers like to actually have right rear visibility in their SUVs.
  • MaintenanceCosts It's not a Benz or a Jag / it's a 5-0 with a rag /And I don't wanna brag / but I could never be stag
  • 3-On-The-Tree Son has a 2016 Mustang GT 5.0 and I have a 2009 C6 Corvette LS3 6spd. And on paper they are pretty close.
  • 3-On-The-Tree Same as the Land Cruiser, emissions. I have a 1985 FJ60 Land Cruiser and it’s a beast off-roading.
  • CanadaCraig I would like for this anniversary special to be a bare-bones Plain-Jane model offered in Dynasty Green and Vintage Burgundy.
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