Reuters Sees EV Doldrums, Barrons Sees Tesla Hit A Brick Wall

Bertel Schmitt
by Bertel Schmitt

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 Vol t. 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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  • SunnyvaleCA SunnyvaleCA on Jun 13, 2013

    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!

  • SixDucks SixDucks on Jun 13, 2013

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

  • Analoggrotto Only allow Tesla drivers to race, we are the epitome of class and brilliance.
  • Wjtinfwb When my kids turned 16 and got their Operators, we spent $400 to send both (twins) to 2 driving schools. One held by the local Sherriff was pretty basic but a good starter on car control and dealing with police officers as they ran the school. Then they went to a full day class in N Atlanta on a racetrack, with the cars supplied by BMW. They learned evasive maneuvers, high speed braking, skid control on a wet skid pad and generally built a lot of confidence behind the wheel. Feeling better about their skills, we looked for cars. My son was adamant he wanted a manual, Halleluiah! Looking at used Civics and Golf's and concerned about reliability and safety, I got discouraged. Then noticed an AutoTrader adv. for a new leftover '16 Ford Focus ST six-speed. 25k MSRP advertised for $17,500. $2500 above my self-imposed limit. I went to look, a brand new car, 16 miles on it, black with just the sunroof. 3 year warranty and ABS, Airbags. One drive and the torquey turbo 2.0 convinced me and I bought it on the spot. 7 years and 66k miles later it still serves my son well with zero issues. My daughter was set on a Subaru, I easily found a year old Crosstrek with all the safety gear and only 3k miles. 21k but gave my wife and I lots of peace of mind. She still wheels the Subaru, loves it and it too has provided 7 years and 58k miles of low cost motoring. Buy what fits your budget but keep in mind total cost over the long haul and the peace of mind a reliable and safe car provides. Your kids are worth it.
  • Irvingklaws Here's something cheaper, non-german, and more intriguing...
  • Wjtinfwb Happy you're loving your Z4. Variety is the spice of life and an off-beat car like the Z4 intrigues me as well. More than anything, your article and pictures have me lusting for the dashboards of a decade ago. Big, round analog gauges. Knobs and buttons to dial up the A/C, Heat or Volume. Not a television screen in sight. Need to back up? Use the mirrors or look over your shoulder. If your Z4 had the six-speed manual, it would be about perfect. Today's electronified BMW's leave me ice cold, as do the new Mercedes and Audi's with their video game interiors. Even a lowly GTI cannot escape the glowing LED dashboard. I'm not a total luddite, Bluetooth streaming for the radio would be nice and I'd agree the cooled seats would be a bonus on a warm day with the top down. But the Atari dashboard is just a bridge too far for me.
  • Craiger Honestly I was incredibly disappointed by the lack of steering feel. I dropped off my 530 at the dealer in New Jersey and picked up the Z. Driving all of my familiar roads I was just shocked at how much info wasn't coming through the wheel. Because of that I was never able to push the Z like I did the 530.