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By Andrew Holland on Sep 27, 2012 with 15 responses

High Cost Prevents Electric Cars From Penetrating the Market

We see this week news that Tesla is having trouble meeting it’s loan repayment schedule, and faces a need to raise more money on the markets. Combined with this week’s pronouncement from the chief of Toyota against electric cars and lackluster sales of GM’s Volt that have forced the company to reduce production, it seems there are more troubles ahead for electric-driven cars.

I believe this shows that pure electric cars are not yet ready for the consumer market. They are both too expensive, and they don’t meet the needs of consumers for range and performance.

Tesla and Fisker, in particular face consumer challenges that the traditional car makers do not face. As a start-up, they have to convince customers that they can both make a reliable car, and their small dealer network will be able to maintain the cars when they need servicing and repair. (See more: CBO: Electric Cars Will Flop, Despite $7.5 Billion in Subsidies)

The US government provides a tax credit of up to $7500 for purchasers of electric or plug-in hybrid cars. But, for cars that range in price from about $35,000 for the Leaf, to $45,000 for the Volt, to $57,000 for the baseline Tesla Model S, that does not drive the price down to a place where it would be competitive with high efficiency traditional gasoline-driven cars, or even hybrids, which are probably the source of the most competition.

The problem, in short, is that the battery-only cars (Leaf, Tesla, Fisker) are inferior cars at a higher price point.

However, I actually don’t understand the opposition to the Chevy Volt. I’ve driven it, and it is a great car. Quick, fun to drive, cutting edge technology, and without the range anxiety of the battery-only car.

I’ve found that some people I talk to simply assume that the Volt is a short-range battery car like the Leaf. It’s not; it can drive 40 miles on a battery charge, then it switches on its backup gasoline engine. Unlike the Hybrid Prius, the Gasoline engine does not directly drive the wheels: it only serves as a generator that charges the battery-driven electric drive.

In short, the Volt is a genuine leap forward that is fun to drive and has superior performance. All for a price that is the same as a BMW 3 series. I do not understand why it has failed to meet sales expectations. Perhaps launching it in the mass-market Chevrolet brand, instead of the upmarket Cadillac brand, was a mistake. Perhaps the uncertainty about how a battery-driven car will hold it’s value in the resale market is driving down demand. (See more: GM Offers $10,000 Discount to Boost Volt Sales)

I don’t know. Let me know in the comments if you have any ideas.

  1. By Buddy on September 27, 2012 at 8:16 pm

    While I understand the need to calculate in R&D costs in unit cost, maybe with the electric entry into the market that needs to be reconfigured and those costs spread out over the entire vehicle line, in effect, hiding the cost among the traditional model vehicles to spur the sales growth of the electric or semi-hybrid model. 

    I’ve also never understood, however, how I can run a 5K Honda generator for a minimum of 2 hours ,and occasionally 4 hrs, on a single gallon of gas, that hybrid vehicles cannot achieve the 100 MPG rate easily. 

    Currently, calculating the lifetime cost of a traditional gas vehicle vs the cost of the electric or hybrid, the gas vehicle still comes out significantly lower in operating costs.  Unless you are running a fleet of vehicles, the cost cannot be justified.

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  2. By GM empliyee working on chevy Volt on September 28, 2012 at 12:09 am

       As a current engineer who is working on the Chevy Volt since 2007, there are difficulties:

    1). The cost, as you said here, it is too expensive, the earlier Reuters gave a wrong number, on one hand, it says the R&D cost is $1.2 billion, but we were told it would be much higher than that. On the other hand, it should be spread out via the life cycle of this vehicle, not 23000 sold so far.

    2). From day one, the engineers are not optimistic about the prospect of this car, it is just not practical. My gut feeling is the baseline cost of this car is >$40K even the R&D is zero. Since there is so much political backlash against Chevy Volt, the actual cost per vehicle is a top secret here at GM, because a few years ago one of our leading battery scientist private conversation was revealed in which he privately doubted the commercial prospect of Chevy Volt, a sensitiment shared by vast majority of engineers here at GM.

    3). These top engineers responsible for chevy Volt are all gone now: Denise Gray, Frank Weber, Tom Stepehens, Tony Posawatz, etc. (list is a little long) We also have other engineers left for competitors, I am still stuck here, but hopefully will move to another company!

     

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  3. By Paul Scott on September 28, 2012 at 12:20 am

    Minor correction, the Fisker is a plug-in hybrid similar to the volt. It’s got `80 mile all electric range.

    I take issue with your comment “The problem, in short, is that the battery-only cars (Leaf, Tesla, Fisker) are inferior cars at a higher price point.”

    BEVs are not inferior except in range. When you consider the type of driving the vast majority of folks do on a daily bases, commuting is a very high percentage of total miles driven.

    Transitioning from oil to renewable electricity to power our personal, and much of commercial, transportation is crucial to our economic and environmental survival. We can’t continue spending almost half of our foreign trade buying oil. $400 billion leaving our country every year for oil is extremely damaging to our economy.

    According to RAND, we spend and additional $80 billion in military protection for our oil endeavors – exclusive of the war.

    The cost in human life is dreadful. Every year, over ten thousand deaths are attributable to pollution from internal combustion. 

    The extraction, shipping, refining, distributing and finally burning of oil costs our environment dearly. 

    All of these costs need to be gradually internalized into the cost of gasoline and diesel. For that matter, the environmental cost of coal and natural gas should be internalized in the kWh used to charge the EVs.

    As we assert the benefits of renewable electricity over oil, we hasten the transition. Any words or efforts to the contrary only serve to keep the money flowing to the oil people, they keep killing our children, and the big money flows to the military industrial complex. 

    Battery-powered cars are significantly better than ICE. Powerful and quick with no noise and no pollution. They are incredibly fun to drive. Both the LEAF and Volt are quite quick. Our charging infrastructure is growing fast. Telsa just announced a solar-powered fast charging station concept they are about to launch. Elon owns SolarCity, along with his 2,000 employees. They are building the systems on property they are buying, so these will have a decent income at some point. But certainly not at first since they are giving the energy away for free for the Model S and presumably the Model X. They will sell as many of these cars as fast as they can make them. 

    Model S is a 300 mile super car that can charge 160 miles of range in less than half an hour. This is here today. There are much more coming. Once you try this technology, it’s only a matter of time before you adopt it. 

    http://www.bloomberg.com/news/2012-09-25/tesla-building-250-000-chargers-for-model-s-drivers-in-highways.html

    http://www.motorauthority.com/news/1079383_tesla-supercharger-fast-charging-system-has-landed

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  4. By GM empliyee working on chevy Volt on September 28, 2012 at 12:26 am

    Quote:”Model S is a 300 mile super car that can charge 160 miles of range in less than half an hour. This is here today. There are much more coming. Once you try this technology, it’s only a matter of time before you adopt it. “

        Wait for your battery lose 60% capability in 2-3 years and you wille be in a dilemma, it cost $30K to replace battery pack, without replacing it, 80 mile range just sucks too much!

        Also do I mention the inherently risk of a fire or bricked EV if you  park your car at SFO for a long oversea vacation, only to find your car totally dead when you come back? Google “Max Drucker”

     

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  5. By GM empliyee working on chevy Volt on September 28, 2012 at 12:32 am

    Wait for your battery to lose 60% capability in 2-3 years and you will be in a dilemma, it costs $30K to replace the battery pack, without replacing it, 80 mile range just sucks, considering how much you had paid!

    Also did I mention the inherent risk of a fire or bricked EV if you park your car at SFO for a long oversea vacation, only to find your car totally dead when you come back? Google “Max Drucker”

        Everyone despise Detroit, but in the end, Silicon valley will not be able to produce a car with the reliability a customer is expecting in 2012. My friend told me the awful quality at Tesla and their inability to scale up.

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  6. By Rob on September 28, 2012 at 1:30 am

    Hi Buddy, your comment interested me and I drive a Lexus CT200h, which is the same power train as a Prius, so I put up a <a href= “http://hamiltonianfunction.blogspot.com/2012/09/faulty-comparison.html”>blog post</a> about it. Conclusion? No reason to be surprised.

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  7. By Rob on September 28, 2012 at 1:36 am

    Ugh. My html didn’t seem to work. The link button is ghosted, and javascript is enabled so I don’t know what gives. In any case, here’s the link: http://hamiltonianfunction.blogspot.com/2012/09/faulty-comparison.html

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  8. By Milo Cook on September 28, 2012 at 9:01 am

    I just can’t see a good reason to buy a car which costs more than both my car and my wife’s that delivers less than what either does. I drive almost the entire range of these cars every day. My pickup needs to haul half a ton; my wife’s minivan needs space for the children and all her business material. In the winter months, I need a car that can keep me warm as well as reliably perform in hours and hours of freezing temperatures and have the power to make it through the snow. In the hottest days of summer when the temperatures approach 100 – and remain there for weeks – we need the AC running. And when the car runs out of juice in a traffic jam, I keep a gas can handy.

    I priced these cars – even at great interest rates, they’re still hundreds more per month than I can afford.

    I’ll keep my old clunker until it dies. I don’t think the manufacturers have any idea how much money this is to the average family.

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    • By notKit P on September 28, 2012 at 1:54 pm

      Milo, these cars are designed and marketed in fair weather cities.  Green marketing targets women with advanced degrees in something like art appreciation.

       

      If you can keep an old clunker running you have nothing in common with those who would buy a $40k BEV even if BEV are within your budget.  Making something last longer reduces the environmental impact of manufacturing.  Since I do not drive aggressively, my old PU gets 25-30 mph for commuting.

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  9. By stan on September 28, 2012 at 9:48 am

    Given today’s high technology “bar” if you will……the electric car is practically a Goldberg. It’s yet another bandaid we will pay for dearly in “OTHER” ways like subsidies…..I case you haven’t realized, fuel cell technology has been nall but “hushed” out of the industrial pipeline….there’s just not any money in it for the gigantic quagmire of money grubbing opportunists….who’s greatest fear is being left out of the “pie cutting”

    You know that extra $10 to $15 k the volt costs over a comperable gas car? That totally pays for a very well built hydrogen station for your home, and the period maintenance is completely offset by it’s running costs being just a fraction of an EVs charging costs…..

    How can everyone be so lulled into this mass comatose state, by ya, once again…..the Gov and it’s corporate pitbulls…….oh well….ho hum…..what else is new?

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  10. By Russ Finley on October 7, 2012 at 11:35 pm

     ”…The problem, in short, is that the battery-only cars (Leaf, Tesla, Fisker) are inferior cars at a higher price point..”

     Enough of us bought the first digital cameras for $400 each (that maxed out at 15 low resolution images and took four new batteries to do it) to advance the technology to the point that they are given away in cell phones. You have to start somewhere.

     Don’t know what you mean by inferior. The Tesla will outperform just about any car it meets. It’s 200 mile range also isn’t much of a concern.

    If you are talking about the Leaf, what are you comparing it to? Sports cars, trucks, SUVs, luxury cars, or the average vehicle on the road? Other than range, the Leaf has no performance issues.

     I do suspect that Tesla will eventually go the way of the Delorian because of their size, not so much because they are an electric car company.

     ”…the Chevy Volt. I’ve driven it, and it is a great car. Quick, fun to drive, cutting edge technology, and without the range anxiety of the battery-only car.”

     I wonder if that term “range anxiety” was first coined by an oil company executive.

     I’ve experienced range anxiety a few times this year. Once in my daughter’s Yaris when I realized while driving down the interstate that she had left me with an empty tank. Once in my wife’s Prius, when I saw the empty tank warning blinking at me as I pulled in to a remote camping site. And once when I got lost in suburbia in my Leaf and had to drive more slowly to get home with five miles of range remaining instead of pulling off  into one of the dozens of charging stations my GPS indicated were in range.

     ”Unlike the Hybrid Prius, the Gasoline engine does not directly drive the wheels: it only serves as a generator that charges the battery-driven electric drive.”

     Close, but not quite right. The engine will directly drive the wheels when needed, like for a prolonged maximum acceleration or at high speeds. And the engine does not serve as a generator. It is a reciprocating internal combustion engine used to spin a generator that in turn sends electricity to an electric motor, not so much to the battery. After the grid charge on the battery is used up the Volt becomes a hybrid and  the battery serves as a place to store regenerative braking energy, like all other hybrids. The Volt design minimizes the storage of any electrical energy created by turning gasoline into electricity because doing so kills its efficiency thanks to the thermal bottleneck between generator and electric motor.

     That thermal bottleneck is why it only gets about 38 mpg in hybrid mode while the plug-in Prius exceeds 50 mpg.

     ”In short, the Volt is a genuine leap forward that is fun to drive and has superior performance.”

    It has less electric range than electric cars. It gets 38 mpg compared to over 50 for the Prius plug-in and here is a video of a drag race between a Volt and a Leaf:

     http://www.youtube.com/watch?v=rkgio9YvOfo

    If I owned a Volt instead of a Leaf I’d be using a lot more gasoline. Range anxiety is a non-issue once you get used to driving an electric vehicle. The Volt makes more sense if you are a one car family.

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    • By Andrew Holland on October 9, 2012 at 11:16 am

      Russ – thanks for this. You make a good case for the Leaf – but I wouldn’t want it to be my only car: probably perfect as a second “around town” car.

      My question, then, given all of this, is why aren’t Volts or Leafs selling better? I actually can’t figure it out: why isn’t the consumer demand higher? Is it just that the most likely buyers are younger people, who have been hit hard by the recession and aren’t buying any cars? Or is there some reason (other than “range anxiety” which you dismiss) that these cars haven’t made the leap yet?

      Meanwhile, the market for pickup trucks has bounced back completely. Strange.

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      • By Russ Finley on October 9, 2012 at 10:10 pm

        Go figure, according to Wikipedia:

        “…the F-150 [pickup] …was the best-selling vehicle in the United States for 24 years…”

        Source: http://en.wikipedia.org/wiki/Ford_F-Series

        Bottom line, electric cars cost too much for what you get, but so did digital cameras.  Time will tell. The Prius also got off to a slow start.

        Electric cars are less complex than regular cars. If not for the battery costs, they would cost less than regular cars, given similar production rates. Plug-in hybrids will always cost more than an equivalent regular car, regardless of battery cost, because they have more major components than a regular car.

        Get the cost down to that of a Fit or Yaris and electrics would probably become a popular urban second car.

        I prefer electric because of their economy of operation, driving performance, and simplicity which leads to  less maintenance. The fact that it can only get me to where I want to go 99% of the time is not a problem. They have to come down in cost to become more popular.

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  11. By Akil Marsh on October 19, 2012 at 10:08 am

    I think it’s true that an EV might not be right for everyone. However, at current EV vehicle price points if one drives a considerable amount of miles (say 15k a year), the fuel savings obviously helps the total cost of ownership comparison. Here’s a blog post from Plug in America that outlines this case: http://www.pluginamerica.org/drivers-seat/why-plug-vehicles-are-so-inexpensive

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    • By notKit P on October 19, 2012 at 11:00 am

      “EV might not be right for everyone”

      How about anyone?   The advantage of BEV is the lack of long term evidence to support claims. 

      I know many who think that a 4wd is the ‘right’ choice because they feel safer in the snow but 150k miles later the POV has never seen snow because they live in the deep south.  This family member is going to buy a new one because the transmission is going out.  Asked when the transmission fluid had been changed.  Never!  After 12 years what do you think would happen to the fluid?

      A BEV might be the right choice for a replacement for someone who understands how to take care of a BEV but outside of early adopters who make an effort to learn the limitations how will long will they last?

       

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