Manufacturers Should Sell Electric Vehicles At A Loss

November 28, 2012 1 Comment

To encourage the mass adoption of electric vehicles, auto manufacturers must be willing to sell them either at cost or for a loss for a few years.

I have been thinking about this for some time now. Some EV cars are retailing for nearly double their gasoline-powered brethren and while federal and state tax incentives do help to bring the costs down a little bit, the average car buyer will not buy an all-electric car for $30,000+ (at the cheapest), especially when they can get a gas-sipping Prius for the same amount of money or less.

Just this morning the new all-electric 2014 Chevy Spark EV was announced and MSRP’d at $32,500, which falls to about $25,000 after the $7,500 tax credit. $25,000 for a car that, oddly enough, no one will announce driving range for – not even GM. I imagine, though, that it will be somewhere around 75-100 miles, which is not enough to encourage anyone other than those living in small cities with short commutes (and money burning a hole in their pockets) to buy one.

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The Mitsubishi i-MiEV that I drove for a week and reviewed back in October had an MSRP of around $30,000 and the Ford Focus EV has an MSRP of nearly $40,000. This new Chevy Spark has a final price that falls somewhere in the middle between the two. Not many folks will pay upwards of $25,000 for a car that can go 75-100 miles but requires hours in between use to charge back up – it’s a very limited market. So how can car manufacturers get more of these cars into more customer’s homes?

Cut the price. By a lot.

Sometimes new technology takes a while to catch on. And I know manufacturers are spending billions to make EVs work better. But the one thing that makes people purchase products is a low price. Period. And if the price is not right, consumers will not be buying any products – including electric cars. I could deal with the range issues in nearly 95% of my daily life, but I cannot deal with the high price that comes along with owning one of these cars. I am not looking at it as a bad investment, like I wouldn’t get my money back; that’s not it at all. It’s just that right now there are cars on the market that get amazing gas mileage, can travel as far as I want to go, and cost significantly less than any electric vehicle. Those three points added up mean less sales for EVs and the only way to encourage the mass adoption of them is to lower the price by quite a bit. You cannot make a $30,000+ electric car compete with a $20,000 Prius; there is no competition. You could, however, make a $15,000 electric car compete. And that’s what I think manufacturers need to do, at least for a couple of years.

They make more than enough profit on gas-powered cars to sustain some losses on electric vehicles, and that’s the only way they will be able to sell more of them. EVs are still niche vehicles with limited capabilities; something about them has to be drastically different in order for more people to buy them. And until the driving range goes way up, the only thing that will work is lowering the price.

What do you think? Do you think manufacturers should lower the price of EVs to make them more attractive to buyers? If they were priced lower, would you consider picking one up the next time you need a new car?

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About the Author:

After a varied past of being a test driver for automotive television programs, a Hollywood studio lackey, and an online media sales director, David is now the publisher and editor of The Good Human. In his spare time he rides motorcycles, drinks good beer, and builds stuff in the garage. You can follow him on Twitter at @thegoodhuman or G+ at Google
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