I talked on the air last Saturday about the
General Motors announcement that by 2023 they would have 20 different
all-electric vehicles. That is slightly over five years from now,
but that’s only the tip of the iceberg. Other automakers are rushing
an additional 50 all-electric cars to market before 2022. Even
vacuum cleaner maker Dyson says it is investing 2.6 billion dollars into a new
electric car.
Automakers Want To Be Like
Tesla, But Why?
Automakers love to grab
headlines, and nobody does it better than Elon Musk, the CEO of
Tesla. One has to assume this rather sudden interest in all-electric
vehicles has something to do with this. Call me crazy, but I always
wanted to emulate people who were wildly successful. Are the auto
CEOs not looking at the public data available on Tesla? Thirteen
years in business, not a cent of profit. Worse, according to
Bloomberg, Tesla will have burned through 10 billion dollars of cash (yes,
billion with a b) by the end of this year.
Behind The Numbers
We have all these all-electric
cars coming at us, but who is showing interest in the United States in
electrics? Today, there are a total of 13 different all-electric car
models you can go out this afternoon and purchase. So how many have
been sold this year? Through August, approximately 105,000
all-electrics have been purchased in America. There is a slight
margin of error because unprofitable Tesla doesn’t actually make public their
sales numbers (inquiring minds want to know why) but even if you assume they
sold every vehicle they produced, the 105,000 number should be really close.
Although 105,000 of anything is a lot, that is out of 12,883,917 sales
of all vehicles through August 2017. Do the math and you’ll see that
even with 13 different models of all-electric vehicles, sales of electrics have
accounted for .08%. Keep in mind too, those dismal sales numbers include a federal tax
credit of $7500 on almost all the all-electrics, and most states offer
additional tax credits, some up to $5000.
Automakers: We’ll
Make It Up In Volume
We’ve covered the fact that
after 13 years of trying, Tesla has yet to make a profit, but again they keep
their numbers close to the vest. The CEO of GM has publicly said
they lose $9000 every time they build a Chevy Volt. Although that is
not a good business model to me, GM is doing better than Fiat
Chrysler. Its CEO says they lose $20,000 per vehicle when they build
a Fiat 500 electric vehicle.
Turn The Calendar Ahead To 2023
Let’s say the fantasies of all
these automakers bringing electric cars to market come true. We’ve
got 13 available today, 20 more coming from GM, and then 50 more the rest of
the automakers say is in the plans by 2023. That is 83 different
models of all-electric cars that will be available.
So far this year, the average
monthly sales per electric car on the market is 1018. Project that out and
let’s aggressively say all 83 electric models sell the same 1018 vehicles per
month, which means electrics will sell almost 85,000 per month, versus 13,245
per month today. Even if the average loss of profit comes down
dramatically by 2023, the automakers take a bath. If the $7500
federal tax credit stays in place, it will come at a cost to taxpayers of over
7.5 billion dollars.
Many Unanswered Questions
Is America ready to make the
transition from a traditional gas engine to an all-electric
vehicle? Many questions remain, and I hear them from listeners all
the time. The most common are about:
- Range anxiety, the fear of getting stranded, which happened
to me with the very first electric car I ever reviewed. This is
a real fear for some people, especially if an electric car is all you
own. Today, most can go 60-100 miles before needing to be
charged, with a couple of vehicles getting between 200-300 miles.
- What effect does weather have on my range? Hot and
cold weather can have a very adverse affect on battery life.
- Chargers. Other than home, how many chargers are
going to be available? Will they be the quick chargers, or the
ones that take many hours? What will it cost me to charge my
car when it is at home?
- How will we ever dispose of all the batteries once they start
going bad? How much can be recycled from a battery pack, if
any, and will they just end up filling landfills?
- What happens to our already poor roads and
highways? All these electric cars will cut down on gas
consumption. Today, 18.4 cents per gallon of gas, and 24.4
cents per gallon of diesel go straight to the Federal Highway Trust
Fund. There is also on average 30 more cents per gallon of gas
and diesel that goes to state and local roads.
In Conclusion
I want readers to know this
article is not about my like or dislike of electric cars. In fact,
many of them, I really like. This article is about automakers and
the pace at which they plan to build electric cars.
Even if consumers decide to try
an electric at twice the rate they are buying them today, it will still barely
represent 1.5% of total sales. If all these automakers build all
these electric cars by 2023, there will be a huge glut of them, it’ll take
massive factory incentives to move them.
My
advice: automakers slow down. Let the
market decide how soon people want to transition to
all-electrics. This is not a race, and if you are trying to make it
one, you might not like first place.
Reprinted from Car Pro.
