News: Electric Car Price Wars

The beginning of the end or the end of the beginning?

Cut-throat price wars are common enough in the auto industry, but ones that include green cars are pretty rare. Remember, these are the cars that several auto makers have been quick to say they would lose money on and, on top of that, were not sure consumers would buy at any price.

Maybe it’s a function of the expansion of the market; as noted earlier, there are now 10 different pure electric models for sale from major manufacturers. That kind of competition in an admittedly early market doesn’t bode well for margins.

So the headlines have quickly turned from “Who will buy these electric cars?” to “Electric cars are sold out.”  Automakers generally (Nissan and Chevrolet are the exceptions) not committed to produce large volumes of these vehicles for the reasons they are quick to enumerate–the market is uncertain, the vehicles’ retail cost is high and production cost even higher and the functionality of the cars is significantly less than a typical gas or diesel-powered alternative.

The flip side of those arguments made by EV-advocates is a mirror image–there is a large pent-up demand for alternatives to the internal combustion engine, early versions of new technology may lose money but the volumes will increase and profits will come, and the functionality of a typical electric car serves the majority of uses most people use their cars for on a daily basis (and alternatives are readily available for the exceptions).

The truth lies somewhere in between these two extremes. Nissan and Chevrolet, along with BMW, appear to be strongly committed to electric mobility, though all three are taking different paths. Nissan is aggressively pricing its Leaf electrics, increasing local production to lower costs, adding battery capacity and features to new models. The Leaf and the extended range electric Chevy Volt have been trading the top spot in sales during the past year with the latest clash echoing the way auto companies typically respond to a marketplace challenge–match your competition’s pricing.

Tesla the exception

Only Tesla with its high-end Model S appears to be immune from the down-and-dirty of retail selling, but they are still in the mode of producing cars to fill existing orders and are in the process of expanding to overseas markets.

So, back in the showrooms, Honda’s Fit EV and Chevy Volt both announced new, lower lease rates. Nissan lowered the Leaf retail price. The Ford Focus Electric, Chevy Spark EV and Fiat 500e already had lease rates as low as

many conventional cars. The result: reports that the Fit EV and 500e were “sold out.” For electric car advocates, it was vindication of their faith in the market. Automakers shrugged, however, as both Honda and Fiat said they would not increase production on a car on which they were losing money ($10,000 per vehicle according to Fiat CEO Sergio Marchionne). Toyota with its RAV4 EV and BMW with its Active-E model similarly have limited production, but don’t appear to be concerned about sales and have stayed out of the retail price wars.

Mitsubishi i-MiEV volume low

The odd man out here appears to be the Mitsubishi i-MiEV. Sales of the small electric car have been quite low, averaging a little less than 150 per month during the first half of the year. They are also running special offers and recently closed a deal to send 50 units to cities in Santa Clara County in Northern California.

Of course, another driver in these price wars is knowledge that further competition is coming. Next year the BMW i3, Mercedes B-Class E-Cell and Golf-E are due to hit the market. Along with that several new plug-in hybrids should be for sale, so consumer choice is only going to expand. The electric car market doesn’t appear to be going away anytime soon. So, it appears the thought by automakers is to lock in as many consumers now as early as possible. The good news is the competition has created some real bargains and the potential to lower the up-front cost to the point where an electric car suddenly makes economic as well as environmental sense.

Additional stories on the subject you might like:

The Top 10 Electric Cars You Can Buy Now!

Ford Focus Electric-First Drive

Fiat 500e road test