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Fiat Chrysler CEO: Please Don't Buy Our Electric Car
schwit1 (797399) writes "The CEO of Fiat Chrysler said he hopes that people don't buy his company's electric car, the Fiat 500e, which he is forced to sell at a loss because of state and federal mandates. 'I hope you don't buy it because every time I sell one it costs me $14,000,' Sergio Marchionne told the audience at the Brookings Institute during a discussion of the auto bailout. 'I'm honest enough to tell you that I will make the car, I'll make it available which is my requirement but I will sell the limit of what I need to sell and not one more,' said Marchionne. Fiat Chrysler produces two Fiat 500s. The gas-powered Fiat 500 has a base price of $17,300. The electric Fiat 500e runs $32,650. In his candid remarks, Marchionne blamed regulations set in place in California and by President Obama." (Also at USA Today.) If they find they're selling too many for comfort, couldn't they raise the price?
Toyota & Honda, heck even GM, can all make zero emission cars. I do like what California did though. They set _sales_ qoutas_ instead of manufacturing qoutas, so they companies couldn't weasel out of getting real zero emission cars on the road. It's rare to see regulations that have teeth in them. I suppose with the amount of Smog California has (insert South Park Smug jokes here) that's pretty important though. But I wish Arizona would do it. We have days when you're not suppose to go outside because the smog is so bad...
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But they certainly could elect to not sell those vehicles in California.
So, we are to believe that the electric variant costs $46,650. I can only believe that must include a huge amount for the sunk costs - designing the electric car, rather than each electric car being $30k more expensive than the gas equivalent.
(Disclosure - I am a cost accountant)
Wouldn't be surprising actually. The powertrain is completely different than the gas powered car and there are non-trivial engineering, tooling, and other fixed production costs that have to be amortized across lots of units if you are going to sell at a relatively low price. Plus I imagine the powertrain is not produced in big enough volumes to realize real economies of scale so the unit costs I would expect to be fairly high. Given the state of the art in electric vehicles I really don't see an electric vehicle being significantly profitable at less than $50,000 right now. There simply aren't enough of them out there to drive the unit costs down. I expect that number to fall over time but it will require investment by companies and maybe some government subsidies here and there.
On the other hand, enough with the whining and make a car that is worth what it costs to manufacture. Tesla makes a genuinely good car and sells it for a price that should bring a profit (eventually). The Fiat 500e is rather pathetic by comparison. It's a little runabout with a short range rather than a serious attempt to build an electric car. Regulations are not to blame for their inability to make a profit with an electric car. Their lack of engineering prowess and lack of commitment to the technology is why they are where they are.
And that, my friends, is why CAFE[1] standards are a stupid way of reducing emissions.
Just figure out what the social cost of the emissions is, charge that much through a tax, and let everyone decide on their own whether that trip, or that vehicle, is still worth it.
Not equitable enough? Rebate everyone an equal share of the money raised this way, which protects from consumption losses at low income levels while preserving the incentive to cut back.
Going to complain about "lol wuts the point of collecting it all to refund it"? I guess you missed the fact that emissions are harmful.
[1] Corporate Average Fuel Economy i.e. cars you sell must on average be this fuel efficient.
Information theory is life. The rest is just the KL divergence.
Sadly, environmental issues, and limited resources, isn't something that the free market will handle when left to its own devices. I have no sympathy for automakers that need to be dragged kicking and screaming into the 21st century.
Now I want to buy an electric Fiat out of spite!
No, I will not work for your startup
The price difference is $15350
You forget the government incentives. $2,500 from the State of California; $7,500 from the federal government and $2,000 from FIAT themselves.
The effective difference is is then $3,350.
I actually did my homework, and the result was that for my old car (Audi A4, 25 mpg avg.) at 4.29-4.49 per gallon (Premium Fuel) the savings with the FIAT 500e for my daily commute were such that with the incentives, the rest of the car cost amortizes in about 5 years.
Plus the car is fun to drive.
As I wrote in another comment in this thread, I actually did the math, and based on my driving needs cost-wise the 500e is a net savings (including cost of the car) for me (compared to the car I was driving when I decided on the 500e) over five years.
Plus, it is fun to drive. This is subjective, of course.
It's clearly not for everyone and every situation, and even though Fiat offers free rentals at major agencies for those longer trips, I am glad that we have a second (ICE) car in the family.
Probably not, they have to meet CAFE standards. For every car they sell that gets less than the mandated average, they have to sell one that gets more. The mandated average is just that, it has to be the average fuel economy of all the cars the manufacturer sells on a yearly basis.
Sounds like the CEO is basically saying that they have to sell it in order to meet CAFE standards, and due to caps put on the electric cars, they can't charge what the car actually costs to build and markup. So he intends to sell just enough of them to meet these CAFE requirements in fuel economy and no more.
If Tesla can make a full-sized sedan with a 265 mile range (85KWh battery) for $73,570 while averaging a 25% profit margin there's no reason why Fiat shouldn't be able to make a profit selling a much smaller car with a much smaller battery and a much smaller range.
Tesla actually loses money on their cars, they make a profit by selling emissions credits to other companies. The car side of the business is a money loser; the emissions-selling side makes their profit.
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
Well, they don't magically get cheaper to build just by building more. They get cheaper to build as the manufacturer refines the process, improves the technology, and scales the production lines to amortize the fixed costs of a production facility over a larger number of vehicles. That is, it takes work to make them cheaper, above and beyond just making more.
As long as there's sufficient demand, producers will have enough reason to scale up the production and work to bring the production cost down. Eventually, if all goes well, this begins a virtuous cycle where decreased price increases demand, and increased demand drives further cost reduction and innovation.
This works great if there's enough demand to kick-start the process. Unfortunately, the price of EVs today is too high to drive sufficient demand. Hence the carrot-and-stick incentives to try to jumpstart the virtuous cycle. On the carrot side are tax breaks and government subsidies / loan guarantees. On the stick side are fleet-wide fuel economy standards, price caps and quotas.
Right now, it seems as if most traditional auto manufacturers treat their electric cars either as halo cars, or as tasks they're required to do by law/regulation/whatever but would rather not. I doubt anyone at GM is staking the quarterly numbers on Chevy Volt sales, for example, but it doesn't stop them advertising it. The only competition at this point, though, is positioning, posturing and establishing a brand. That is, competition on the marketing front. The market's still too small to have meaningful competition driving the product development. At least, that's how it seems to me.
Eventually they'll figure out how to bring the costs down. Meanwhile, the early adopters hopefully help build interest and therefore demand in the future. When that happens, I'd expect the real competition to start. You'll see Toyota or GM or someone get into the mega-battery business, like Tesla is currently. Or some other major, bold move like that.
In the meantime, the carrot-and-stick will push both the supply and demand curves to the right, elevating the total units shipped to a modest number until the market can sustain itself.
Program Intellivision!
If the left and right look the same to you, it's either because you're a centrist (doubtful), or some kind of libertarian weirdo.
Is your boss's Prius's battery covered in gold trim and studded with tiffany diamonds and signed by George Clooney or something? Because brand-new OEM Prius batteries cost $2.5 to 3.5k and you can get refurbished ones for under $1k. Some companies that specialize in refurbished packs charge less than $1k *total* (including labor) to swap out a Prius pack with a refurbished one.
$10k? If that's true, either your boss was pulling your leg or he was scammed, big-time.
For the love of Crom, am I the only one here who wants to keep the U.S. technologically competitive?