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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?
No, they can't. CA Regulations don't allow electric alternatives to be n% more than gas.
This is in effect an indirect tax. Buyers of non-zero emission cars are effectively paying for the loss that automakers make on the zero emission cars. It would be much more honest to tax them directly instead of letting the auto industry act as an intermediary. But then again: taxes and honesty are probably not words that one should use in the same sentence.
Interesting marketing technique.
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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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.
...why Chrysler is doomed.
And as for Fiat - you're doomed as well, because clearly you were stupid enough to buy Chrysler after they already failed miserably in a disastrous merger a few years earlier.
Not when I'm riding one home from Taco Bell.
Toyota despises electric cars and has publicly stated this on many occasions. They plan to sell exactly the number of RAV4EVs that they need to meet CARB requirements (about 2,600) and not one more than that! Toyota believes (foolishly) that the future is hydrogen... It is unfortunate because the Fiat E is actually an excellent electric car! Far better than the gas version, in fact!
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.
You are correct that Chrysler could in theory choose to leave the California market entirely. But in order to sell any cars in states with emissions and fuel economy rules like those of California, an automaker has to sell these compliance cars.
California doesn't regulate the prices of electric vehicles: they require that either 1% of vehicle sales be zero-emission, or that the car manufacturer buy zero-emission credits.
Nobody is forcing Fiat to build an electric car, and nobody is forcing them to sell that car at a loss. They have decided to sell an electric car at a loss because they believe the loss incurred will be smaller than the cost of the zero-emission credits, and they're selling it at a loss because they don't believe consumers would buy the car unless it's sold below cost.
It's a fantastic car. I've had mine for about nine months and after having owned an number of rather expensive (and inexpensive) cars, this is probably my favorite.
I've never driven a gas-powered Fiat 500, but I imagine the build quality is similar. It's surprisingly comfortable and well built for a car in its price range. I'm pretty particular about the noise levels in my cars and the electric model is reported to have more sound dampening than the standard model; external noise is probably more obvious when there's no engine to mask it. Quiet, fantastic acceleration, and virtually no maintenance. There's a lot to like about this car.
I hope they continue selling them. I've leased mine since the technology changes quickly enough that I expect better range / faster charging, or both within 3-4 years (plus competition from Tesla in that market segment), but if there were no other option I would definitely purchase mine at the end of the lease.
This is my first electric car, but I can say unequivocally that I will never purchase another gas-powered car (unless it's an exotic / sports car). It really is that much of an improvement over internal combustion.*
*For me. Obviously electric cars are not for _everyone_(yet). If you need to haul bales of hay up a mountainside four times a week, buy a truck.
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 Fiat 500 has also a very very efficient Diesel mult-jet version, which can do 76 MPG (in UK gallons or 63 MPG US gallons). Unfortunately you can't buy that in the US.
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I just dropped my daughter off at the gym. In a 15 minute round-trip drive, I counted 5 Leafs. Nissan isn't trying to stop people from buying their car. Neither is Tesla.
I have a Fiat 500, the non-electric one. For $17,000, it's a good car. But it's clearly a sub-$20K car - and unless they completely redesign major sections of it that are completely unrelated to the propulsion, they aren't going to be getting it to a be worth $30K even with the value of an electric engine.
Just for one example of what isn't good, the sound system supposedly supports USB. It does, technically, but it does so in the least competent way possible. You would expect it would support folders - like it does for data CDs. It does not. You would expect it to play songs in filename order. It does not. It plays every song on there, in the order of file creation. I noticed in the manual that the entertainment system runs on Windows Phone 7 - I have a very difficult time believing that Windows, in any version, has such broken support for FAT32.
Another example? The seat belt warning alarm activates even if the car is in park, within a second of turning on the car. I've had to get into the habit of buckling up before even turning the key.
The Fiat 500 is a cheap car. I'd say an electric version is worth about $25K (I couldn't actually use one myself - I use street parking, so I literally have nowhere to charge it up).
Tesla got one thing right - because electric cars, for the foreseeable future, are going to add $20K-$30K to the cost of the car, you're better off doing so in high-end cars where that's an extra 10-20%, not double the cost.
This is the same mindset automakers had back in 1994, when the California (CARB) emissions standards were going to (eventually) require a tiny percentage of all cars sold had to be zero-emission vehicles (ZEVs).
Ford's Th!nk and Chrysler's EPIC were piles of crap ("compliance cars") produced just to minimally meet the regulations. GM thought they could one-up them, and produce an actually NICE ZEV that people would WANT, which would then allow them to sell MORE conventional vehicles, which is where the infamous EV1 came from. Toyota had a similar mindset as GM, but couldn't compete on ZEVs, and invented their Prius as an alternative to meet the standards.
The successful court challenges to the CARB rules set back ZEVs by two decades, and we're repeating history again, today. GM makes a nice ZEV (with some inspiration from Tesla and Toyota this time), while Ford and Chrysler sell crap ZEVs they have to give away, and Toyota doubles-down on their Prius with longer range and plug-in capabilities.
Nissan is the only surprise, being quite competitive this time around, while their previous Altra attempt, despite pioneering lithium-ion battery EVs, wasn't noteworthy at the time.
http://www.ucsusa.org/clean_ve...
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Except this isn't about CAFE at all, but a specific ZEV mandate in CARB standards for the 6 largest automakers.
These rules gave us the GM EV1, Nissan Leaf, the Toyota Prius, the Chevy Volt, and more. I'd say those vehicles are indications that the regulations are highly effective. You're free to disagree (once you get onto the correct subject), but I think the above list stands on its own.
While there are a number of other "compliance cars" that aren't as noteworthy, they're still helping support ZEV R&D, and amortization of the costs.
A web search for "compliance car" turns up numerous insightful write-ups:
http://www.greencarreports.com...
http://www.autoguide.com/auto-...
http://www.usatoday.com/story/...
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Fiat could give away an electric bicycle with every car they sell and come out far cheaper.
50% zero emissions. Would fuck Tesla over hard by reducing the price of zero emissions allowances.
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with a moron like that in charge.
enough said.
Where are we going and why are we in a handbasket?
Car makers cried and pitched an absolute shit-fit about seat belts, air bags, and fuel efficiency standards.
In theory, the free market should produce incentives for solving for safety and efficiency. In reality, it just optimizes the local maxima, since no one wants to be the first to "blink" by making these new technologies standard (thus greatly lowering the cost), ensuring they stay high-priced luxuries.
If we leave it to the free market, we'll be stuck on gasoline engines for another century at least, with all the negative impacts that will have on our economy as the increasing cost of oil and various shocks hit. That's not even dealing with the environmental or global climate change issues.
Government regulations can jump-start the industry and so far it appears to be working for electric vehicles. We are still in the early-adopter stages; they'll get better and cheaper as long as we keep at it.
Fun fact: government almost always leads the way into uncharted territory. It wasn't private industry that built trans-continental railroads (which makes Atlas Shrugged hilarious). It was the US government. The government gave the rights of way, passed a series of massive funding bills to give the railroads free money and tax breaks, sent in the army to protect the rails from Native Americans, robbers, etc. Without federal government involvement, the US rail network would not exist in the form it does today.
For that matter, neither would the interstate highway system.
Nor would computing: it was massive US federal government spending that paid Grace Hopper to invent the first compiler! And it was government spending that created the Internet, both TCP/IP via ARPA and the WWW via CERN.
Natural != (nontoxic || beneficial)
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!
They seem to be sticking their heads in the sand and hoping that EVs go away. Rather than seeing how Tesla is doing and worrying about the affordable model coming in a year or two they just churn out a lazy compliance car by shoving batteries in an ICE car, shove their fingers in their ears and hope no-one buys them.
Fiat Chrysler is a dinosaur, and is going to be killed off by evolution unless it makes a real effort.
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