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?

Comments

Raise the Price

[Anonymous Coward]

No, they can't. CA Regulations don't allow electric alternatives to be n% more than gas.

Re:Raise the Price

[NoKaOi]

But it is already expensive enough that it doesn't make a lot of sense to buy if you want to buy one to save money on gas. The price difference is $15350. If we assume $4/gal for gas, then that's 3837.5 gallons. Fiat 500 gas version gets 31mpg city, 40mpg highway. If we average that, then we get 136,231.25 miles before the price difference pays for itself. And that's assuming we paid cash for the car. If you finance it, then add interest on top of that.

Now, if you want to get the electric version because it's cool and/or you want to support the technology, cool, but realize it's not really saving you money on gas.

But really, if they have to make at least X cars, and they're not making one more, why is he telling people not buy them? They're still making the exact same number. If some people listen to him and don't buy them, doesn't that just mean they'll sit on the lot longer and sold for even less? If it does help them somehow, could they make the electric version is really horrible colors?

Re:Raise the Price

[wagnerrp]

But really, if they have to make at least X cars, and they're not making one more, why is he telling people not buy them? They're still making the exact same number. If some people listen to him and don't buy them, doesn't that just mean they'll sit on the lot longer and sold for even less?

Presumably as a PR stunt to bring attention to the regulatory issue.

Re:Raise the Price

[stephenmac7]

s/Republicans/progressives

Re:Raise the Price

[erice]

No, they can't. CA Regulations don't allow electric alternatives to be n% more than gas.

Citation needed. I looked through the regulation and I see no mention of requiring a certain price for ZEV's.

What it does require is that a certain % of the sales be of ZEV's. If they are change too much, they won't sell enough. This leads to two solutions:

1) Spend little on R&D for an electric vehicle. Sell it just cheap enough (at a loss if you have to) to meet the minimum requirement. Whine about it.
2) Put some effort and investment in developing an electric car that people will actually want with a manufacturing cost that leads to a price people are willing to pay. Refine the design over time so that it becomes that profit center that saves your bacon when the bottom inevitably drops out of the IC car market as the cost of gas heads toward the stratosphere.

Re:Raise the Price

[The Grim Reefer]

How is he short sighted? The Republicans have fuck him and his company. They want to put him and all of his employees out on the streets. To their kind, autoworkers are scum that need to starve. That is their world. That is why they are doing this to him. They are forcing him at gunpoint to sell cars at a loss until they go out of business.

Are you saying that the oil and coal burning/global warming denying republicans are forcing Chrysler to sell electric cars (at a loss) "at gunpoint"? And they're going to hurt the oil and coal industries so they can add the autoworkers to the unemployed?

Marchionne blamed regulations set in place in California and by President Obama.

I must have missed when the president switched parties. Obama the Republican. Who knew.

Re:Raise the Price

[amiga3D]

It's US political discussion, or what passes for it. It doesn't have to and almost never makes sense.

Re:Raise the Price

[fizzer06]

You forget the government incentives.

Damned government hand is in my pocket - again!

Re:Raise the Price

[amxcoder]

This is the funniest comment I've heard. While I'll admit, most republicans and conservatives alike (yes, there is a difference), don't like some of the tactics and fundamentals of unions, your comment is highly ironic. I don't think the republicans WANT to force the company out of business, I think most conservative groups and libertarians were agains the auto bail-out in general. Mostly because it goes against free market principles, and also rewarded specific companies for mismanaging the company into bankruptcy. This is true of the auto companies that were bailed out, as well as the banks that were bailed out. The UAW took a big hit, because a big chunk of the bailout went to make sure the Union still got it's demands met, for hourly wages and retirement perks, all from a dying company. If any other company was about to founder, the last thing most employees would get would be raises and more pay. I certainly didn't when I worked for a company that was going under, they told us the truth, they were hurting, they enacted unpaid furlough days, and froze all pay increases as a step in trying to save the company from going under. While us workers didn't like this necessarily, it was better than all of us get let go when the company goes under.

The part of your comment about forcing them at gunpoint to sell cars at a loss is the ironic part of your statement. Just WHO do you think is the party and groups that are pushing the hardest for electric car sales? Who is pushing the hardest for higher, hard to meet CAFE standards for gas mileage, and who is behind the electric car subsidies to try to entice the general public to purchase these overpriced, under-performing, cars? Here is a hint... it's not conservatives.

Re:Raise the Price

[vriemeister]

There is no regulation requiring electric alternatives be less than n% more than gas. There's no way to even enforce it. The Fiat has to be sold for $30k at a loss but the Tesla can go for $80k because the government things its so much nicer? No, Fiat just knows they are competing with the Nissan Leaf and no one would buy their car for 50% more than the Leaf is going for. He just wants to whine and make it sound like the government is ruining him, not that he's being beat in the market.

And as for that Executive Order, its directed at the California government as a goal to strive towards. You are trying to make it sound like he has passed some sort of law directed at car manufacturers which would be illegal, and impossible as there's no legal definition for "cost competitive". http://gov.ca.gov/news.php?id=...

There is no law requiring a Fiat 500e to be sold for less than 200% the price of a regular 500.

Re:Raise the Price

[blindseer]

You are assuming that the problems with the price of electric cars versus gasoline cars is economies of scale. If that were true then we'd think that Chrysler would want to see their electric cars be successful. Problem is that gasoline cars are made of iron and aluminum, two of the most abundant elements on Earth. Electric cars need lithium for the batteries, an element that is relatively rare and therefore will always be more expensive.

Where is the benefit in electric cars anyway? Our electricity comes from coal and natural gas. We could build more wind and solar but that means energy prices triple, if we're lucky. It's quite possible energy would be ten times what it costs now if we cannot use fossil fuels or nuclear. We can build nuclear power plants and get cheap energy with very little carbon output, lower carbon output than wind and solar per kWh produced.

Nuclear power does not address the issue of the cost of materials in electric cars. What would lower our carbon emissions and give us cheap energy is synthetic fuels. We can make hydrocarbons from carbon in the air and close that loop, no new carbon added to the atmosphere. Power it all from nuclear power. Then we get to have our cars made from cheap iron and aluminum. We also get to keep our 300 mile range from a five minute fill up.

Using waste annihilating molten salt reactors also means we get to burn up the "spent" fuel from old reactors that keep piling up. Nuclear power means cheap energy, cheap cars, clean air, and reduction in radioactive waste. Electric cars means expensive energy, more carbon output, and unless we get modern nuclear power that radioactive waste will continue to slowly decay away. We can get rid of the waste in decades with modern nuclear power or we can let it sit for hundreds of years.

Economies of scale cannot compete with the laws of physics.

Re:Raise the Price

[FatLittleMonkey]

Obama the Republican. Who knew.

It took a lot of us by surprise.

Re:Raise the Price

[Rei]

I can guarantee you that he's not "exhausting every resource he can muster" because there's really just one figure that matters most, and that's volume.

Most people think EV prices are all about the batteries, but that's just not true. Even the drivetrains are really expensive. *Everything* is really expensive because they're made in small volumes. The Volt's drivetrain, for example, reportedly costs about $6k per vehicle. Why? It's a heck of a lot simpler than a gasoline drivetrain, with a tenth as many moving parts and less raw materials costs. But they're just not mass produced. Here's my favorite line of EV motors, the EMRAX series. They're the size of a desk fan yet have up to 160kW peak power (215hp); they're designed for electric airplanes, and can be inline chained together for even more power. Simple, tiny, no exotic raw materials... but they cost something like $4k each, plus something like $3k for the inverter/controller. Why? Because they're all wired by hand. Even the magnets are hand-wound. With enough volume, you could open a Chinese factory to pump out something like that for maybe $500 dollars a pop. But that's just not the situation today.

The same thing applies to batteries, which is why Tesla's gigafactory is such a big deal. A lot of people seem to think, "But hey, batteries are already mass-produced!". But really, those are the wrong kind of batteries, batteries designed for small electronics, not the type of large EV batteries you can get serious economies of scale on rather than wasting your effort stamping out tens of millions of tiny casings and the like, then wiring ten thousand little cells together and trying to ensure no cell failures. Also the batteries that best suit EVs are cobalt-free, while the potential for price reduction on your typical small electronics li-ion batteries is limited by cobalt prices; the raw materials on most EV batteries are far cheaper, it's always been manufacturing costs that have held them back. Something like the gigafactory has the potential to dramatically slash EV pack prices per kilowatt hour.

Basically, in pretty much aspect, if you want EVs to be cheap, you need to go big. Just like it is for gasoline cars, the key to affordability is scale. If your team responsible for a gasoline car engineers every part from the ground up and produces them in small volumes like some supercar makers do, it'll cost an arm and a leg and your firstborn as well.

To go big, you need a combination of an interested, motivated public and a good sales campaign. Once people start driving EVs, as a general rule, they love them and never want to switch back, but it's hard getting them to start, especially because of "range anxiety" concerns. So things like including with a purchase or lease X number of free 24-hour gasoline car rentals, or installing widespread fast charters, or making available range-extending self-steering genset trailers, or things of that nature is important to making people comfortable enough to take the plunge the first time. And of course subsidies can help a great deal while you're trying to establish the market.

Re:Raise the Price

[Rei]

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.

Indirect tax

[jlar]

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.

Re:Indirect tax

[Anonymous Coward]

And it would also be more honest to tax people who drive gasoline vehicles for the damage their exhaust gases are doing to the environment rather than externalizing it. But, that's the way it goes.

Re:Indirect tax

[AaronW]

I see tons of EV cars in California. Leafs are everywhere.

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. Perhaps they should invest in Tesla's gigafactory to bring down cost and/or license Tesla's batteries like Toyota did. If they're like Nissan then they only need around 1/4 the capacity of Tesla's 85KWh battery pack, a smaller electric motor and a smaller inverter. If it cost Fiat $46,650 per-car then they're doing something wrong. They're probably using those more expensive, lower energy dense LiFePo prismatic batteries that everyone except Tesla is using.

Now I want one.

[Camel Pilot]

Interesting marketing technique.

I blame bad design

[rsilvergun]

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...

Fixed costs & whining

[sjbe]

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.

Could elect not to sell any vehicles in California

[tepples]

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.

Some context

[Guspaz]

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.

He'll have his work cut out for him

[Steffan]

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.

Re:He'll have his work cut out for him

[dreold]

Fellow 500e owner here. Seconded your opinion in all points.

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.

Tragedy of the commons

[GWBasic]

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!

Diesel?

[iserlohn]

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.

Maybe he should build a better car.

[dbc]

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.

Wouldn't be worth it anyways

[gman003]

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.

Re:Could elect not to sell any vehicles in Califor

[AmiMoJo]

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.