The Electric Car Insanity

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.

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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.

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