Fiat Chrysler CEO: Please Don't Buy Our Electric Car 462
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?
I blame bad design (Score:5, Interesting)
Re:Raise the Price (Score:2, Interesting)
Fixed costs & whining (Score:5, Interesting)
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.
Re:I blame bad design (Score:4, Interesting)
I'd much rather see a mandate for a certain percentage of all-electric vehicles than I would to see a deviation from the Federal standard for any given state. I really wouldn't mind an electric for my commute as I only drive 20 miles round-trip, and my wife only drives 40 miles round-trip, so either of us could easily commute with an electric if they'd build one that we would actually want to own. The Fiat 500e was the first one that appealed to me, and I was hoping for a 100% electric Dodge Dart or Chrysler 200 so that I could have four doors, but that doesn't look like it'll be in the cards based on what's being said here.
Inefficient emission regulation (Score:2, Interesting)
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.
Tragedy of the commons (Score:5, Interesting)
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!
Re:Fixed costs & whining (Score:4, Interesting)
It may not have a huge range (I get ~ 100 miles on full charge), but it is absolutely a serious attempt at an electric car. It appears to be well-engineered, and not an afterthought of tacked-on parts. It is based on the same chassis as the gas-powered Fiat. Doubtless it could be even more efficient if they were to optimize it more for the drivetrain it has.
I think the engineers did a commendable job of creating a practical electric car within their budget / time / materials constraints. Pathetic it absolutely is not. In my opinion, until Tesla takes on this market segment, there is nothing that will touch it.
I do find it curious that Marchionne is publicly trying to dissuade people from purchasing it. A weird reverse-psychology attempt?
Re:Raise the Price (Score:3, Interesting)
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.
Re:He'll have his work cut out for him (Score:4, Interesting)
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.
Re:Fixed costs & whining (Score:4, Interesting)
It's not really the engineering so much as the lack of commitment. Building a small number of these on a one off process makes the prices silly. If they built the real full production assembly line and put the engineering into the cost reductions they'd have a far cheaper car where the costs would go down year over year as the supply and manufacturing scale play into price reductions.
Honestly the battery IS expensive but it's not that much more expensive than all the junk you are losing and many buyers fail to take into account all the positives such as the fact that you will never change the oil or have to flush a cooling system again. There are a dozen different systems in an ICE car that are no longer needed in an electric car. Combine this with the fact that battery advances have spend up dramatically over the last decade and any manufacturer that isn't prepared for the electric car is going to get their lunch eaten and FIAT has just proved they are in the latter category.
Just FYI Tesla is making money on every car sold, pretty decent money too. The problem they face is that selling only 20k cars a year they can't keep an entire production line busy, let alone an entire plant (they are renting a line in a Toyota factory part time). The average car plant runs 24/7 with three shifts and can push upwards of several hundred thousand vehicles a year. Once you get to that volume your factory costs are spread so thin and design costs spread out that you're pushing the manufacturing cost right down to the price of parts (which are also driven down by the volume).
I personally have no doubt in my mind that once Tesla gets Panasonic's battery factory built and they can fully take over the soon to be abandoned Toyota production facilities in California that they'll be able to push enough volume to cut the Model-S price in half. I'd pay $40k for a Model S so fast I'd be a blur running by and I suspect I wouldn't be alone jumping in line, after all the equivalent of a gallon of gas in an electric car is about 5 cents and I'd be fully willing to keep a gas car on standby (or even rent) if I needed more than 300 miles and didn't think the Model S could get me there.
It's actually kind of surprising how short sighted these other manufacturers are because of their ties to fossil fuels. Tesla should be giving these CEO's nightmares. I suspect they think they can shift production (or possibly get Musk to sell them the parts) if Musk is successful but I think they will find they are so far behind in the technology and Tesla has secured exclusive access to key resources that they'll get their lunch eaten and it's possible some of the big boys will end up going bankrupt.
Re:Raise the Price (Score:3, Interesting)
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.
Re:Indirect tax (Score:3, Interesting)
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 [forbes.com], 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.
Re:Amazon "lose $ on each book, make it up on volu (Score:3, Interesting)
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.
Re:Raise the Price (Score:0, Interesting)
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.
Re:Raise the Price (Score:5, Interesting)
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.