Seven years ago this week, I wrote an article that was published widely and caused quite a stir inside and outside the auto industry. It was titled: Stop The Electric Car Insanity. At the time, electric cars were something brand new, there were not many on the market except Tesla. So, I thought it would be fun to look back and see what has changed since then. Here is what I wrote for the Car Pro Show newsletter in October 2017, midmonth:
October 2017
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 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.
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 its sales numbers (inquiring minds want to know why) but even if you assume it sold every vehicle they produced, the 105,000 number should be really close.
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.
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.
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.
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:
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.
The one thing from 2017 that has not changed is that I am not anti-electric vehicles. Listeners to my radio show know I got one myself and I love it. I highly recommend people who want an EV to lease it to guard against losses, and to make sure an electric is right for them.
Applause to Elon Musk for figuring out how to make money on electric cars. The lessons were expensive, but he got there, and it was no easy feat. Also, kudos to Toyota for seeing that hybrids were the way to go. Putting money into hybrids and not electrics has proven to be incredibly smart, even though they took a lot of heat early on. Today, Toyota cannot meet demand for its products.
If I am still around and take another look at this 2031, the EV landscape will likely look very different and there will be as much change in the next 7 years as there was in the last 7 years. I just hope all the automakers that went “all-in” on electrics, are still around.