Are Electric Vehicles Being Sold at a Loss? Kelley Blue Book Seems to Think So

JUL 17 2013 BY ERIC LOVEDAY 11

Ford Cuts Focus Electric Price by $4,000

Ford Cuts Focus Electric Price by $4,000

Ford’s slashing of $4,000 off the price of its Focus Electric for Model Year 2014 prompted a negative response article by Forbes.  In it, the author argues that Ford was the last major holdout in the EV price wars that began when Nissan introduced the base LEAF S for the 2013 Model Year.

Fiat Admits to Losing Money on Each 500e Sold

Fiat Admits to Losing Money on Each 500e Sold

The Forbes article goes on to say that “Ford couldn’t afford to be out of sync with the competition” and notes that LEAF sales increased by “18 percent” … “after the price cut.

But the main point of the article is not price cuts.  Forbes turned to Karl Brauer, senior analyst at Kelley Blue Book, to drive the point home:

“Manufacturers are realizing that selling an electric car at a loss is better than not selling one at all.  And because these vehicles still make up a tiny percentage of total sales these automakers can absorb the financial loss with minimal pain.  But at some point electric cars will have to stand on their own in terms of generating a profit. In the meantime, if you’re a buyer looking to try out an electric car there are some excellent deals to be had.”

Brauer is making assumptions there that we don’t know to be true.  While Fiat openly admits that it’ll lose up to $10,000 on each 500e it sells, other automakers don’t say they’re losing money on the sale of electric vehicles.  And with some degree of certainty, we can say that Nissan profits from LEAF sales and that Tesla makes money on each Model S it sells.

There are certainly some automakers who may lose money on the sales of electric vehicles, especially when they move in low volumes.  In fact, almost all low-volume vehicles are money-losers for automakers.

But the end goal for most automakers is to go from low-volume, low- or no-profit to high-volume money makers.  It takes time though and, for all intents and purposes, the modern-day electric vehicle is still less than 3 years old.

Source: Forbes

Categories: Chevrolet, Fiat, Ford, General, Nissan

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11 Comments on "Are Electric Vehicles Being Sold at a Loss? Kelley Blue Book Seems to Think So"

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It seems what KBB is not taking into account the economy of scale that Ford is benefiting from.

The Focus Electric platform is shared with 4 other models, ICE Focus, C-MAX, Escape and Transit Connect.

The Top Hat or Focus EV 5-Door Body, is shared with the ICE Focus which is the #1 selling compact car in the world for 2012, and currently #2 in China, #2 in UK, #7 in Europe, etc.

The software and electrical components are shared with the C-Max Hybrid, C-Max Energi, Fusion Hybrid, Fusion Energi and MKZ Hybrid.

The only component not shared is the additional battery capacity where the gas tank would be. The larger rear battery is shared with the Energi models.

Which means over the last 10 months Ford has sold over 38,000 models sharing the same components. Including over 1,500 Focus EVs.

Which is a very smart move on Ford’s part. And as the public moves more toward EVs and demand increases, so will the shared platform of the next generation Focus, C-MAX and Fusion better accommodate battery packs and electronics necessary for hybrids and plug-ins.

The Azure Transit Connect EV is done.

Tesla seems to be doing OK for selling EV’s at a loss. 😉

When their profit comes from selling emissions credits.

The profit they wanted to show was helped by credits.
The reason the make a loss is because they take all the money they make and INVEST it. When they made 300 million more from their recent share issue, they did not pocket the money, they spent it to go further sooner.

They could have been profitable with the roadster, but that could never have covered the huge cost of developing a platform and two vehicles and then setting up the entire manufacturing process for 20k vehicles per year.

An investment is not a loss.

When they claim a “loss” I wonder if they’re only factoring in the incremental cost of making each additional car, or if they’re also including the extensive R&D that had to occur up-stream of the first car. I suspect the latter. Battery prices have dropped a lot in the last five years. And with economies of scale, I don’t see how a simple motor + battery + controller can cost so much more than a complex engine + fuel-system + exhaust-system + transmission.

Unfortunately it does.

Complex engines are well understood and also have economies of scale, just like all the other parts of conventional items, not just auto parts.

The motor is simple, and with the controller are used in many areas, so here costs can be low.

But it’s the battery, man!

Even if batteries fell radically in price, the cost of putting the same range in a car as the gas version has would be very high.

It will take some time for the tech to advance, hopefully not too much 😉

I see your point, but the numbers still don’t add up IMHO.

A Spark EV costs about $13K more than a regular Spark. At current battery prices, the Spark EV battery probably costs GM about $10K. Let’s say $3K more for the motor and controller. Now cash in the unneeded ICE engine, transmission, fuel system, exhaust system, etc. Say $5K? That should be profit.

Obviously I’m swagging the above numbers. But I would love to see actual numbers that show how they could possibly be losing money.

I know what you mean.

I have read that ice and tank cost the same as e-motor and power electronics, so the difference in price should be battery costs.

Yet most ev-versions are more expensive than their ice counterparts by a margin much larger than the cost of the battery.

“In fact, almost all low-volume vehicles are money-losers for automakers.”

You’ve just described every EV made today, and the fact that all EV’s lose money should not be a surprise to anyone. The reason massive incentives and tax credits at local, state, and federal levels exist is because this industry needs help to get started.

Once kick-started (via these economic stimulants), the EV industry can eventually achieve market awareness and adoption that will create economies of scale on par with traditional ICE production, and hopefully someday surpassing it.

But today, the manufacturers are simply paying the costs of getting in early to a new market segment.

If Ford is losing money at 36k per unit then they are idiots. But then again, they are idiots.

LGchem batteries cost less than 200$/kWh. And nothing else is cost prohibitive. So that doesn’t leave many excuses for these nitwits to justify the ridiculously high prices.