Building (and buying) a cheaper electric car
After scoring its first profit earlier this year, electric car maker Tesla Motors swung to a loss in the latest quarter. But it beat Wall Street estimates, reported big operating profit margins and sold more cars, 5,150 of its Model S’s, than ever.
That modest sales number is a reflection, in part, of the limited appeal of an electric car that starts at just under $70,000. Tesla CEO Elon Musk hopes to cut that price in half within four years to help realize what has always been his ambition: a truly affordable electric car.
That apparently already exists. You can buy an electric car today for under $20,000 — if you’re in the right state.
Georgia is one of many that offer a tax credit for electric vehicles — up to $5,000 off the sticker price.
“You get a lot more people who are interested, and that now becomes a vehicle that people can actually afford,” says William Cook, whose branch of the Georgia’s Environmental Protection Division oversees the program. Cook says that as of today, more people have applied for the tax credit in 2013 than in any previous year.
State credits come on top of a $7,500 federal income tax credit, as well as new manufacturer discounts. Earlier this year, Nissan cut the sticker price of its all-electric Leaf from $35,200 to $28,800. Chevrolet just cut the price of its Volt from $35,995 to $34,995. These prices make them more competitive, in particular with hybrids like the Toyota Prius (starting price: $24,200).
“By lowering the price, it gives us the opportunity to be on the shopping list of consumers,” says Chevrolet spokeswoman Michelle Melko.
But what about profits?
“Whether the manufacturers are making any money at that price… I don’t think so,” says John O’Dell, green car analyst at Edmunds.com.
Yet car companies to make electric vehicles in part because they are required to by several states, including California, the biggest car market in the U.S.
“There’s an incentive right there to build them even if you’re going to lose money on each one,” says O’Dell. “You make your money up on your high-profit stuff.”
That “high-profit stuff” includes gas-guzzling pick-up trucks. But for the manufacturers that are investing heavily in zero-emission technology, low prices are also about creating a genuine market.
“More than all the advertising you can do, more than all the spiffs you can put on it, the thing that sells cars is when you see one in your neighbor’s garage,” O’Dell says.
Still, he thinks the day when electric cars can compete with their gas-powered counterparts for price-conscious buyers is decades away.
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