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- Aug 13, 2013
Why EV prices are being slashed, and how that affects pickup sales
A number of articles are floating around, trying to answer the question, and we thought we'd point you to a few of them. Automotive News took a look at the issue, wondering how long the automakers can stand to lose money (while pointing out that Nissan head Carlos Ghosn has said the Leaf is profitable, even at the new, reduced price). Part of the price war is that these cars are getting cheaper to make; another part is simply that the OEMs need to offer competitive prices to the customer. Our friend Chelsea Sexton said this is all just how the industry works. "They know that part of the game is not making money in the first few years because they see the market growing," she told AN. Jon Bereisa, CEO of consulting firm Auto Lectrification, told AN that it's a temporary situation, "People forget that this was brand-new technology. Of course the price will fall. The price of your smartphone doesn't go up. It goes down."
"People forget that this was brand-new technology. Of course the price will fall."
Bloomberg got an analyst to come up with a number for how much "research and development cost" is in each Volt: $9,000. This compares to about $1,200 in the "average automobile." Those numbers come from Sean McAlinden, chief economist with the Center for Automotive Research in Ann Arbor. Another analyst, Anthony Pratt, director of forecasting for the Americas at R.L. Polk, told Bloomberg that it is thus a somewhat good thing the Volt isn't selling in huge numbers. "The good thing about the Volt and the bad thing about the Volt is that the volumes are low," he said. "If they have to concede on price and lose money on every one, the amount of the revenue lost based on incentives won't be as significant as a higher volume [vehicle]."
"The good thing about the Volt and the bad thing about the Volt is that the volumes are low."
But Businessweek points to another wrinkle in the plug-in sales pictures. Namely, how selling more Volts at cheaper prices allows GM to sell more pick-up trucks. The article lays it out: "Chevy is slashing Volt prices because it has been selling a ton of pickups and wants to keep doing so." The reason is how CAFE works, and you can get all the details in the original article. There's also a Bloomberg video about Tesla sales available below.