EVs Need Scale to Produce Profits for Automakers

If you don’t laugh, you’ll cry. That’s the way I feel when I read something as stupid as this article in Automotive News Europe:

TURIN – Chrysler Group LLC will lose more than $10,000 on every battery-powered Fiat 500 its sells, Fiat-Chrysler CEO Sergio Marchionne says. That heavy financial hit won’t stop the automaker from launching the Chrysler-built electric version of the minicar in the United States in 2012, underlining the pressure automakers face to improve fuel economy and remain competitive in the race to offer alternative powertrains.

“The economics of EVs simply don’t work. On the 500 that (Chrysler) will begin selling in the U.S. next year, we will lose over $10,000 (per unit) despite the retail price being three times higher” than a version of minicar with an internal combustion engine, Marchionne said on the sidelines of Fiat S.p.A.‘s general meeting on Wednesday.

“The economics of EVs simply don’t work?” Really? What could this guy possibly mean by making such an outrageous generalized statement? Maybe he means the economics don’t work at very low volumes, when the world is introducing its first ten thousand electric vehicles onto a planet that has roughly one billion internal combustion engine-based cars and trucks in it, the result of over a century of automaking — dominance by a factor of 100,000:1 over EVs.

But this is so obvious. It goes without saying that IBM didn’t expect to make money on the first computer it sold. This can’t be news to the CEO of one of the world’s largest companies. Why wouldn’t he make himself clear? There must be something else going on here.

No. Sure enough, skipping down to the bottom of the article, we see: “Although the per-unit loss is high, the automaker’s total financial hit should be minimal because Fiat-Chrysler, without being more specific, said it would produce a low volume of the electric 500.”

Ah! Thanks for the clarification, Sergio! That’s information we could have used.

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