U.S. Electric Car Manufacturers Begin Price War

US electric car manufacturers begin price war
US electric car manufacturers begin price war

Despite the fact that electric cars are yet to break into the mass market, when looking at their percentage of sales compared to traditional gasoline/diesel vehicles, there seems to be something of a fight to the bottom with regards to prices in the U.S. Ford has this week announced a further $4000 reduction in the cost of a 2014 Focus EV, which now has a price tag in the region of $36,000. Is this price war helpful to the industry as a whole?

Is this a fight to the bottom?

Only a few months ago the Nissan Leaf 2013 was released with a $6400 price reduction compared to the original model. We have also seen the likes of Honda reduce their leasing charges and it seems as though some manufacturers are now getting themselves into a battle to reach the bottom. It will be interesting to see whether the ongoing reductions in electric vehicle prices, together with government incentives, transfer into a significant increase in sales numbers.

There is no doubt that electric vehicle manufacturers such as Ford are losing money on some of their electric vehicles at this moment in time. The idea is that by selling more vehicles, albeit at a loss, the general public will become more used to this new mode of transport and when battery and electric car prices finally fall there will already be a very receptive market to sell to.

Will some EV manufacturers fall by the wayside?

While the likes of Ford and General Motors have all had their financial concerns in the past, they do have very successful ranges which are making money. As a consequence while they will lose money on some of their electric vehicle sales in the short to medium term these losses will be to a certain extent reduced by the more profitable lines.

Quote from ElectricForum.com : "As the Nissan Leaf phenomenon continues to grow around the world this thread is the place to discuss your experiences having received your own Nissan Leaf. Was it exactly what you expected? Are you happy with the vehicle? Have you had any running problems?"

This ongoing battle to find a price at which motorists will move towards electric vehicles still has some way to run and no doubt we could see some of the smaller less financially stable operations begin to wobble. The likelihood is that we will end up with a very strong core of electric car manufacturers who will dominate the industry going forward, with other smaller niche players still able to make a living on the sidelines. This is probably not what the U.S. government had in mind but the electric vehicle market still has some way to go before it hits the mass market and only then will we start to see profits flow.

Is leasing the way forward?

There are long-term profits to be made in the leasing sector and interestingly it is estimated that 70% of electric vehicles on the road today are leased. as opposed to 20% for gasoline/diesel vehicles. However, we will need to see a significant reduction in this split between leased and non-leased vehicles in order to create short-term profit streams to support long-term investment.

At this moment in time leasing a vehicle will give motorists the potential to switch to new technology based electric vehicles in the future. Once the vast majority of the technological development of electric vehicles has been completed we should then see a levelling out of the leasing/non-leasing split.