Fisker always was a snake oil car company. Fisker came to the American public’s consciousness in 2009 as part of the Obama administration’s plans to promote green manufacturing, and to “put Americans back to work.”
Fisker Automotive, backed by Kleiner Perkins Caufield & Byers, a veteran Silicon Valley venture-capital firm of which former Vice President Al Gore was a partner, got a $529 million loan guarantee from the Department of Energy to build the Karma, a luxury sports car which would sell for about $90,000. In September 2009 The Wall Street Journal reported that Fisker officials said the car would be “powered by a lithium-ion battery, will be able to run solely on electric power for 50 miles, and will achieve an average fuel economy of 100 mpg over the span of a year.”
Then things started to go sideways. After the California company displayed facilities in Irvine, California and Pontiac, Michigan to secure public funding, the company quietly revealed that the Karma would actually be manufactured in Finland. So much for putting Americans back to work.
In March 2010 Fisker purchased a shuttered GM plant in Delaware to use for its “Project Nina” operation to build a family sedan, promising to release the car sometime in 2013. But in April 2012, USA Today reported that Fisker Automotive laid off most of the employees at the former GM plant, refitted with federal and state money.
And now Delaware taxpayers are on the hook for a deal in which the Democratic governor loaned $21.5 million to Fisker to entice the company to Delaware, home state of Vice President Joe Biden, even though the company never actually produced a car.
In 2009, Fox News notes, Democrat Gov. Jack Markell and Biden said it would bring as many as 2,500 green jobs to the state. That never happened, but Delaware reportedly has paid at least $400,000 in utility bills since about April, when Fisker halted operations.
The Electric Car Market Is Not Charging
Last October AutoChannel.com quoted the Detroit News saying that, like Fisker itself, the EV industry is in “serious trouble.”
The News pointed to the grisly death of one of “the nation’s largest electric car battery companies, A123 Systems,” with 1,000 workers and contractors in Michigan, which “lost $900 million since 2007 amid sluggish electric vehicles sales.”
Manufacturers of electric cars and components are used to bad news, “reports of lagging sales and projects being pushed back,” AutoChannel.com says. Indeed, with electric cars and gas-electric-hybrid models accounting for a tiny 3 percent of total sales through the first eight months of 2012 — and over half of that is Prius sales alone — and plunging sales, optimism is in short supply.
Political Favor ‘Evaporating’
Part of it is the fact that, as the News observes, in Washington, “the political consensus in favor of electric vehicles has evaporated.” Even flawed hybrids such as the Chevy Volt, with auxiliary gas engines, are faring better in the market than EVs, which rely heavily on government subsidies.
Last September the Wall Street Journal noted that Tesla’s Model S luxury sedan’s sales were lower than expected, and Toyota was even publicly musing whether or not hydrogen fuel cell-powered cars might not be more feasible than electrics. The Nissan Leaf and other flagship models are struggling.
There is still a federal mandate to nearly double car fleet average fuel economy by 2025, but one wonders, given the recent disillusionment with electric cars, whether the political will to strictly enforce the mandate will be there in 12 years.
Expensive Components, Expensive Car
The main reason why manufacturing costs for electric cars are so high is battery costs. “At an estimated $600 per kilowatt-hour, or about $10,000 to $12,000 for a fully electric car, lithium-ion car batteries cost too much,” industry executives surveyed by The Wall Street Journal agree.
As The Wall Street Journal’s auto critic points out, electric cars cost twice as much and are far less efficient: “I could buy a gasoline Honda Fit that has more cargo room, gets 31 miles per gallon and starts at about $15,000, or less than half the $37,415 list price of the electric model,” which has a far more limited range than the gasoline version.
And EVs have a sharply limited driving range. In other words, what we have here is an expensive, inefficient status symbol, a statement car. That’s not a large market.
Forbes wrote recently that the Congressional Budget Office decided that “even with the $7,500 tax credits we taxpayers generously provided to purchasers, electric cars are still a bad buy, costing owners far more over the life of the car than traditional gas-powered vehicles.” Toyota agreed, essentially canceling the EV version of its iQ.
Should EVs Be Manufactured At A Loss?
Frankly, the only way electric car sales are going up is if electric car prices are coming down. Green automotive reviewer The Good Human recommends simply selling the things at a loss until they catch on — “The only way to encourage the mass adoption of them is to lower the price by quite a bit. You cannot make a $30,000+ electric car compete with a $20,000 Prius; there is no competition… until the driving range goes way up, the only thing that will work is lowering the price.”
The bottom line is that there probably isn’t much future in a car that costs manufacturers money to make. Forbes reports that, “GM is even losing $49,000 on each $40,000 Volt it sells.” GM officials quibbled about the exact figure while admitting yes, we do lose money on each car we sell. In the same breath they claimed there’s a plan to turn that around and render the Volt profitable.
There doesn’t seem to be a silver bullet technology that will change the fate of EVs. From a pure market standpoint gasoline cars will always be more attractive. Your best bet is to pester the government to keep stringent mileage requirements in place that favor electric cars, and keep emphasizing how many jobs you could create with massive government subsidies. As a friend recently remarked, when it comes to EV component manufacturing, “the car may be green, but the pasture sure isn’t.”
Industry analysts themselves see the writing on the wall. Carter Driscoll, an alternative energy company analyst at Capstone Investments, said the Obama administration’s entire approach is to think “Jobs, jobs, jobs.” For government, Driscoll says, “It was about making jobs in certain areas. It wasn’t market driven.” Electric cars never have been market-driven, they’ve always been about the politics — climate politics, energy politics, Delaware politics. And that’s not good business.