The focus on electrics is sinking profits for carmakers, as many play the long-game in this slow-moving product segment.
According to Automotive News, GM loses $9,000 on each Chevy Bolt it sells. The loss is over twice that for the electric version of Fiat’s 500, which reportedly puts Chrysler $20,000 in the red on every transaction.
In their recent report, Automotive News highlights the challenges plaguing the EV market – things like heavy incentives and tax rebates that result in a depreciation cycle that’s hard on the pre-owned market. The media outlet interviewed one EV enthusiast who managed to wrangle a lease on the BMW i3 electric for a mere $112 per month, which is astonishingly low when you consider the sticker price of about $50,000. This particular model is scraping the bottom of the depreciation barrel, at an estimated 27 percent of its original value after just three years.
Not all models are faring quite so poorly, but they do all seem to have one problem in common: Gas prices are, at least in the U.S., still so low that there is not a huge value incentive that outweighs the lack of electric vehicle infrastructure, like charging stations.
So why place all these resources into this product category? Well, there are a few reasons that every major automaker has a gasoline contingency plan:
First, analysts are bullish on electrics, and Boston Consulting Group suggests that, by 2030, battery-powered vehicles will comprise half of the global market.
Secondly, prices on electric vehicle manufacturing are said to be falling – perhaps due to expected advancements in what’s currently a very expensive battery. Additionally, as automakers begin to scale up production on the segment, costs will become more stable as well. One analyst firm estimates that the sticker price on the Chevy Bolt could drop by $13,000 by 2025.
And third, carmakers like GM are teasing next-gen batteries that will hold much longer charges and recharge lightning-fast, which makes EVs that much more appealing to consumers.
And once you have the buyers, the profits will come, right? Well — fingers crossed.