"Car manufacturers today don't drop the price –significantly – of cars they currently produce. The only way an individual car company will drop prices on cars is to introduce new, usually smaller and less well equipped models."
"While car companies could drop the price of cars as production efficiencies improve, they aren’t likely to do so. Why? Because if price reduction became a trend, no one would be fool enough to buy a car. Why would you buy a car one year, knowing that the next year it would be cheaper? Buyers would be in an endless waiting game for the lowest price."
April 26, 2012 – Vol.17 No.6
RETHINKING ELECTRIC CARS - PART 7.
by Bruce Mulliken, Green Energy News
When Ford's Model T was introduced in 1908, the price for that open, 4-seat touring car was $850. In today's dollars (about $22,000) that will almost buy you a bottom of the line Prius, or a new Prius C with some upgrades.
By the time Model T production ended in 1928 the same car sold for about $260, or about 30 percent of the sticker price 20 years earlier. Don't expect today's $24,000 Prius to eventually sell for $7000 or so.
Other than rebates, car makers rarely drop prices.
In fact, Prius prices have gone up. But not much. When Toyota first introduced the Prius to the US market in 2001, the sticker price was just under $20,000. By the time that first generation car was retired in 2003 the price had risen to about $23,000, according to an owner/friend who still drives his first-gen car (No major problems, by the way).
When hybrids first hit the market, manufacturers promised that the cost of the expensive technology would go down. To give them some credit for their prediction, prices haven’t risen by much, and probably less than conventional cars.
Steady improvements in production methods helped Ford reduce the cost of manufacturing the Model T. Ford's willingness to pass those savings on to consumers was unusual and certainly not done in today's automotive world. Costs saved in production efficiency today are kept by car manufacturers as profits.
The cost of battery electric cars today is well above what the average consumer is willing to pay. Though car companies keep saying that the price of electric vehicles will drop, they're really not telling the whole story. Car manufacturers today don't drop the price –significantly – of cars they currently produce. The only way an individual car company will drop prices on its cars is to introduce new, usually smaller and less well equipped models.
In introducing a new Prius model, for example, Toyota hasn’t dropped the price of its hybrid technology. The new Prius C is a smaller, less powerful, less equipped car at a lesser price, but with pretty much the same technology under the hood as its older sibling.
While car companies could drop the price of cars as production efficiencies improve, they aren’t likely to do so. Why? Because if price reduction became a trend, no one would be fool enough to buy a car. Why would you buy a car one year, knowing that the next year it would be cheaper? Buyers would be in an endless waiting game for the lowest price.
Generally speaking, the only way see prices drop significantly with electric cars is for new manufacturers to come along with new, less expensive cars. (This is the way prices for conventional cars have been kept under some control in recent decades. Low cost Japanese cars forced Detroit to offer less expensive models in the 1970s. Low cost Korean cars have been doing the same job in the last decade or so. Next up will be China's and India’s contributions to the world of low-cost automobiles.) [not sure the parentheses are necessary here]
Fortunately for those who are more concerned about zero-emissions than country of origin, both of these countries might be the ones that start the mass adoption of battery electric cars.
Tata Technologies, an engineering services unit of India’s Tata Group, has been developing the all-electric eMO, engineered from the ground up to have a manufacturer's suggested retail price point of $20,000. Careful attention of every detail in the design of the car, as well as its manufacture, has been aimed at low cost and environmental sustainability, while still building a four-seat zero-emission car capable of traveling 100 miles on a single charge.
Says Tata in a press release:
The eMO architecture emphasizes "right size" personal urban transportation by minimizing its exterior footprint and maximizing interior space, including seating for four adults.
As a ground-up EV study, eMO also incorporates design advantages over an internal combustion engine vehicle, like smoother aerodynamic surfaces and shorter overhangs. With sustainability in mind, eMO benefits from a low carbon footprint and a recyclability strategy. To reduce the overall carbon footprint of the manufacturing, assembly, and other associated processes, Tata Technologies eliminated the traditional body shop and paint process, and utilizes many green product materials in eMO.
Tata Technologies says it’s “the first Indian engineering services organization capable of delivering a full vehicle.”
CODA Automotive, a unit of CODA Holdings of Los Angeles, is already selling, in California, a four-door, four-seat battery electric sedan based on a conventional car built by Chinese automaker Hafei.
CODA, with its first electric car only a few months on the market, is already expanding its line and has partnered with Great Wall Motors Company, also of China, to develop an electric car “intended to be the most affordable EV on the market, comparable to entry-level internal combustion engine vehicles,” according to a press release (In the US an entry level car is what, $13,000?).
It will be the first electric car developed for worldwide distribution. From a CODA press release:
Combining the product portfolio and manufacturing assets of Great Wall with the expertise of EV propulsion systems and battery technology from CODA, both companies aim to benefit from their ability to develop products and manufacturing processes rapidly. Products will be developed by employees of both companies in their research facilities in Los Angeles and Baoding, China. Vehicles will be sub-assembled in Great Wall's manufacturing facilities in Baoding. Final assembly of US destined vehicles will take place in Coda's facility in the US.
Great Wall Motors is the fastest growing car manufacturer in China, delivering nearly 500,000 vehicles worldwide in 2011.
So, while efficiency and new technologies on the electric vehicle production line (particularly on the production line for those expensive batteries) may allow manufacturing costs to drop, retail prices for the cars won’t drop until new models are introduced by either existing car makers or startups. The problem is new models can take years to develop and bring to the showroom floor.
RETHINKING ELECTRIC CARS - PART 1
If EV’s don’t catch on at a quicker pace, manufacturers might have to go back to the drawing board.
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