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Waiting for the Electric Car Price War

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As plug-in hybrid and all-electric cars gradually make their way to dealers’ lots over the next 12 months, we are likely to see more aggressive price cutting and hardcore marketing deals in an attempt to lure consumers away from their good ol’ gasoline vehicles. It’s something to look forward to because, frankly, these green cars – though slick and good for the environment – will be out of the reach of average consumers pocket books in their early years.

Already, Japan’s Mitsubishi has lowered the price of its i-MiEV since its launch in its home territory last July, when it was priced at 4.59 million yen ($50,500). Now it reportedly plans to cut it further to 2 million yen ($21,890) by fiscal 2012, which will end in March 2013, reports the Nikkei (via Reuters). Mitsubishi is cutting the price to better compete with Nissan, which plans to launch its electric LEAF in Japan, the U.S. and Europe later this year. Nissan has priced LEAF at $32,780 for the U.S. market, before the $7,500 federal tax credit and incentives from states such as California, making it one of the cheapest options.

GM also has begun throwing goodies at consumers in order to market its Chevy Volt, a plug-in hybrid sedan scheduled for launch this November. The auto maker yesterday said 4,400 buyers could get free home-charging equipment, though this comes at the expense of the taxpayers. The American Recovery and Reinvestment is funding this as part of a program to study electric car-charging infrastructure.

The exact price for the Volt, meanwhile, continues to be a mystery even though General Motors plans to start selling it toward the end of this year. GM’s CEO Edward Whitacre, Jr. has tossed some comment about the Volt being “in the low 30s” (after the federal tax credit), but the car company hasn’t released the sticker price. But watch for a supposedly big event that GM is planning at the end of this month to showcase the complete design for the Volt – we might hear more about pricing then.

Meanwhile, the “low 30s” seems to be a target for other carmakers. Startup Coda said last year its first electric sedan would have a sticker price of $45,000. But as of last month, the company said it was aiming to hit the low-30s when it launches the model in California later this year, though this would include the federal tax credit.

Even at that price, it’s still far more costly than gasoline cars such as Honda Civic and Toyota Camry, which start at less than $20,000. For hybrids, the Toyota Prius starts at $22,800 while the Civic is set at $23,800. Sales volume for plug-in hybrid and electric vehicles are going to be tiny in the next few years. Frost & Sullivan’s Stephen Spivey told me earlier this week that the sales in the U.S. would likely hit 500,000 units by 2016, from 4-5,000 in 2009. And those would include those non-highway legal, neighborhood cars.

Even if price isn’t a factor, consumers could very well wait on buying an electric car for the same reason they wait on spending big money on novel electronic devices — there’s a narrow audience that wants to buy the first generation iPhone. I’ve heard friends who say they want car makers to work out the bugs from their first-generation vehicles before they buy. After all, the cost of owning a car involves not just the purchase price, but also all the repairs that it will need over the years.

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IT Opportunities for the Electric Vehicle Market

Image courtesy of GM.

12 Responses to “Waiting for the Electric Car Price War”

  1. Eletruk

    Until the production factories for Lithium battery packs come on line, there still aren’t going to be EVs of any significant quantities. And until there are significant quantities, there isn’t likely to be price competition. Mitsubishi took too long to bring th i-MiEV to market, and when they could have had market leadership because they were the only game in town. However, they now are going to be competing against several other manufacturers who have vehicles at lower price and greater capabilities. They probably wouldn’t have to lower their price initially because the demand will still exceed supply.

  2. joe pah

    Nissan has not sold ANY EV’s yet; 13000 Americans pre ordered the Leaf with a refundable $100 deposit. Once they are faced with the cost reality of permitting, rewiring and installing the charging station in their garage, those numbers will drop by 50%.

  3. The entire premise of this article is WRONG. Just because Mitsubishi reduce the price on a stupidly over priced EV doesn’t indicate a ‘Price war’! I’d call that getting in touch with reality.

    Nissan sold out their first 20,000 Leaf in 35 days, no test drives, sight unseen. Battery EVs will be in such short supply for the next few years demand will far exceed supply…. in the laws of economics that is the opposite of the market conditions required for a price war.

    • 20,000 isn’t exactly high volume. There will always be at least 20,000 enthusiasts, but clearly, the price point isn’t fit for mass market at this point.

      Even with subsidies, they aren’t exactly flying off the lots.

    • Ucilia Wang

      Paul, car makers want to sell more than mere 20,000. They need volumes. They need to scale up manufacturing in order to reduce costs and prices. How do they generate demand in order to scale? They lower prices, particularly when many of their competitors will be rolling out similar cars with similar marketing campaigns (EVs are eco-friendly, etc.). High Volumes. Lower prices. This is the law of making money.