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Electric company: GM makes statement with Bolt, Volt

General Motors CEO Mary Barra has sent a strong message to the auto industry: It’s serious about producing electric cars for the middle class.

One of the most talked-about vehicles unveiled Monday at the North American International Auto Show in Detroit was GM’s Bolt, an all-electric concept car that could go on sale in 2017, the Detroit Free Press reported. The company also officially unveiled its redesigned Volt, a plug-in electric-and-gasoline hybrid that got a first glimpse at CES in Las Vegas last week.

The Bolt’s price tag is $30,000, including the $7,500 federal tax incentive, GM North America president Alan Batey said. It would get about 200 miles on one battery charge.

As the Detroit News reported, GM is positioning the Bolt as an affordable EV option:

“This is truly an EV for everyone,” Barra said. “For most people, this can be their everyday driver.”

Batey said the Bolt isn’t aimed at Tesla, noting Tesla’s current average transaction prices are above $100,000.

“They are for the rich and famous. This is for the people,” Batey said of the Bolt. “I would probably counter and say I haven’t seen Tesla with anything like this.”

Despite what Batey said, Forbes took the unveiling as a direct challenge to Tesla:

The Bolt is a clear shot at upstart rival Tesla, which has said it is working on a less-expensive version of its $70,000+ Model S. Dubbed the “Model 3,” it would cost somewhere between $30,000-$40,000, a clear attack on the most popular segment of the automobile market.

Barra is clearly looking to meet the challenge. The Bolt, she said, would be an “all-electric vehicle for the real world.” Tesla CEO Elon Musk is scheduled to appear at a related auto industry conference in Detroit on Tuesday afternoon.

As for the revamped Volt (with a “V”), the biggest news is that the battery range has gone up to 50 miles. At that point, the gasoline engine, a 1.5-liter “range extender,” kicks in, pushing the limit to 400-some miles before the vehicle needs a charge or a fill-up. With the electricity and gas range combined, mpg on the highway is about 41. In all-electric mode, however, it’s 102 for a gallon-of-gasoline equivalent, thanks to the new 18.4-kilowatt-hour lithium battery.

Auto Blog notes:

To compare, today’s four-seat 2015 Volt has a 38-mile range from a 17.1-kWh battery in a powertrain that offers 37 mpg and 98 MPGe. So, across the board, there are notable improvements.

The blog has much more about the dashboard improvements, and the Verge has a bunch more photos.

The Volt is expected to be in showrooms in the second half of 2015 as a 2016 model.

(Photo: General Motors)

Despite cheap gas, EV sales were strong in 2014

One narrative for 2014 is that cheap gasoline reduced the incentive for energy-efficient vehicles.

Tell that to all the people who bought electric cars during the calendar year.

With sales data still coming in, it appears certain that U.S. sales of EVs, including both all-electric and plug-in hybrids, surpassed 100,000 units.

That marks the third straight year of sales increases, since the electric vehicles we know today first went on sale in December 2010, according to Green Car Reports. The growth rate won’t come close to 2013, however, when 97,000 EVs were sold, nearly doubling the 2012 total of 53,000.

Nissan is emerging as the sales champion for the year, having moved 30,200 all-electric Leafs, a new U.S. record for an EV. That’s up nearly 34 percent over 2013, when 22,610 Nissan Leafs were sold.

Compare that figure to the Chevy Volt, of which 18,805 were sold — down 19 percent from the previous year, when 23,094 were sold.

According to the Auto Blog, Volt sales really tailed off in December, with just 1,490 units, a 38 percent falloff from the same month in 2013. Nissan sold 3,102 units for the month, up 23 percent from December 2013. The federal government’s $7,500 sweetener might have played a role, as new-car buyers sought to grab that tax savings before the calendar turned.

More Auto Blog:

The Leaf outsold the Volt every month in 2014. The closest gap was 215 units, in February. The biggest was 1,612, in December.

One theory for the Volt slowdown is that potential buyers are waiting for the redesigned 2016 model. Although the car won’t be officially unveiled until the Detroit Auto Show next week, Chevrolet opened the kimono to allow journalists a peek Sunday night at the Consumer Electronics Show in Las Vegas. Check out stories here, here and here.

What about sales of the Tesla Model S, you ask? The company doesn’t post monthly sales reports, so we’ll have to wait until later in the winter for its annual report. But Inside EVs mentions both Nissan and Tesla “hitting it out of the park” in December.

Inside EVs also has a breakdown of how other anticipated models sold during the year. For instance, Cadillac moved 1,310 units of its plug-in ELR. And BMW moved 6,092 units of the i3, “not bad considering it was only available for 7 full months in the US.”

Also:

Current owners got some good news this month as earlier, long standing issues surrounding the onboard chargers being muted to avoid failure incidents has now been rectified and BMW has a recall/repair bulletin out for owners to now get new units installed. 7.4 kW charges again for everyone!

More problems for Tesla: Analyst cuts sales forecast

Morgan Stanley auto analyst Adam Jonas has been bullish on Tesla Motors. But he added to the company’s woes Wednesday when he slashed its sales outlook in the face of falling oil prices.

Jonas predicts that the luxury electric-car maker will only be able to sell 300,000 vehicles by 2020.

Cheap gas prices could be partly responsible, since the narrative at the start of this month was that plunging prices had contributed to consumers returning to their SUV- and pickup-loving habits. (Electric vehicles didn’t sell badly in November either, particularly the Nissan Leaf.)

But this segment in CNN Money’s story presents an other interesting angle:

The biggest drag on Tesla sales will be the lower-priced, mass market Model 3 expected in showrooms in about three years.

Jonas’ doubts that Tesla will be able to price the Model 3 in the $35,000 range as many have been expecting. He’s now thinking the price could be closer to $60,000.

Tesla’s philosophy is that it won’t put out a vehicle that doesn’t meet its own, and founder Elon Musk’s, high expectations. See this post from November, about how the company wasn’t bothered about delaying production of the crossover-utility vehicle Model X, which is now expected in showrooms until the third quarter of 2015.

Tesla’s stock has fallen precipitously since Sept. 4, when it was $286.04. It closed at $197.81 on Tuesday.

Will falling gas prices hurt alternative vehicles?

Everyone is saying that falling gas prices will ruin the market for alternative fuels and vehicles. But it isn’t time to give up on them now.
Ethanol and methanol are still two liquid fuels that will easily substitute for gasoline in our current infrastructure. Ethanol is making headway, particularly in the Midwest, where it is still cheaper than gasoline and has a lot of support in the farm economy. The big decision will come when the EPA finally sets the quota for ethanol consumption for 2015 – if the agency ever gets around to making a decision. (The decision has been postponed since last spring.) A high number should guarantee the sale of ethanol no matter what the price of gasoline.

That leaves methanol, the fuel that has the most potential to replace gasoline and would it fit right into our present infrastructure but must still run the gamut of EPA approval and would require a change in habits among motorists. Methanol is still relatively unknown among car owners and is hindered by people’s reluctance to try new things. But the six methanol plants that the Chinese are building in the Texas and Louisiana region could break the ice on methanol. The Chinese have 100,000 methanol cars on the road now and are shooting for 500,000 by 2015. Some of that methanol might end up in American engines as well.

Another alternative that is still in play is the electric car. In theory, electric cars should not be affected much by gas prices because that is an entirely different infrastructure. The appeal is not based on price so such as the idea of freeing yourself from the oil companies completely and relying on a source of energy.

The Nissan Leaf has not been badly hit by oil prices. Tesla’s cars, of course, have not gone mass market yet, but the company is relying on a new breed of consumer who does not worry too much about the price and will appreciate the car for its style and performance. Elon Musk has shown no indication of backing down on his great Gigafactory, and Tesla is still aiming to have the Model III (its third-generation vehicle, which will come at a much lower expected price point of $35,000) ready by 2017.

This leaves natural-gas-powered vehicles as the only group that might be hurt by falling gas prices, and here the news is not too good. Sales of vehicles that have compressed natural gas as their fuel declined 7.2 percent in November. As David Whiston, an analyst at Morningstar, told the Houston Chronicle’s Ryan Holeywell: “I hear all the time from dealers: As soon as gas starts to go down, people look at light trucks.”

CNG’s appeal has always been that it will be cheaper than regular gasoline, so plunging gas prices make it lose much of its appeal. It costs $5,000 to install a tank for CNG fuel, and that is not likely to attract a lot of takers with oil prices low. For a gas-electric hybrid, there is similar math. For the Toyota Corolla, the electric portion adds another $7,000 to the price. That’s why the CNG-based solutions never caught up with the light-duty vehicle. They are still attractive for high-mileage vehicles like buses and garbage trucks. “For the consumers doing the math, if gas goes below $3 per gallon, the payback period goes out a number of years,” Whiston told Holeywell. “And the break-even point makes sense for fewer people.”

The collapse in gas prices is not the end of the road for alternative fuels. In a couple of months, the price may be up again, and all those people who have rushed out to buy light trucks will be stuck with them. The changeover to alternative fuels is a slow process, fraught with false starts and misleading signals. But in the end, it will be well worth it to reduce our dependence on imported oil and achieve some kind of energy independence. Car buyers have very short memories and an inability to look very far into the future. Remember, it’s always a passing parade. Consequently, their reaction has been only short-term. But once people buy those trucks, they’re stuck with them for the next 5 to 10 years. If the price of gas goes up again, they may live to regret it.

Are Americans risk-averse?

The name of the game is “the St. Petersburg Paradox,” and it proved that people are risk-averse, even when they have nothing to lose and a chance to win big from playing a game. It has become a well-established principle in economics and helps explain why people are so reluctant to switch to alternative fuels, even when they stand to gain from the exchange.

The architect of this theory is Daniel Bernoulli, the 18th century Swiss mathematician who is also responsible for Bernoulli’s law, which states that pressure becomes less intense as a fluid travels over one side of a surface at greater speed. It is the basis of airplane flight.

Bernoulli lived in St. Petersburg for a period and became involved in the gambling scene, which was very intense. Like any good mathematician, however, he became more interested in why people bet, rather than the outcome of the game.

He became particularly intrigued by something called the “St. Petersburg Game.” The rules were fairly simple: It involved the simple flip of a coin. If the coin came up tails, the player would receive a dollar (ruble). If the coin came up tails a second time, the player would receive $2, third time $4 and double for each round thereafter. In other words, as long as the coin kept coming up heads, you kept winning. Theoretically, a player could make $500 and on up. The question is, how much would you pay to play this game?

Bernoulli found that even though the average payout was $2, players were very reluctant to buy into the game for more than $2. Their thinking was very short-term and logical. The possibility of a huge payout was of little appeal to them. They were risk-averse.

From this observation, Bernoulli deduced another principle he called the “marginal utility of wealth.” Bernoulli differentiated between “wealth” and “utility.” The utility curve, he said, was concave, and people tended to put more value on the money they lost rather than what they gained. Therefore, they were much less inclined toward risk. Even the possibility of a large payout in an uncertain future is not enough to entice them into the game for a higher price.

What does this have to do with alternative fuels and alternative vehicles? Well, the early adopters are taking big risks. They risk that the new technology may not work out, and they will be stuck with a white elephant. They risk that the fuel savings may not be as great as they are led to believe. The risk that the price of fuels may change drastically – such as the current free fall in oil prices – and any advantage they might have had with the alternative fuel may quickly evaporate. The natural gas tank on a utility truck costs about $5,000, on top of the cost of the normal gas tank. Anyone who as one installed is taking a big risk. Is it worth the extra investment?

The concave marginal utility curve also explains why wealthier people are more inclined to try the alternative vehicles than the average person. They have more room to experiment and are less concerned about losses. Tesla has been deliberately targeting the $75,000 and up market. The first Tesla driven in the United States was bought by Leonardo DiCaprio. Elon Musk is taking a tremendous risk himself by trying to manufacture a $45,000 Tesla that will appeal to a much larger audience.

But risk aversion for the average person is very hard to overcome. Look at another version of the St. Petersburg game: You are allowed to buy into a game where you flip a coin for money. If you win that one flip, you will be awarded $1,000 each year for the rest of your life. Alternately, you may flip the coin every year for $1,000 for that year. Which would you choose?

Experience proves overwhelming that the majority of people prefer to flip every year rather than stake it all on one flip. This proves that people are not risk-takers but would rather have incremental increases rather than an all-or-nothing opportunity. People do not expect extraordinary events to occur to them, but base their decisions on the more normal rate of chance.

Peter Drucker said that in order to replace an existing technology you had to have something that is 10 times as good as what you are trying to do. There are so many impediments – inertia, trying to get known, trying to overcome people’s aversion to risk –that it’s a very difficult task.

That’s why many believe that we need the intervention of the states and the federal government to prime the pump for alternative fuels and vehicles. There are just very few people willing to take the risk. California’s program to put 15,000 cars on the road running on methanol in the 1990s was a good example. Should it be duplicated? There is no downside to running on ethanol or methanol, and there are probably some environmental advantages, as well as money to be saved. But the societal benefits – energy independence and freedom from imported oil – are spread out, while the risks remain on one person – the individual who buys the vehicle.

Individuals are risk-averse – there’s no getting around it. It may take some initiative from the government to mitigate those risks and spread them out over a wider range of people. That way they become more tolerable.

Real Clear Politics: The Future of Cars: Batteries Included?

Elon Musk, founder and CEO of Tesla, has done what GM couldn’t when, 20 years ago, EV1 was introduced as the first (failed) mainstream, all-electric car. Tesla has moved electric vehicles (EVs) from cult to elite status. Seductively designed and impressively engineered, the nearly $100,000 Tesla is a must-own for one-percenters.

Could Tesla, in particular, with its to-be-released cheaper plug-in sedan, along with the other dozen major EV manufacturers, be the portent of an automotive revolution that finally displaces the vilified internal combustion engine? Or has Musk created—no small feat—a modern Maserati? (The latter celebrates its centennial on December 1, 2014.) At present, the wisdom of the stock market gives Tesla a value approaching that of GM, which produces as many cars in a week as Tesla does in a year.

 

Read more at: Real Clear Politics

Tesla won’t produce the Model X until it’s sufficiently awesome

Elon Musk would rather wait to put out an eagerly awaited product than push one out that’s not awesome.

That was apparent from the language used in Tesla’s Q3 newsletter, published Tuesday (emphasis ours):

We recently decided to build in significantly more validation testing time to achieve the best Model X possible. This will also allow for a more rapid production ramp
compared to Model S in 2012.

In anticipation of this effort, we now expect Model X [the company’s forthcoming SUV] deliveries to start in Q3 of 2015, a few months later than previously expected. This also is a legitimate criticism of Tesla – we prefer to forgo revenue, rather than bring a product to market that does not delight customers. Doing so negatively affects the short term, but positively affects the long term. There are many other companies that do not follow this philosophy that may be a more attractive home for investor capital. Tesla is not going to change.

Tesla’s earnings beat analyst’s expectations, but some weren’t impressed by the pace of deliveries by the luxury electric-car maker. Tesla said it would deliver about 33,000 vehicles in 2015, lowering its estimate by 2,000. John Thompson, CEO of Vilas Capital Management, said on CNBC’s “Closing Bell” program that Tesla is “grossly overvalued … A company making 33,000 cars is worth half of Ford Motor Company today.”

Still, Tesla’s stock closed at $240.20 Friday, down 98 cents for the day, but up from $230.97 since Tuesday’s earnings report. Ford closed at $14.17, down 2 cents.

(Photo: Darren Brode, Shutterstock)

Report: Electric car buyers hate the dealer experience

Researchers at the Institute of Transportation Studies at the University of California at Davis have made a startling discovery: Consumers in the market for an electric vehicle hate dealing with the traditional car dealers that sell EVs.

Green Car Congress has a story on the UC Davis study, which found that purchasers of plug-in electrics were less satisfied with their experience with the sales departments at car dealerships than purchasers of traditional gas-powered vehicles.

And the feeling is mutual, it seems: Sales people at dealers that sell EVs alongside traditional cars often don’t like to take the extra time (for time is money) to explain the basics of how EVs work. As Green Car Reports notes, “Customers tended to be more discriminating, they said, which demanded more time and effort by the staff to answer questions and arrange test drives.”

The exception to the rule of customer dissatisfaction is Tesla, which doesn’t even use dealers: Buyers pick out the model they want in the showroom, then order online.

Paul Revere: The Teslas are coming, the Teslas are coming!

When he died, the patriot Paul Revere was embalmed in V8 juice, tanning lotion and several energy drinks. Surprisingly, he reappeared at a relatively recent conference of the Massachusetts Association of Automobile Dealers, looking fit and ready for another ride. The dealers had prayed for his second coming. They hoped that even though his previous ride was only one horsepower, he would consent to try a low-horsepower vehicle and ride the state, warning their brave residents that Tesla is online and in-store sales of electric cars coming. The dealers’ marketing folks felt that a reincarnated Revere would do wonders for their shaky image as wheeler dealers (excuse the pun). His deep, holier-than-thou, Fred Thomas-type voice (you know, the actor-turned-politician-turned-actor who now sells most anything on TV for money) would convince all but his former peer group (dead people) that Tesla was anti-American.

“What did Tesla do wrong,” asked Revere? Oh, it’s trying to sell its non-horse, torque-engine vehicles directly to modern-day patriots. Can you imagine euthanizing horsepower? Tears came to Revere’s eyes. But there’s more, paraphrasing a former automaker and cabinet officer Charles Wilson, one of the dealers indicates that what’s good for automobile dealers was and will always be good for America. What Elon Musk, the head of Tesla Motors, wants to do is eliminate dealerships. If the present case before the courts in Massachusetts is won by Tesla and Teslas are sold online, from a storefront, or shopping mall, surely Ford, Chrysler and General Motors will not be far behind. Forget capitalism, forget free markets, forget competition, even forget, Paul, your membership in the old Tea Party in Boston (you know, the taxation-without-representation crowd). Forget everything you fought for. By eliminating dealerships, Tesla will cost jobs. Dealers soon will have to close their doors. Bypassing dealers to sell cars will also first limit and then end our community philanthropy — you know, Little League teams, Fourth of July concerts, community picnics, jerseys for kids etc. Tesla’s headquarters is in California, and it’s a crazy state with Hollywood and all that. Californians act like foreigners. Tesla’s founder believes in global warming, he isn’t satisfied with life in America and he is developing a spaceship where the elite can, someday soon, travel to a second home and ruin our local economy. Losing dealers will make every community less American. Sure, vehicle costs may come down and emissions may improve, but what American is unwilling to pay extra to save his or her friendly auto dealer?

Revere was puzzled. He was a merchant way back then and he believed that competition and the free market were part of the American Dream. (To be honest, he also feared riding and did not understand how he could ride a multiple-horse powered vehicle. He had only mounted one horse.)

But he understood what the dealership folks were trying to tell and sell him. While in his heart, he was a bit ambivalent, he finally said he would do the famous ride again, and this time, because mileage capacity had increased and population of Massachusetts had grown, he agreed to try to go farther west than in his famous, poet-legitimized and sanctified ride.

But just as he gave them the okay, the dealerships received an email from a colleague in Boston that Tesla had won in the Massachusetts court. One dealer started crying. Several others criticized “those activist judges.”

Revere asked to read the email. It indicated that the Massachusetts Supreme Judicial Court unanimously determined that the Mass. State Automobile Dealers “lacked standing to block direct Tesla sales under a state law designated to protect franchises owners from abuses by car manufacturers” (Reuters, Sept. 15, 2014). Succinctly, the law was tied to the franchise relationship rather than unaffiliated manufacturers like Tesla.

The court’s finding should make it easier for Tesla to secure positive rulings in many other states. Earlier this spring, senior officials from the Federal Trade Commission strongly indicated that laws outlawing direct sales harmed consumers. Revere, after looking at the email, felt guilty that he had all but agreed to replicate his famous ride. But he was consoled by the fact that freedom and competition won out, at least in the Tesla case in Massachusetts, and that at least consumer democracy was alive and well in the state. He couldn’t help but muse on the fact that Texas, a state supposedly committed to minimal regulation and almost zero interference by government concerning businesses and citizens’ lives, turned its back on Tesla because of lobbying by dealers. Tesla cannot sell directly in Texas. But, as Ralph Waldo Emerson suggested, “foolish consistency is the hobgoblin of little minds.” After driving a Tesla (with no horsepower), Revere went back to the halo- lit neter lands happy. We haven’t heard from him since. But on faith alone, his experience with reincarnation likely would have made him a fan of Tesla’s electric cars and other alternative fuels.