Electric cars: will any auto company make money?

Chinese electric car [image credit: scmp.com]

The author paints a bleak picture: ‘Hundreds of new car models chasing only five percent of the market is a recipe for financial debacle.’ High prices don’t help either.
H/T Heartland Freedom Pub / Washington Times

Tesla reported second quarter results earlier this month. Despite losing $718 million during the quarter, Tesla shares rose 16 percent on renewed promises of profitability.

Driven by government incentives and mandates, world automakers have announced big electric car introduction plans. But will any electric car firm be able to make money, asks Steve Goreham?

Start-up automobile companies face long odds. Over the last ten years, Tesla posted cumulative losses of over $3 billion. In the second quarter, Tesla began to ramp production of its new Model 3 sedan, producing more than 50,000 cars. Tesla also promises to attain profitability in the near future, but the firm is about to face rapidly growing electric car competition.

World auto makers have not only embraced electric cars, but now appear to be competing to introduce the most electric models. More than 400 fully electric or hybrid electric vehicles have been announced. BMW plans to introduce 12 all electric and 13 hybrids into its lineup by 2025. Ford announced an $11 billion investment, 16 fully electric, and 24 plug-in hybrid electric cars by 2022. Toyota, Volkswagen, General Motors, and others appear to be all in for electrics.

Hybrid electric vehicles, such as the Toyota Prius, use a conventional internal combustion engine along with an electric motor system to improve mileage. Hybrids can’t be plugged-in and charged. After ten years of production, Toyota was finally able to turn a profit on the hybrid Prius. Hybrid electric cars, which do not suffer the range limitation of fully electric cars, grew to about three percent of global vehicle sales in 2017.

Plug-in hybrid electrics, such as the Chevrolet Volt, can plug-in and run wholly on electric batteries but also use a gasoline engine for longer trips. Battery electric vehicles, such as the Tesla Model S and the Nissan Leaf, are fully electric and run only on batteries. Neither plug-in hybrid electrics nor fully electric vehicles are yet profitable.

UBS analysts estimate that General Motors loses $7,000 on every one of its new Bolt battery electric cars. The Bolt battery pack costs about $10,000‒$12,000, or up to one-third of the Bolt price tag. Daimler, Peugeot, Honda, and other auto makers warn of looming electric car losses.

Where is the demand to support all these new electric car models?

Continued here.