Arguably, that’s what any hybrid – or electric – car has become given what’s happened to the price of gas. Hybrid and electric cars aren’t selling well all of a sudden. In October of 2014, they were down 30 percent – and that was when unleaded regular was averaging $3 a gallon.
It is now averaging under $2 a gallon. Very hard to make a case for a hybrid that costs thousands more than otherwise-similar non-hybrid when you can fill up the non-hybrid for $20 again. And forget about electric cars that cost tens of thousands more than otherwise comparable non-electric cars (see “Electric Pegasus” for more on that).
The ugly truth is automakers have always had to resort to heavy discounts – and depended on government subsidies – to prop up “sales” of hybrids. But – assuming gas prices stay where they are (or go lower) – things are going get downright comical. Sad might be a better word.
Fiat’s Sergio Marchionne inadvertently let it slip that his company loses $14,000 on the “sale” of every electric 500 they – cough – “sell.” This is fairly typical. But not well-known.
Even Toyota – which “sells” the most successful of all hybrids (the Prius) reportedly drops money on each one. It is only the profit made on gas-engined Toyotas – and the prop of government support for hybrids and EVs – that makes it economically feasible to manufacture them. If you bought a Corolla or a Camry, part of what you paid for your car helped pay for your neighbor’s Prius.
Put another way, Prius “sales” – and sales of hybrids and EVs generally – are fundamentally artificial. If such vehicles were priced to reflect their actual cost to manufacture, plus an adequate profit per car to make the effort worthwhile – and sans any numbers fudging/cost-shifting, subsidies and so on – their fate would be that of the Edsel, Pacer and Vega.
This is obvious to a sane mind. The trouble is the auto industry has gone nuts. Or rather, goes along with nuts. For the oldest and most cynical of reasons.
What we’re dealing with here is a form of automotive affirmative action. Hybrids and EVs can’t cut it on their own. It is entirely possible they never will. Everyone knows this – but as with affirmative action for people – it’s considered impolite to openly discuss it. Instead, we’re supposed to smile at failure. No – it’s much worse. We’re supposed to bankroll it (in perpetuity) and smile. It is like putting Forrest Gump in the pilot’s seat of a 747 on take-off roll and hoping for the best.
This entire clusterfuck would never have happened had the free market been allowed to operate. In which case, no hybrid or electric car would have seen the light of day until they were ready. Until they could be sold on the merits – at an honest profit.
But that day has been put off indefinitely because of the interferences and machinations – however well-intended – of government policies and the cynical calculations of corporate rent-seeking.
The government – meaning, the politicians that run it – is mostly driven by feel-good claptrap (e.g., “green” cars) that takes no account of engineering and economic realities because these are hard to explain and don’t sell well to a Kardashianized public that prefers emoting to reasoning. The car industry, for its part, merely cashes in. They have learned it is easier – and, apparently, more profitable – to join ’em than it is to fight ’em. This has been the case since at least the 1990s, when the entire industry rolled over like a submissive tail-tucked beagle and presented its soft white belly to NHTSA (the government bureaucracy that regulates – and mandates – automotive “safety” stuff) over the Supplemental Restraint (that is, air bag) mandate. The engineers knew perfectly well that air bags were dangerous, but rather than stand their ground, they folded their cards. And came to realize – or were simply told – there was money in it. Shut up, go along with the program.
Now every new car has at least four Claymores built into it – and guess who pays for that?
But while politicians are hopeless, people in positions of authority within the car industry might want to rethink the wisdom of selling cars at a loss, despite the flim-flam fungibility of their balance sheets.
How many billions have been pissed away building cars like the 500e that “sell” at a $14,000 loss each? How many more Camrys and Corollas would Toyota have actually sold – at a profit – if the cost of each did not reflect the Prius Surcharge? GM has a whole production line devoted to the Volt – and the even more unsalable Cadillac ELR – which has been idle for months because GM literally cannot give these electric Turduckens away. They tried offering a $200/month for two years lease deal on a car with a base price of $35k (you do the math) and it worked as well as defibrillating Heath Ledger’s corpse.
It is only because the car industry is so big that it can afford to endure such losses. Because it can use high finance bamboozling to obscure failure – and rent-seeking pull to make a buck off it. Wouldn’t it be better, long-term (and for everyone involved) to see whether a hybrid or EV can be developed that makes more sense than a standard car? That doesn’t need government “help” to exist?
And if not, to call it a day – and try something else?
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