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Do automakers stand a chance of increasing electric vehicle sales in China? Though the talk from...

Do automakers stand a chance of increasing electric vehicle sales in China? Though the talk from major companies (F, GM, VLKAY.PK, TM) is that they plan to start or ramp up electric sales in China - and even Tesla Motors (TSLA +1.4%) plans to open a dealership in the nation - by all accounts EV sales in China are stuck in neutral. Mind-blowing levels of smog in Beijing this year have elevated the debate on vehicle emissions, but until the government actively decides to sacrifice economic growth for environmentally friendly practices the EV initiatives are speculative.
Comments (29)
  • Cassina Tarsia
    , contributor
    Comments (643) | Send Message
     
    From what I have read and understand China has already begun to start taking action to limit smog, at least with cars, giving incentives for electric vehicles, such as the Tesla Model S. The fact that they are allowing Tesla to open a dealership in their nation is an indication, all by itself, that they are beginning to get serious about their smog problem. From what I have heard, it is not easy to open new businesses in China, and it can't be done without government approval.
    8 Mar 2013, 11:29 AM Reply Like
  • 123man
    , contributor
    Comments (1095) | Send Message
     
    The debate in China is not so different that there in the US - "sacrifice economic growth for environmentally friendly practices" is a serious question no matter where one lives - where the environment is favored the people flourish, where the bottom line is the most important, people suffer the consequences - Germany and the Nordic countries seem to have figured it out or at least brought some balance to the subject - perhaps we can here in our wonderful country by supporting technologies that are American made and environmentally friendly, such as Tesla -
    8 Mar 2013, 11:50 AM Reply Like
  • orthophonist
    , contributor
    Comments (126) | Send Message
     
    China will become Tesla's biggest market, not so much for environmental reasons, but for geopolitical ones.
    8 Mar 2013, 12:15 PM Reply Like
  • Locked Down Investments
    , contributor
    Comments (1353) | Send Message
     
    Agreed...other EV sales have been low because the cars are uninspiring and cost 2-3 times their gas powered versions (see Toyota Rav4 EV and Ford Focus EV)...that strategy will never work...Tesla on the other hand IS making beautiful cars that smoke gas cars in its price range, typically for LESS money and MUCH LESS operating and maintenance cost.
    China is providing MASSIVE subsidies for EV's due to their smog problem (in some cities it is as high as $15,000 USD!)...so a Model S for $50,000 USD or a BMW 5 series for $70,000? You do the math...China will be a BIG market for Tesla.
    8 Mar 2013, 12:47 PM Reply Like
  • Tdot
    , contributor
    Comments (3718) | Send Message
     
    Ted - Your statement that the cars cost 2-3 times the gas-powered versions is false and misleading.

     

    The Focus Electric is loaded and costs about $40k. After federal and state incentives, the net cost can be $30k. That happens to be the same price as a comparably equipped Focus Titanium edition. Basically the government/taxpayers are paying for the upgrade from Focus Titanium to Focus Electric.

     

    You cannot compare the price of a loaded Focus Electric with a stripped down base Focus, and blame the price difference on the electic motor and battery. You are ignoring all the options and features that come with what is essentially a Titanium edition Focus Electric.
    8 Mar 2013, 03:30 PM Reply Like
  • Locked Down Investments
    , contributor
    Comments (1353) | Send Message
     
    Sorry TDot most people only look at starting prices and as per the Toyota website:
    Rav4 gas starts at $23,000
    Rav4 EV starts at $50,000

     

    Rav4 EV is heavier, has less cargo space, a measly 75 mph (EPA rated range) and its quickest possible charge from empty is 6.5 hrs.

     

    So tell me why exactly would I buy a car for twice as much that does a whole lot less, unless I am some crazy enviromentalist trying to make a point? Most sane people won't and Toyota knows this which is why it is a compliance car at best, that they will only make a few thousand of per year..if that.
    Same with Ford and their Focus EV.

     

    Ford Focus gas starts at $16,000
    Ford Focus EV starts at $40,000 (doesn't say anything about "loaded" on the website either..that is the STARTING price..options are extra)

     

    Again Focus EV is heavier, MUCH less cargo space than the gas version (because I assume Ford, like idiots, merely shoved the batteries into the storage space areas), and STILL a pathetic 75 mile range. It can charge in 4 hours but only if you buy an expensive charger to be installed in your garage.

     

    What I am trying to say is that this "just shove in some batteries and electric motor into to our regular cars and people will buy them" philosophy is fundametally flawed. It allows customers to look directly across the showroom floor at what appears to be the exact same car but the EV version costs twice as much and does LESS.

     

    As a direct result many dealers have admitted that the EV versions are actually increasing sales of the petrol powered versions because after getting to the dealership (with the intention of looking at the EV version) by the time they have weighing up all the pros and cons, the vast majority of people agree that the gas version is by far the better deal...and this is exactly what the dealers want...as their margins are much better on the petrol cars.

     

    At least Nissan wasn't dumb enough (or smart enough) to have a DIRECTLY comparable gas vs EV version with the Leaf in their lineup. Unfortunately they designed the Leaf to be the most butt-ugly car on the road so are failing there (I actually think the Leaf would be doing fairly well if it had an ounce of style).

     

    What I mean is that this approach is the exact opposite of what Tesla is doing and why Tesla has it right because they made an EV FROM THE GROUND UP!

     

    Tesla is making BETTER cars at LOWER price points. The Tesla can BEAT a BMW M5 in 0-100mph, at a LOWER price, with more than twice the cargo space, is safer, and running/maintainence costs are roughly 1/8th that of the BMW (even after paying for your increased electricity bill). Oh and the Tesla has up to 265 miles of EPA range and can recharge in as little as 30 minutes at the superchargers (which are exclusive to Tesla vehicles and are...FREE TO USE!)

     

    Here in New Zealand that BMW M5 costs $250,000 NZD...my Model S will cost around $150,000...in Norway BMW M5 costs nearly 2 million kroner...Model S only 600,000!
    Europe with its higher petrol costs and enviro leanings will gobble up Tesla's much faster than they can be produced.

     

    In 2-3 years Tesla is easily the Porsche of the EV industry (120,000 cars per year)...in 5-10 years they will be BMW (1 million cars per year)...in 10-15 years...who knows?

     

    All I can say is that big auto better wake up...their current plan is failing miserably...but maybe that's what they want so they don't actually have to make real EV's?

     

    They can keep playing that game but if they do...Tesla will eat their lunch big time.
    8 Mar 2013, 05:02 PM Reply Like
  • Tdot
    , contributor
    Comments (3718) | Send Message
     
    "Ford Focus gas starts at $16,000
    Ford Focus EV starts at $40,000 (doesn't say anything about "loaded" on the website either..that is the STARTING price..options are extra)"

     

    Again Ted, FALSE. As clearly stated, there are no significant "options" for the Focus Electric - aside from paint color. I think one of the premium paint colors adds another $595. But go ahead and check what is included. We'll wait. Just stop making stuff up.

     

    The Focus Electric is essentially a fully loaded Focus Titanium edition, with an electric motor and high voltage battery, and associated support equipment. You cannot compare a Fully Loaded Focus Electric with a stripped down base price Focus. You MUST compare it with a comparably equipped fully loaded Titanium Edition. There is no argument here.

     

    Your statement is just as false and misleading as it was before, and even worse, because you are just making stuff up from poor research on the topic.

     

    Everything else you said above is irrelevant smoke and mirrors and jabber, meant to draw attention away from your misleading and falsified information, and misconceptions about the pricing of the Focus line.
    8 Mar 2013, 05:53 PM Reply Like
  • pvenkate
    , contributor
    Comments (634) | Send Message
     
    Tdot: Ford's strategy in offering only "loaded" version for the EV, is quite frankly brain-dead. You are right, after govt rebates it will be a $30K car here in Calif, but why wouldn't they atleast offer a base focus EV sans the options that they offer as standard? Post rebate, that price could have been in the mid $20K making them very competitive with ICE cars, right? Nissan has realized that and is making a cheaper Leaf for this year.

     

    Ford, Toyota and other major ICE incumbents don't have the gumption to make EV's mainstream in a hurry. They currently survive on the strength of ICE sales. But they don't want to be seen as EV haters either.
    9 Mar 2013, 03:32 PM Reply Like
  • Tdot
    , contributor
    Comments (3718) | Send Message
     
    "Ford's strategy in offering only 'loaded' version for the EV, is quite frankly brain-dead."

     

    P-Kate - you might think so, but you would be dead wrong. You don't know much about manufacturing and selling cars, do you?

     

    Automakers and dealerships make money - lots of money - on "loaded" cars, and can maximize profits (or minimize losses) in selling "loaded" vehicles. Stripped down base models have been known as "loss leaders" ... they are meant to bring shoppers into the show, where the dealership sales staff could then "talk up" buyers to the loaded cars in the show room.

     

    The base $16k Focus model probably costs Ford about $14k to build, and earns Ford about $1000 in profits selling it to the dealership at wholesale. The Dealership gets up to another $1000 in the markup from wholesale to retail. Meanwhile the loaded Focus Titanium ($30k) probably costs about $20k to build, and Ford and the Dealership can split the $10k in profits accordingly.

     

    In the case of the Focus Electric, the electric powertrain option costs about $15k to Ford. Customer clinics showed folks would not pay an extra $15k for an electric vehicle, but $10k was about right if the vehicle was otherwise a "premium" level.

     

    If Ford simply added $15k to a stripped down $16k base Focus, the $31k price tag would have represented a poor value to the customer, even with a $10k government tax rebate. It was still a stripped-down base Focus with an extra $5k on the final cost, and Ford and the dealership would still lose money selling it. A lose-lose-lose scenario for everyone.

     

    So Ford took an essentially loaded Focus Titanium vehicle, costing about $20k to build, added the $15k powertrain for $35k total cost, then charged $38k wholesale price to the dealership for a $3k profit, who then sold it for $40k to the customer for $2k profit, who then got $10k back from the government in tax rebates. A Win-Win-Win scenario for everyone.

     

    That is how you manufacture and sell cars for a profit.

     

    Customer clinics show that electric vehicles are considered a premium upgrade feature, and are considered a premium value to more mature and wealthy folks who appreciate "all the options and gadgets". These folks are sensitive to the environment, looking for alternatives to oil and gasoline. They are willing to spend the extra money, and don't want to compromise value and features in a cheap EV.

     

    More info on Ford's strategy with Electrified Vehicles: http://bit.ly/MvDAQe
    9 Mar 2013, 05:41 PM Reply Like
  • pvenkate
    , contributor
    Comments (634) | Send Message
     
    Tdot: All good stuff, but I still don't get it. You are saying a price of $21K at the low end represents poor value to the customer? $21K to $30K is a very wide range. I'd say, let the customer decide (just as he/she gets to decide with gasoline cars) what options they want to get. The $21K EV could also tease those customer looking for an affordable EV into the showroom, just the same.

     

    IMO, until the Focus EV cars have characteristics like that of Tesla and its range, I wouldn't expect customers to confuse them with premium cars. Nissan realized it a bit late and is correcting that this year.
    10 Mar 2013, 03:03 AM Reply Like
  • Tdot
    , contributor
    Comments (3718) | Send Message
     
    Kate - No, you misread. I never said anything about $21k. I said a stripped down Focus Electric at $31k would represent a very poor value to the customer, when a fully loaded Focus Titanium with all the gizmos and options is less at $30k.

     

    If Ford did try to price a stripped down Focus Electric at $21k, it would be essentially the same as giving them away - they would be losing at least $10k per unit. Yes, folks might jump at the chance to buy one at that extremely low price, but Ford is not in the business of irresponsibly giving away the shareholder's cash. Ford already donated a limited number of Focus Electrics to various charities and nonprofits, but there is a tax benefit in doing that. They are not going to give more away at the retail dealership level.

     

    Frankly, as an investor, your only interest should be how Ford can maximize profits, or minimize losses, on the Focus Electric and the rest of the lineup. Ford has people and business models far more clever than you or me to figure that stuff out. What they are doing is the best they can do with what they have. If you do not believe that, then take it to the shareholder meeting in May and complain to Bill and Alan.
    10 Mar 2013, 09:03 AM Reply Like
  • pvenkate
    , contributor
    Comments (634) | Send Message
     
    I am looking at Ford as an investor too. I repeat, Nissan has learned its lesson and is now offering 3 different Leaf models plus you can add other customizations as you choose. Net cost to consumer in the $21K through $30K+ range. I like that strategy much better than Ford's all-in-one package Focus EV. I'm sure they'll come around in the not too distant future, when the market will speak for them.

     

    http://bit.ly/WCVFnG
    10 Mar 2013, 07:11 PM Reply Like
  • Tdot
    , contributor
    Comments (3718) | Send Message
     
    If there is sufficient and profitable demand for stripped down and "cheap" electric vehicles, you can bet that Ford (and GM and the others) will be there with offerings. But with batteries costing upwards of $15k, that is doubtful. Companies have no reason or business deliberately losing money just to try to satisfy a tiny segment of the market.

     

    Meanwhile Ford is seeing great success with the new hybrids and plug-in hybrids.

     

    Just because Nissan does something, and you happen to agree with it, does not mean it is "right" or a good business model, nor that it will work. It remains to be seen whether "Nissan has learned its lesson", whatever that means.
    10 Mar 2013, 08:15 PM Reply Like
  • Tdot
    , contributor
    Comments (3718) | Send Message
     
    Also, Ford already tried a cheap electric car. It was called the "TH!NK". It failed. There was also the Electric Ranger and the Electric Transit Connect.
    10 Mar 2013, 08:39 PM Reply Like
  • pvenkate
    , contributor
    Comments (634) | Send Message
     
    Ford Think and GM's EV1? Don't get me started. Who killed the electric Car, again? Those cars with Lead acid batteries were DOA anyway.

     

    I agree, there isn't too much money in selling just a stripped down EV and like you say, EV consumers generally tend to be the more affluent type. But lumping every option available into one Model to "make" it feel like its a substantial car (esp. when they don't have Tesla-like driving characteristics or the range) and marketing it the Premium segment is bad strategy, in my book.

     

    Nissan Leaf, the first "real" EV to come to the market went with this strategy and even after 2 years, its sales had been languishing. Lesson learned and all that has changed starting this year. We'll pick up this thread after we see how their sale will do vis-a-vis Ford Focus EV starting (or the Spark EV coming a bit later) this year.
    12 Mar 2013, 01:27 AM Reply Like
  • Sam Liu
    , contributor
    Comments (3864) | Send Message
     
    "China is providing MASSIVE subsidies for EV's due to their smog problem "

     

    A few EVs are not gonna solve the tragic corrupt smog situation. Corruption lead to this tragedy.
    8 Mar 2013, 12:50 PM Reply Like
  • chfp
    , contributor
    Comments (593) | Send Message
     
    Perhaps not corruption, but just plain greed. Greed to grow the economy as fast as possible without any consideration of the environment and human health.

     

    The one advantage that China's totalitarian government affords is that they can mandate all-EVs with one stroke of the pen and no one could oppose. They might start with only allowing EVs in the city center, then slowly expand that out to the rest of the city. Tesla may not be the largest benefactor since China obviously prefers homegrown products (BYD for instance). But Tesla's presence is a sign that China's so-called communist party is waking up to the reality of the price they're paying for unbridled economic growth.
    8 Mar 2013, 04:05 PM Reply Like
  • Locked Down Investments
    , contributor
    Comments (1353) | Send Message
     
    A few thousand EV's this year...means tens of thousands next year...then hundreds of thousands in a few years...and then millions in 5-10 years....you have to start somewhere.

     

    The lithium e-bike has transformed China, getting many off the traditional bicycle while increasing their speed of mobilty and productivity...all while reducing noise and direct pollution in these cities when compared to horribly polluting and loud 2 stroke motorcycle engines which are common in Asia.
    Battery costs are falling rapidly in China...look to companies like BYD and Kandi to start offering more affordable EV's in the not too distant future.
    8 Mar 2013, 04:18 PM Reply Like
  • Locked Down Investments
    , contributor
    Comments (1353) | Send Message
     
    Very good point chfp...I do believe that the Chinese and actually some Western governments may start banning petrol powered cars from inner cities in the next few years. Or at least setting a time frame for when the ban may be introduced to allow people time to adjust.
    Of course China can introduce such measures much more quickly if they wish...but that will depend on BYD and others getting costs down far enough and the government investing heavily in charging/battery swap stations.
    Kandi is going down the very cheap (smart car like) EV with swappable batteries...will be interesting to see how they fair...I know a few people on this forum who are quite bullish on Kandi.

     

    None of these developments can be bad for Tesla though.
    8 Mar 2013, 05:45 PM Reply Like
  • jpmj4847
    , contributor
    Comments (508) | Send Message
     
    Hello.....not only China....many are in that category! Thanks SAM LIU for your comments.....maybe the USA will get out of the smog, do what they do best, and let all those other countries.....figure it out for them selves.jpmj4847
    9 Mar 2013, 02:03 AM Reply Like
  • Sam Liu
    , contributor
    Comments (3864) | Send Message
     
    " start banning petrol powered cars from inner cities in the next few years. "

     

    15 years ago Shanghai Santana taxis were dual tanked with LPG or gas running them. But the cabbies hardly used the LPG option because as a few of them told me that it screws up the engine. So that venture has been abandoned long ago.

     

    Second of all my step-sister told me she heard that bicycles were not permitted to ride in the inner city.

     

    I ride in the inner city on my bike. On streets permitting or not.

     

    Third, the city government said that it would outlaw the motor bike before 2000, they are still on the streets. Though those running on gasoline are practically non-existent.

     

    Fourth, the city government said that it would halt construction 2007 to clean up the air-- never happened.

     

    Greed is corruption.
    9 Mar 2013, 04:40 AM Reply Like
  • Sam Liu
    , contributor
    Comments (3864) | Send Message
     
    Dear JPM:

     

    I got the hell out of Beijing on Jan 2012, hardly ever wanting to return. Even the Shanghai press blames the Beijing pollution jet streams to this city. The difference between the smoggie cities is that Shanghai is windier and has a lot of rain!

     

    Even 18 years ago, Guangdong weathermen still deny that its factories' exhaust flow to Hong Kong. Now they use expensive machinery to prove that.
    9 Mar 2013, 04:47 AM Reply Like
  • JohnnieDD
    , contributor
    Comments (4) | Send Message
     
    Wheras yes, there is growing concern in the Chinese Communist hierachy for the air quality diminution driven by their sharp industrial development they are none the less committed to that continuing development. To rationally embrace total EV transport will further degrade the already straining electrical power production grid. Given it is primarily coal reliant this would only contribute negatively to this environmental problem. I.E. the "Smog" problem in China is not auto driven it is unbridled industrial pollution causing the problem. ICE powered transport is in the end "Cleaner" and more efficient, by its volume more manageable, and by its consumer preference more profitable.
    As in the West Communism may "Badge" a few EV's for political window dressing but, they will not promote it on a mass production basis. One final note: All western Capitalist corporations are required to forfeit at least 51% ownership to the Chinese Communist state in order to produce or market their product in Red China.
    8 Mar 2013, 01:19 PM Reply Like
  • Sam Liu
    , contributor
    Comments (3864) | Send Message
     
    "forfeit at least 51% ownership to the Chinese Communist state in order to produce or market their product in Red China."

     

    Greed and Corruption on the part of global MNCs!
    8 Mar 2013, 01:26 PM Reply Like
  • Randy Carlson
    , contributor
    Comments (1416) | Send Message
     
    Forfeit 51% ownership just to build products and sell them in China? I didn't know that. Finally I understand why AAPL took such a tumble. After all, if they just turned 51% of the company over to the Chinese Communist Party, all that dilution would easily explain why their stock tanked - and just so they could sell iPads in Shanghai... What was Tim Cook thinking?

     

    /sarcasm off
    8 Mar 2013, 01:26 PM Reply Like
  • Sam Liu
    , contributor
    Comments (3864) | Send Message
     
    "promote it on a mass production basis."

     

    There seemed to be quite a few BYD autos in Beijing.
    8 Mar 2013, 01:28 PM Reply Like
  • Locked Down Investments
    , contributor
    Comments (1353) | Send Message
     
    Sorry Johnny that is completely false. Even if using 100% coal an EV is about 50% cleaner than your average ICE powered car thanks to the efficiencies of the much larger coal plant over a tiny combustion engine in a vehicle. I agree with you that cars are not causing most of the smog in China and more of it is to do with heavy industry located far too close to the large cities.
    China has been doing a lot to relocate these factories further from the cities and improve their emissions. Of course this is going very slowly...just as the adoption of EV is going slowly.
    However when you have millions of ICE vehicles in a very small location..these cars ARE contributing to the smog problem. Just as they do in Los Angeles and many other large cities.
    The EV is a legitimate answer to these problems.
    In addition I would say that it is MUCH easier for governments and business to work on better filtering the emissions from a relatively few fixed power plants (usually in more remote locations) than trying to do the same with hundreds of millions of mobile ICE vehicles spewing pollution all over our most densely populated cities.
    EV's have technology on their side (both in terms of battery and renewable energy generation advances). China is actually the largest single investor in renewable energy in the world and coal is actually on the decline as a total % of their energy mix.
    So please do some more research before touting wild claims.
    8 Mar 2013, 04:11 PM Reply Like
  • Sam Liu
    , contributor
    Comments (3864) | Send Message
     
    "forfeit 51% of the company"

     

    I suspect that that is in a wholly formed new JV made specifically to deal with the Cn operations, which was the only route in establishing Cn operations last century. Remember the JV partner stealing the IP and setting up competing operations, literally across the street.

     

    Also last century, I recall that Sg Senior Minister Lee Kuan Yew himself launched the groundbreaking to establish a Sg science and technology park in Suzhou. But the Suzhou government established a science and technology park quicker.

     

    http://bit.ly/XxoAIq
    SIP was built near-simultaneously with the competing Suzhou New District (SND) industrial park. As the Suzhou city government had only a minority (35%) stake in the SIP, while they had a major stake in SND, the city government largely ignored SIP and concentrated on promoting the SND instead.

     

    There are many avenues in setting up Cn company registration as restrictions are also removed:

     

    Representative Office
    Foreign-Invested Commercial Enterprises (FICE)
    Wholly Foreign-Owned Enterprises (WFOE)
    Joint Ventures (JV)
    Hong Kong and other offshore incorporations
    Foreign-Invested Partnership Company
    Fund Management Company
    9 Mar 2013, 04:55 AM Reply Like
  • Sam Liu
    , contributor
    Comments (3864) | Send Message
     
    "Why Beijing roads might soon be full of electric cars: Free license plates"

     

    Those BYDs will clear up the street congestion, those are slightly smaller than the Prius.
    9 Mar 2013, 05:53 AM Reply Like
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