Monday, August 7, 2017

GM Losing "Some $9,000" On Every Bolt It Sells, But It's Actually Much Worse -- Financial Times -- August 7, 2017

I'm re-posting the Financial Times story on EVs (see link below). I don't think the writer could have spelled it out any simpler:
GM believes it is losing "some $9,000" on every Bolt it sells. 
What can that possibly say about Tesla's Model 3? But note also, even with government subsidies, EVs cost significantly more than ICEV by a wide margin. EVs are simply not mainstream yet, and the tea leaves suggest that will not change for at least ten years.

From an earlier post:
And yet another article on the downside of EVs: Electric vehicle realities in the Financial Times.
In the spirit of non-consensus thinking, it’s time for FT Alphaville to ask just how green electric cars really are. Are policies to ban diesel and gasoline cars at some arbitrary point in the future likely to unleash a barrage of negative externalities that no one’s yet even thought about?

Brian Piccioni and team at BCA Research offer a good starting point to our questions on Thursday, in a report entitled Electric Vehicles Part 1: Costs of Ownership.

The bad news for EV fans is their work determines that the cost of ownership of an EV still far exceeds that of an internal Combustion Engine Vehicle (ICEV), even after subsidies are accounted for.

With numbers crunched, a comparison between the Chevy Bolt EV and two equivalent ICEVs, the Chevy Sonic and the Open Astra, over 100,000 miles, shows that there’s no denying EVs are still more expensive than ICEVs.

Three points come up in particular.
1) Excluding subsidies, the net expense difference is about $16,000 in the US, $18,500 in Germany and $13,200 in France.

2) After subsidies, the difference is about $6,600 in New York State, $13,900 in Germany and $6,000 in France.

3) Even if electricity were free (which of course it isn’t), after subsidies, the difference in cost of ownership in NY would be $3,400, $3,200 in Germany and $600 in France.
With respect to the Bolt specifically, the analysts note GM believes it’s losing some $9,000 with every Bolt it sells. The automaker would need manufacturing costs to be cut by about $14,750 — 34 per cent — to make the vehicle competitive with GM’s Opel Astra in France.
I'm re-posting this story because there are so many other data points from the article. For example:
  • the numbers above can thus be adapted for a “What If…” scenario, wherein GM actually begins selling the Bolt at average corporate profitability
  • in that case the numbers get even more bleak. Excluding subsidies, a Bolt would be $26,900 more expensive in the US than the equivalent ICEV, $29,300 more expensive in Germany and $24,000 more expensive in France
  • there are additional manufacturing costs for “Pure Play” EV vendors like Tesla, meanwhile, because unlike integrated auto manufacturers, they can’t use many of the same components from ICEV production, limiting economies of scale
  • but the common denominator for all EVs is the cost of batteries, say the analysts, since that’s a commodity. It’s also the key factor behind the faster rate of depreciation of EVs versus ICEVs
  • here, arguably, some significant issues are being overlooked. For example, while the consensus view is that EV battery prices have been experiencing price declines over the past few years (in the order of 8 to 14 per cent), the analysts themselves could not find any evidence to support that position
  • some confusion is probably also occurring on the comparables. While some reports claim battery cells cost $145/kWh, the analysts stress this is not the same thing as a battery pack, which comes as a fully assembled unit with wiring, electronics and a cooling system. In the case of the Bolt, GM lists the cost of its battery pack as $15,734, so about $262/kWh

  • And this:

    • the analysts further suspect it may be part of GM’s commercial strategy to subsidise the battery packs so as not to show EV buyers that a replacement battery is overwhelmingly expensive.
    • given the Bolt comes with a 100,000-mile guaranty and an 8-year warranty on the battery, however, the analysts believe it’s highly unlikely many consumers will spend $15,734 (plus labour) to replace the battery on an eight-year-old EV. This allows GM to sell them below cost, since it’s unlikely to sell many replacements. Accordingly the analysts note: “We believe that most likely the actual cost of the battery pack of the Bolt is much higher than $15,734”
    • regardless, when it comes to degradation, GM's own expectation is that depending on use, the battery may degrade as little as 10% to as much as 40% of capacity over the warranty period
    • overall, batteries currently don’t last much more than 100,000 miles and yet 18,300 miles per year is the average UK mileage for a company car. Assuming a normal distribution, the BCA analysts predict up to half of all EV drivers may experience degradation sooner than the eight year guarantee because of surpassing the 100,000-mile limitation on the warranties (comment: a flaw in this argument: most agree that EVs will be bought as a second or third car and used for local trips; not long trips; thus average mileage will be will less than 18,000 miles per year)
    I have to quit here. But I haven't even gotten to the "most important" part of the article. See the linked article for more. If behind a paywall, googling it will get you there.

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