The Case for Luxury EVs Lacks Evidence
Bob Lutz, who earned the title “Father of the Volt” when he championed the car through the treacherous shoals of General Motors’ bureaucracy, is having some second thoughts. “If I had my time again at GM then I would have started with the Cadillac Escalade for the range-extender technology, and brought the Volt in later. The more gas-guzzling the vehicle, the more economic sense of electrifying it,” the former GM vice chairman (now building plug-in hybrid trucks at Via Motors) said last month.
Lutz added, “Electrifying [a smaller car] that uses virtually no fuel anyway, and then lumping a huge premium on it to cover the battery costs is nonsensical. Why bother?”
And according to NBC News, "It turns out there are not multitudes of would-be planet savers desperate to shell out $40,000 for an electric economy car." The point is, though, that there are unlikely to be multitudes waiting for, say, a $60,000 electric Lexus that has 75-mile range because of the weight from its luxury add-ons."
The Big Bucks Market
Lutz’ point is that automakers are better off adding batteries to luxury cars, because upper stratosphere buyers are accustomed to paying high prices. That was essentially Tesla Motors’ strategy with the Roadster—hide the big battery bottom line in a high-performance supercar. The $109,000 price tag was par for the course on those cars. But Tesla has been on a down-market trajectory since then, and its next reveal will be a car in the $30,000 - $40,000 range for you and me.
Lutz is forgetting that GM essentially followed his advice with the “dual-mode” hybrids developed with BMW, Chrysler and Daimler. Familiar with the Chevrolet Silverado 1500 Hybrid, GMC Sierra 1500 Hybrid, GMC Yukon Hybrid and GMC Yukon Denali Hybrid? No? “The dual-mode hybrids have sold poorly for GM,” notes Cars.com, which points to a $5,000 premium on the models.
Here was a clear example of a lot of bang for the buck—gas guzzlers made much more efficient with hybrid drive, and the public emphatically rejected it. In 2011, GM sold an underwhelming total of 3,114 of all five of its big hybrids.
Luxury Sends the Wrong Image
I think Tesla was smart to lead with the ultra-cool Roadster, but I also think that GM made the right call with the Volt. These analysts are missing an important fact—that early adopter buyers don’t want to drive huge SUVs or expensive luxury cars. Vehicles like that don’t match their self image. The Prius is a huge hit precisely because it fits in so well with buyers who want to proclaim their sustainability to the world.
Also, luxury cars tend to be heavier, and their performance with battery power would be lousy. That’s why the lightweight Tesla Roadster made sense (the all-new Model S, too) but an electric (or plug-in hybrid) Escalade does not. The Fisker Karma, a luxury car if ever there was one, is also hampered by excessive weight, though that’s only one of the problems it’s having in the marketplace.
A Question of Value
Leftlane News echoes Lutz in an editorial that says the Volt and Nissan LEAF (not to mention the upcoming Chevrolet Spark) are misfires because they’re lousy values compared to other cars in their respective classes. The Volt, it says, “doesn’t perform like a $40,000 car—by any measure. It also lacks the amenities of the cars it’s priced against (think Lexus ES 300h, BMW 328i, Acura TL). Even after the available discounts, it’s simply not a good deal.” And Leftlane calls the Spark EV “the worst value proposition yet.”
The website doesn’t blame the automakers for lower-end EVs, it blames the “eggheads” at the EPA and DOE. “It would be terrible optics for governments to subsidize electric cars if the only EVs on the market were high-end luxury cars like the [Tesla] Model S, even though such cars are the only EVs that make sense today.”
The problem with this argument is that the $7,500 federal tax credit is available to all EVs with big-enough batteries, and doesn’t favor lower-end vehicles in any way. Both the Model S and the LEAF get that credit.
Remember the MPV5?
We will be seeing some upmarket EVs on the market soon, including the Infiniti LE version of the LEAF. The BMW i3 could also qualify. It's not a conventional luxury car by any means, but it's likely to be priced like one.
All this brings us to the Cadillac ELR. GM is being cautious about volume levels, and that makes sense—the market for a $60,000 upscale version of the Volt is unclear. Consumers, as Leftlane points out, are wary of the car at $31,645 (after the tax credit). The version of the Volt I would have put ahead of the ELR is the small MPV5 crossover SUV that GM showed in Beijing in 2010.
"The Volt MPV5 concept takes the efficient design of the Chevrolet Volt and adapts it to the family vehicle crossover segment,” said GM’s Bob Boniface at the time. That’s a big segment, and the MPV5 would stand out in it as a fuel economy champ. If the car was cheaper than the Volt (no guarantee on that), it could do quite well.
I'd like to hear of specific luxury electrics that would make sense in today's market. Obvious candidates are not coming to mind.
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