The Case for Luxury EVs Lacks Evidence

By · February 12, 2013

Chevy Volt MPV5

The Volt MPV5, shown in Beijing in 2010, might appeal to more buyers than the upcoming Cadillac ELR version. (GM photo)

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.

Infiniti LE Concept

The Infiniti LE is headed for the market, but are consumers willing to dig deep for a fancier LEAF? (Jim Motavalli photo)

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.

Comments

· · 1 year ago

Volt was precisely the wrong car for a plugin.

The ideal car for a plugin hybrid is the small SUV/Van/Cross Over. It will have the space below the vehicle to not reduce cargo/passenger area.

We will know whether what I'm saying is true, once Mitsu Outlander PHEV starts selling here.

BTW, if Model S sells the same number as Leaf, what does it tell us ?

· · 1 year ago

I guess Tesla had no problem of "selling a luxury EV".

The problem is that people aren't willing to sacrifice performance just to be "green". At the end of the day, the car itself has to be competitive for the price range. At a higher price range, the EVs cost becomes less of an issue than economy segement since the battery cost so much these days. (ICE is really cheap to produce).

As far as Volt goes, it is a decent first try. GM tried to save as much money as possible using some of the Cruze parts. But that also limited the type of price that GM can charge for... Double edge sword.

· · 1 year ago

My problem with Volt is that it was the wrong type of car. They should have chosen either a family car or a small SUV. May be they would have got lower EV range, but that is ok - compared to compromises in space (no fifth seat !).

· · 1 year ago

I would think wealthy people who are not car fanatics or even terribly interested in cars are loath to take 'risks' that could upset their comfort and well-being, as exemplified by the current mess with the Tesla that got flat-bedded. Which doesn't bode well for EVs making much of an impact in a segment where affordability is of less concern.

The ELR, on the other hand, should be most able to tap the market potential in the wealthy buyer segment, thanks to the absence of range issues spoiling the party. The wealthy do appreciate frugality, as long as it is not at the expense of their own comfort and well being, and the ELR has that nailed down in spades.

Cadillac better be ready to pounce into the fray with a decently roomy 4 door sedan - I'm afraid the ELR is too 'niche' to allow Cadillac to realize the market potential here. Even if they keep the same drivetrain in a larger package, and EV range drops from 35 to 25.... it'll still stand out and be desired.

· · 1 year ago

Looks like we're all going to have to wait a bit longer.. Manufacturers don't seem to be taking much of a chance here. That Infinity LE is just a bit different from a Leaf.

Mr. Musk's Model X seems to be the exception, seeing as it has both capacity, decent traveling distance and (optional) high performance. If the Model X Tesla sells well, there will be copycats from other vendors trying to play catch-up.

As regards Bob Lutz you'd think he'd be pushing and/or marketing his Via vehicles a bit more strenuously. Their WebSite is horrible. Plain Jane as can be with almost no information, just plain wrong information, and even less pricing.

Now, I realize they are currently aiming at fleet purchases, but it never hurts to wet the appetite of an awaiting public. A different marketing team there would be pushing Via Escalades, and Pickups, Manly supercab trucks and Vacation ready MicroBuses (vans) as VW did back in the '60s'

· · 1 year ago

A Voltec S-10 type truck would be pretty darn groovy.

· · 1 year ago

In this case we really need to separate the EREV from the pure EV. The markets are very different, but not necessarily the buyers.

Both EVs and EREVs have a big limit on their buyers, in that the buyers are almost always going to be a home owner. If California is a good sample for the rest of the US, only 4% of EV/EREV buyers live in apartments, condos or mobile homes. Home ownership is about 67% in the US. To add to the problem two big EV/EREV states are California and New York which have lower home ownership rates at around 55%. The ownership problem is offset somewhat by the fact that home owners tend to be higher earners. In California only 21% of buyers make under $100,000/year. So just the housing problem cuts a third from the potential buyers for both EVs and EREVs.

The EV market has another limit, in that an EV makes for a poor only car (I know some of you make due, but not very many). The only figure I could find for home ownership with a single adult was old and it was 43%. So knock at least another 20% off the potential market for pure EVs. And then cut that in half, because only one of the cars will be a pure EV.

So looking at EVs, the market is at a maximum 25% of the total new car market. That is a big hole to start in. So for now the EV manufactures are looking at innovators and early adopters who own a home and will own at least two cars. That gets you down to about 4% of the population. So assuming that only half of the population can afford a medium priced car, that leaves the target buying population at 2%. So the manufactures have to figure out how to get that 2% of the population to buy their EVs.

The EREVs have a bit better time, in that a EREV can be an only car. That leaves their market at about 5% of the total new car market. The 5% has a complete overlap with the 2% of the EV market.

So looking at the market, with my caps in place, the plug in market is not doing to badly. About one in ten potential buyers are becoming a real customer.

So would changing the vehicle mix up the sales? We will see. The Mitsubishi plug in is coming soon. The Honda Accord and Ford Fusion plug ins are starting to sell. This adds a much wider range to the plug in market. Still not work truck from a major manufacture.

· · 1 year ago

Finally, someone is saying this stuff . . . make a family hauler with a Voltec drivetrain. Leave off as many gadgets as possible, or offer a base package that's as stripped down as much as possible. I don't need GPS and computer-controlled all-wheel-drive to drive my son and the neighbor's kids to school 5 miles away. That Cadillac hybrid thingy GM has been showing off lately at car shows is a complete non-starter with me and to just about anyone I know in the real world.

On a different EV topic, I wandered into a local shopping mall the other week and saw three Fiat 500s parked inside. I was invited to sit down in one (passing by the fancy Abarth and sporty ragtop to gravitate towards what was certainly the base model.) I was surprised how roomy the tiny car was inside and pleased to find the base level interior unpretentious and cleanly functional. Of course it has electric crank windows (ugh) and an automatic transmission, which I think is heresy on a little 4-banger 2-door. But I guess this is what Generation Z is asking for these days.

The sales people were putting an emphasis on safety (counting the number of airbags, etc.,) domestic manufacturing and reliability (it was they who quoted the famed "Fix It Again, Tony" translation for the Fiat acronym - not me - and declaring that this wouldn't be the case with these newest one,) Needless to say, I turned the conversation to the 500e fairly quickly, thinking the sales people wouldn't know a thing about it, much less that any car could even run on electricity.

To my pleasant surprise, though, the young lady I spoke to was very much up to speed on what the 500e was all about and informed me - despite its California-only compliance status - that examples will be made available in Tucson and that she has already gotten several serious inquiries.

We talked about price and I expressed my ongoing concern that any/all EVs seemed to be offered only in luxury trim . . . especially the 500e, which - if you read the early press releases - makes you feel that platinum plating is the only way it's ever going to be available. She admitted that it wasn't going to be cheap, but that rumor mills had been working overtime in regards to sticker price (I had previously heard something like $40K before rebates.) She spent some time combing through official Fiat sites on her laptop and found one page where the projected pre-rebate list was going to be around $34K . . . which puts it in the same league as the Chevy Spark EV.

· · 1 year ago

The main reason GM decided to produce the Cadillac ELR before producing a plug in CUV is cost. The ELR was easy because it's the same platform as the Volt. This should be obvious to anyone who knows anything about automobiles.

· · 1 year ago

I concur with the "home ownership" problem mentioned above, although maybe we should clarify it a bit and limit it to "apartment dwellers". Many people who rent houses, townhomes, or duplexes (as I do) have no problem using an EV. It is easy to plug in, just not as easy to install a level 2 charger - as I have to ask the landlord (ours was totally OK with it).

Apartments or large condo complexes are a different story. A couple in our area have thrown some charging spots in, which is cool. But it really should be building code anymore, something along the lines of : any complex with more than 5 units should have at minimum one level 2 charger available, and at a minimum one one charger per 30 parking spaces.

Also, so many apartment complexes have carports with lighting installed. Those could easily have chargers here and there (and should have solar panels on top of the carports but that's a different discussion).

· · 1 year ago

@CharlesF – “Both EVs and EREVs have a big limit on their buyers, in that the buyers are almost always going to be a home owner.” I never thought it would happen but I believe you have convinced me of the need for large public subsidies for Level 2 charging station installations – in apartment and condo building parking lots. Without ‘home’ charging stations EVs / EREVs are never going to take off.

Another truth – “an EV makes for a poor only car”. (Is there even a big-battery Tesla driver out there for whom the Tesla is an only car? I doubt it.) In theory I think it could be. But prospective owners should take a serious look at their driving requirements – not just range but the climate and topography of the drive. For many the capabilities of existing EVs would be sufficient for most of their needs. If there were convenient, cost-effective alternatives for the rest, this need not be an issue.

That ‘serious look’ might be difficult, given all the misinformation being disseminated by EV partisans and vendors. Until big-battery Tesla-like cars come down in price to a level affordable for the rest of us (and assuming they can safely be quick-charged- which apparently they can), EVs will not be long distance cars. Someone said the reason a LEAF can’t be repeatedly quick-charged is that Nissan undersized its battery. I would like to know how many other EV vendors ‘undersized’ in order to keep their products affordable. Until this happens, filling the wide-open spaces with Level 2 & 3 chargers isn’t going to accomplish much (except waste the public’s money).

It all comes down to money. My guess is that a lot more people would like to be ‘green’ – so long as it isn’t inordinately expensive. While it remains so, cars like Teslas, Fiskers or the Caddies Lusk apparently envisions, EVs will be seen by those who can’t afford them as playthings of the rich, a sort of ‘conspicuous consumption’ with moral window dressing. For this to change, governments are going to have to take a serious look at the externalities, the costs, involved in continuing support for driving ICE-powered cars. At the very least, they need to terminate policies like paying for oil wars, tax breaks and low-cost leases of public domain oil reserves that create an un-level playing field.

I find it hard to believe that electric utilities couldn’t make a lot of money from EVs if they were a little hungrier. Has anyone ever looked at the economics of those utilities buying the EV batteries in exchange for vehicle to grid and salvage rights? Even if this was a wash or caused a slight loss, could the profit from a greatly expanded market make up the difference?

· · 1 year ago

I must be missing something with the size of the Volt. According to Wikipedia the Volt and the Cruze are the same width at 70.4 inches. We don't have any Volts driving around here but there is a Cruze that parks in our undercover carpark and it looks bigger than my Toyota Corolla which is a 5 seater car and is narrower at the most it is 69.4 inches wide and it looks like the Japanese model is only 66.7 inches wide. Are the Cruze and the Volt both 4 seater cars.

· · 1 year ago

@Deckard,

Cruze is a 5 seater and Volt is 4-seater. Volt lost the mid rear seat due to battery.

· · 1 year ago

slightly off topic, If nobody has mentioned it yet....The concept Chevy SUV/Crossover "VOLT MPV5" above would be a hit seller if/when it ever goes into production. I would jump on one in a second.

Even the high price of the EREV, I'm still looking to obtain one in the near future.

· · 1 year ago

Justin H,

GM's next generation of small CUVs will be built on the same platform as the Cruze and Volt. It make sense this will be when a production version of the MPV5 will arrive. http://gmauthority.com/blog/2012/08/gms-next-gen-d2-platform-to-support-...

· · 1 year ago

It is a tough call. The big draw for EVs is really cheap fueling costs. But the batteries are expensive so that pushes EVs out of the low-end market.

Tesla has pushed the 'luxury' aspect of no smell, great torque, refuel at home, no vibration, no noise, and environmental correctness. I guess that works but I think that market segment will quickly become saturated.

I think it is a matter of time as gas prices go up and battery prices come down until EVs become the more economical choice and thus catch on.

· · 1 year ago

@World2Steven

Remember years ago when so many were saying EV's were going to "Overload the Grid"? No body is saying that these days and rightly so.

Going from old refrigerators to energy star things and replacing incandescents with CFL's is saving much more juice than the typical home EV will use.

It looks to me as though with widespread adoption of Ev's there will be no infrastructure change AT ALL. Of course, some people put in solarcells and windmills, lessening the requirement further.

Now Obama in the SOTU says he wants more carbon taxes for us and to use half the energy we do now (of course, Mexico, India, and China can use as much as they want, as the Deindustrialization of the US continues).

Utilities so far have said they really don't want anything to do with V2G.

People in general are getting more up in arms about ZIGBEE, including the UPROAR in Naperville, Illinois where people are upset about being arrested by cops for refusing smart meters....

· · 1 year ago

I think the SmartMeter protesters are funny. My stereotype of them is the San Francisco and Santa Cruz "hippies". The most common objection is that they think the wireless radio being installed on their property is "harmful". If any of these people carry and use cell phones I would literally laugh in their face. Anyway, PG&E got the CPUC to agree to an opt-out program that charges a $75 one time fee and $10/mo "meter reading" fee if the customer does not want a smart meter. There were a lot of objections about the legality of the fees. I think if PG&E legal were smart, they would just raise the $/meter/day fee by $0.333/day and then give a $10/meter/mo SmartMeter discount. Charging $75 for the company to NOT do something is pretty lame though.

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