RAV4 EV Owner Contemplates Future of the Car
My fellow owners of the RAV4 EV occasionally discuss how much money the electric vehicle costs Toyota to sell in California. If Toyota wants to continue selling cars in California, the company must either sell 2,600 cars through 2014—to earn California Air Resources Board - Zero Emission Vehicle (CARB-ZEV) credits—or buy credits on the open market.
Currently, six "very large manufacturers" are selling zero-emission cars in California to meet this mandate. These are the vehicles used to comply: Spark EV (General Motors); Ford Focus EV (Ford); Fiat 500e (Fiat/Chrysler); Nissan LEAF (Nissan); Honda Fit EV (Honda); and the RAV4 EV for Toyota.
In the near future, BMW, Hyundai, Kia, Mazda, Mercedes and Volkswagen will be added to the list. Four additional manufacturers would also be required to comply with the ZEV requirements, but would be allowed to meet their obligation with plug-in hybrids.
Trying to Roll Back Progress
It's no secret that Toyota doesn't like non-hybrid battery electric cars. Earlier this year, the trade group representing Toyota and other manufacturers, including GM, attempted to stop CARB mandates yet again, this time through the EPA. Thankfully, the fact that Tesla sells only electric vehicles, at a pace of about 400 to 600 per week, made the trade group's cries that "nobody wants EVs" seem insincere.
Their petition was declined this time, but ten years ago it was successful. When CARB previously relented and removed the ZEV mandate, the original RAV4 EV—made between 1997 and 2003—was cancelled (in the same era of the more famous cancellation of the GM EV-1. A total of 1,484 were sold or leased of the first generation RAV4 EV.
Toyota intends to meet future CARB-ZEV requirements not with the RAV4 EV, but with a hydrogen-powered vehicle, scheduled to arrive in California late next year. Toyota isn't the only company planning to offer a hydrogen vehicle.
If Toyota can't get CARB to repeat the events of 10 years, and Toyota doesn't want to build ANY pure battery electric vehicles, wouldn't it be cheaper to just buy the CARB-ZEV credits from Tesla? (Toyota owns a minority share of Tesla.) Tesla has earned more than $60 million dollars from selling those credits.
Toyota already paid at least $60.1 million to Tesla for the background work on the RAV4 EV. That work includes "the successful completion of certain at risk development milestones" and the "delivery of prototype samples." In other words, the basic engineering and design work is paid for.
So, how much does it cost per Rav4 EV unit today? If we divide the total of just the development costs billed to Tesla—and not Toyota's internal development costs, which included crash testing, etc.— by the 706 Rav4 EVs delivered since September 24, 2012, we get $85,000 per each car delivered so far. Yet, if Toyota delivered all 2,600 cars, those fixed expenses to Tesla would drop to $23,000 per unit.
Here's my breakdown to date:
- $85,000 = $60,000,000 divided by 706 vehicles sold. The $60 million fixed Tesla costs are for everything except the actual hardware per delivered car.
- $15,000 is my wild guess of the cost of a basic "glider" Rav4 EV (engine-less car).
- $40,000 per drivetrain (battery and hardware from Tesla to be installed in the "glider").
That adds up to:
- $140,000 net cost per car delivered to date. That's without marketing costs, Toyota's engineering costs, spare parts stockpiles, assembly tooling, warranty expenses, etc.
- $40,000 is my guess of the typical net price to Toyota per sale with all of Toyota's discounts.
Discounts offered by Toyota are typically $7,500 to $15,000 from the $51,000 total window sticker price. Therefore, there is:
- $100,000 loss per car if production stopped today. Multiplied by 706 cars is a total of $70,600,000 lost. If Toyota built all 2,600, the Tesla fixed costs are lowered by $62,000 per car so that 2,600 multiplied by $38,000 lost per car equals $98,800,000 total program cost.
- That's $28,200,000 in additional expenses if the entire 2,600 are produced that could be used to buy those credits instead.
Problems with the Car
The RAV4 EV has had a number of technical problems, some of which are still unresolved. My particular car—one of the very first ones to go on sale—has had the motor assembly replaced, the heater, and the DC-to-DC computer. Thee battery pack was dropped to replace the charge port that failed. My car has been in the shop for more than 30 days during a period of nine months of ownership. My car is not isolated in these issues, and there are ongoing problems—for instance, with the charger timer.
But the single biggest issue with the current Rav4 EV is that it doesn't sell well. In June 2013, only 44 were sold. Toyota made several aggressive changes to pricing and the sales only went up to about 100 for the month ending July 2013. They still have to sell 2,000 more cars.
So, is it cheaper to cut the losses now and buy credits instead of delivering more cars? With potentially $28,200,000 in additional costs to Toyota to sell 2000 more cars, there are some very serious considerations to make. It's impossible for me to know any potential offer on the table, but if Tesla or some other company offered them a sweetheart deal on ZEV credits that cost less than $28 million, why wouldn’t they just cancel the RAV4 EV?
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