The Electric Car Bubble: Let's Hope It Bursts in 2012

By · December 21, 2011

The electric car is in trouble and it would be wrong to ignore it. It happened before and it took years to recover, but we can learn from past mistakes.

GM was really enthusiastic about EVs some 20 years ago when it launched its EV1 program. The company poured a lot of money into it, and that lasted more than 10 years before it realized that the return on investment would take more time, and more investment, than executives were willing to invest. So they killed the whole project. (Peugeot, the French manufacturer, pulled the plug on its own electric car program a bit earlier.) GM had canceled another well-known car some time before: the Chevrolet Camaro. There's no way to compare the Camaro to the EV1, but it's possible to compare the business cases.

The Audi R8 e-tron will launch in 2012 with the goal of being the best EV on the market

The Audi R8 e-tron will launch in 2012 with the goal of being the best EV on the market

Nobody made a movie entitled, "Who Killed the Chevrolet Camaro?" but when GM stopped it in 2002, it had built 42,098 of them in that last year. (Could GM have sold 42,000 EV1s in 2002?) Nobody would argue that the Camaro was vastly cheaper to build, because it didn't have any cutting-edge technology. But GM canceled it because profitability was impossible at that low volume. The market changed a few years later, and the Camaro came back. GM sold 81,299 last year. Nobody doubts that it's now a profitable car. The electric car is back too, in the form of the Chevrolet Volt. GM will sell less than 10,000 of them this year, all at a loss. GM said the Volt won't be profitable in its first generation. If battery safety worries affect sales, it will push ROI even further away. Not much has changed.

Of course, GM isn't the only player. Nissan is the leader. With Renault, the alliance said it has invested more than 4 billion euros (about US $5.2 billion) in EVs. It's hard to say how many sales are needed to make a return on that kind of money, but it's not trivial. We've seen an electric car driving more than 600 miles without a recharge. We've seen an EV driving at 300 mph, but the world is still waiting for a guy saying he's making money building electric cars. Many people think it's fine to lose money when launching a new product, and that is true in a booming economy—but that may not apply in today's world. Living in Europe, there is now a clear understanding that piling up a mountain of debt eventually catches up with you.

Modec electric van

Modec electric van

This year has been bad for EVs. Modec, a British company which designed a beautiful electric van (pictured), closed its doors. Ecocraft, a small German company which was building a compact electric truck, followed. In the US, Aptera Motors bit the dust earlier this month. Of course, they were all small players, but Renault-Nissan was supposed to open a new battery factory in Portugal last month. That has been canceled. There was also a plan for another battery factory in France, but it was delayed for two years. People who think the electric car is such a great idea, that it can live with a lengthy or sketchy ROI, should get ready for a brutal wake-up call.

Happily, new and better models are coming. Next year will bring us the Audi R8 e-tron. It will be a $200,000 car, but it should be profitable for its manufacturer, even selling in small numbers, like the Goupil is today. Goupil is a French manufacturer of extra-small electric trucks, which has been a profitable company for many years now. (It can't afford not to be profitable.) They're used all over France in every city that has narrow streets. Business is so good, Goupil was sold last month to Polaris Industries from Minneapolis.

Goupil electric truck charging in Grasse, France

Goupil electric truck charging in Grasse, France

EV fans are dreaming of wide availability and big market share. But maybe we should be looking for profitable manufacturers, and the sooner, the better. We often hear that EVs are the way to sustainability. That can't work with manufacturers accumulating losses. This has to change—if EVs are going to be put on solid ground. It's the only way to stop auto executives and other key decision-makers from looking down on electrics. It's better to see a small dream come true, than have a grand one come crashing down.

New to EVs? Start here

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