Confession time. I’m a dishonest and deceitful father. I’ve lied to my daughter. Deliberately misled her with outright distortions of the truth. Made her do things she otherwise would not have done.
But if you think I’m going to apologize to her, then think again.
My daughter, Rachel, deserved everything she got. And what she got was…
A 2001 Prius, the first year it was available in the US. Here, let me explain.
My wife (Cecily) and I love our daughter. But she has one big fault. It showed up (again) one day about a half year ago when she was driving me to the airport. We had plenty of time to get there. There was absolutely no need to rush. Yet, Rachel being Rachel, she got stopped for going 80 in a 60 mph zone.
One month later my wife was driving home from work. The traffic was crazy. Both lanes were clogged, going about 40 mph on the highway. On her right, a car zoomed by her on the shoulder lane going 70, my wife estimates when she told me this story.
Cecily honked and cussed the stupid and reckless driver under her breath. That was before it dawned on her that the car was Rachel’s.
Before she went off to graduate school, Rachel wanted to buy some hopped-up Fiat or Mazda. I told her those cars were over-styled and overpriced and gas guzzlers to boot. Said she should buy a Prius instead. They’re great cars and you’d save a lot on gas. Then I threw in the kicker: I offered to buy her the car if she chose a Prius. I’d even pick one out for her.
So she agreed.
I had an agenda she didn’t know about. I wanted to buy her an underpowered car so she couldn’t speed and I knew the early models of the Prius fit the bill perfectly. The first year’s model has less giddy-up than later ones (0-60 in a painstakingly slow and uninspiring 12.9 seconds), so that’s what I bought her.
She got her car. And I got to welcome a safe driver into the family. Everybody won.
Now here we are, 11 years after that Prius was made, and hybrids occupy a nice little niche in the auto industry as they wait for one of the possible next “Big Things:” Electric vehicles or EVs.
Car companies have poured billions of dollars into developing EV technology. Last year alone Nissan released the Leaf EV. And this year Toyota, Renault, BMW, Daimler and other manufacturers will also launch electric or plug-in hybrid cars.
An exciting time for the auto industry? Not as exciting as you think.
The new era of green and clean cars is off to a plodding start. In 2011, Chevrolet sold less than its target of 10,000 Volts, Chevy’s battery and gas-powered entry into the EV market.
Meanwhile, Nissan had hoped to sell more than 20,000 Leafs but got stopped at 20,000… “Marginally below expectations,” the company said.
Now, admittedly, it’s still very early in the ballgame. And automakers have struggled to build up capacity (and suffered earthquake related stoppages) for these new EVs. But all the hype and noise that accompanied the ushering in of the new EV era seem to have been way overblown.
And I blame the biggest cheerleader of all: The government.
After all, it was the government that enacted regulations requiring minimal fuel economy standards by 2016 and still higher ones by 2025.
The auto companies complied. But instead of adopting expensive hybrid and EV technology for every model coming off their assembly line, they decided to spend a lot less money and simply improve their gas-powered engines, making them more powerful and more efficient.
What we’ve ended up with is a weird two-track auto industry…
- Slow Growth Track Number One: EVs that sell at premium prices. The problem is, they don’t deliver premium performance. They remain mostly underpowered with limited range before having to be plugged back in again.
- Fast Growth Track Number Two: Efficient, powerful and stylish gas-powered cars are driving automakers’ big comeback. They’re reasonably priced and auto companies make a decent (though not great) profit margin on them.
Auto industry experts have been busy lately ratcheting down their forecasts for EVs. PwC Autofacts estimates that pure EVs will make up 1% of the global car market in 2017.
And a Morgan Stanley analyst has reduced his expectation of their market penetration in 2025 to 4.5% from 8.6% before, adding that “EVs were not ready for prime time.”
In the meantime, GM and Ford are making billions of dollars from their new gas-powered models. GM and Ford have lots of new models coming up, led by advances in aerodynamic designs, lightweight materials and fuel-efficient engines.
And you’re crazy if you think the two tracks don’t compete with each other. Of course they do. Sure, auto companies want to give their customers choice and I don’t see them giving up entirely on EV models. But, at the end of the day, EVs will have to pull their own weight. And it’s going to take another decade before they can match the performance, range, and overall capability of a gas-powered car (or even hybrid.)
There’s an important lesson here. Don’t always believe the hype. Whether it’s green cars or clean energy, price, convenience and performance matter. If you’re missing any of these three, you’re in trouble.
EVs happen to be missing all three.
I don’t mean to pick on clean tech. The lesson applies to all industries and sectors.
The next big thing in mobile devices? Are they Intel’s ultrabooks or something else?
The next big thing in TVs? Are they 3-D flat-screen technology (minus the stupid glasses) or something else?
The one thing we do know is that the eventual winners don’t always generate the most hype. You should always look beyond the superficial excitement of a story.
For EVs the focus should always have been on the cost and performance of the batteries. Until the price goes down and the performance improves (we’re going to have to wait at least 5-10 years for that to happen), EVs will never be that profitable or popular.
I think their time will eventually come. But it’s not now.
The only companies that seem to be making strides with EVs are the ones that cater to rich consumers. Companies like Fisker, Porsche, Jaguar and Tesla. Their customers can afford overpriced cars.
But for the average consumer, EVs are about as irresistible as the Edsel was over 50 years ago. Some investors have learned this lesson the hard way. And so have some auto companies.
So, let me ask you what you would prefer buying if given the choice: The electric version of the Ford Focus loaded with all the options for $34,000 (including a $7,500 U.S. government tax credit plus a home battery-charging unit)? Or an entry level gas-powered Focus going for $16,500? Leave a comment below.