Despite overwhelmingly positive press for the Fiat 500e, the electric Fiat is known to be a bete-noir for Fiat CEO Sergio Marchionne. Speaking at the SAE Congress last week, Marchionne claimed that Fiat loses $10,000 on each 500e, describing it as “masochism”.
Marchionne has repeatedly stated that Fiat is only building the car to comply with California regulations that mandate the sale of zero-emissions vehicles. But despite rave reviews and an aggressive lease program, Marchionne has repeatedly made negative statements about the car. The Detroit Free Press quotes Marchionne on the nature of the money losing EV
“For every 500 electric that we produce even after all the subsidies we will lose about $10,000 bucks a car,” Marchionne said. “Doing that on a large scale would be masochism to the extreme.”
Machionne also urged governments to stay “neutral” on what technologies it decides to subsidize, citing the current trendiness of EVs versus the widespread enthusiasm for hydrogen a decade ago.
“A number of governments around the world including the U.S. have provided incentives for consumers to purchase plug-in electric vehicles and have provided direct incentives to manufacturers…my fear is that regulators are rushing precipitously into embracing electric vehicles as the only technological solution.”
Then why are they leasing them so cheaply? Does Fiat have to try to offset Dodge’s gas mileage figures for all those SUVs and Hemi-powered sedans?
California is requiring each automaker to sell some fraction of electric/plug in cars. The Fiat 500e is Fiat’s entry into this requirement. Most other makers have their own, including the Fit EV, Spark EV, Smart EV, etc…
The problem is not that its electric, but that its not a very good electric car. The Leaf is substantially cheaper, bigger, and more established, and with equal or greater range. And because the Leaf at least attempts to sell more, the engineering costs are spread over more units.
Really, the optimal design is probably like the BMW i3: a ~80 mile electric range and a small (~300 lb, 3 gallon, ~50kW (70hp)) generator for range extending.
Or the Volt, with a ~40 mile range and a bigger range extender.
An automaker gets pissed because it creates an excellent electric vehicle that’s an instant money-loser and so tries to sabotage itself. This sounds like the GM EV1 thing all over again…
I don’t see how you come to the conclusion that the bussiness is trying to commit suicide, the government is the one sabotaging the company if anything, forcing them to make a vehicle that is not wanted, theirfore forcing themselves to lose 10k per vehicle sold.
” An automaker gets pissed because it creates an excellent electric vehicle that’s an instant money-loser and so tries to sabotage itself. This sounds like the GM EV1 thing all over again…”
That’s certainly how the yarn was spun. But in the end, it didn’t make any more sense for GM to make cars to lose even more money per vehicle sold than the CAFE specials they had already been cranking out, either.
I wouldn’t call the Leaf substantially better. It doesn’t have any way to actively manage the battery temperature and therefore will suffer much more rapid battery degradation, especially in the extreme climates.
The 500e at least has a liquid cooling system for the battery and therefore has a fighting chance to decent battery durability.
Most of the reviews of the car thus far have been positive – in fact many of them have said the car is more enjoyable to drive than the gasoline powered model.
As mentioned in the article it is mainly due to California’s ZEV mandate that says a certain percentage of the vehicles they sell must be ZEVs. The bonus is that MPGe does factor against the gas sucking Hemi powered vehicles. That is the same reason that Honda does their Fit EV and only makes it available for lease in CA.
Yeah, that could very well be possible, a loss of $10K on each 500e. You really have to be a masochist to buy any EV. Either that or a green-fanatic.
But what Sergio isn’t telling us is that he more than makes up each loss on the 500e in sales of the 2014 Grand Cherokee and Chrysler 300.
That isn’t masochism. Hell, that’s self-pleasuring!
What difference does a loss to the manufacturer make to the consumer? In other words, why do you have to be a masochist to _buy_ an EV, especially an apparently very good one like the Fiat 500e, where you’re basically getting $10,000 worth of car at Fiat’s expense?
The market determines the worth of the car. All you’re talking about is its cost. If its worth exceeded its cost, FIAT wouldn’t lose money on them and the cretins wouldn’t have to subsidize them. Everyone else has to bear the expense of EV cars for the…people that buy them.
Right on the money, bud.
Only those people who pay taxes.
The fact is that the way the tax system is set up money gets redistributed. I pay less than someone who rents instead of buys a place to live. I’m not saying that is necessarily a good thing overall but that doesn’t mean I’m not going to take advantage of that mortgage interest deduction.
Marchionne isn’t saying that consumers who buy/lease EVs are masochists, he’s saying that car companies making and selling EVs at a loss is masochism.
Make and sell EVs at a loss, pay fines for not meeting the ZEV quota, purchase credits if anyone is willing to sell, or just don’t sell cars in CA. It’s not Masochism it’s staying in business or at least mitigating other losses.
I don’t understand why Marchionne has to go around moaning about the whole EV program. He should just consider it a cost of business, and be glad that his breadwinners (300, Charger) sit on a platform that has long been paid for. When Marchionne doesn’t like something, he sure likes to let everyone know it. He and Elon Musk do enough griping and moaning to cover the entire rest of the U.S. auto industry.
If the government told you that you had to dedicate your finite resources to building something that can’t be sold for what it costs to build but must be sold none-the-less, then you’d be angry too. It hurts the competitiveness of every other car they produce by driving up the cost of doing business and wasting development resources on some nitwit politicians’ fetish.
It’s not different than the requirements for airbags, crumple zones and catalytic coverters; or any other kind of government mandates. You could always single them out and cite them as money losers. But these are all part of the cost of doing business.
But the beauty is you, the consumer, ultimately pay for those things through a slightly higher price-per-unit. The higher cost of the EV in this case cannot (or will not?) be passed on to the consumer and eats into the company’s profits.
They themselves would be demanded of automakers naturally, and it’s not like people are screaming for the need of EV’s only politicians who will never drive them are making a ruckus about them.
People want to be safe and have a basic instinct to live, there is no basic instinct to trade a better product for a more expensive yet bigger hassle/inferior product.
“It’s not different than the requirements for airbags, crumple zones and catalytic coverters; or any other kind of government mandates. You could always single them out and cite them as money losers. But these are all part of the cost of doing business.”
When I pay the thousands of dollars in additional cost for airbags, crumple zones, catalytic converters, evaporative emission canisters, backup cameras(coming), stability control, tire pressure monitors, safety labels only needed by people that can’t read, ABS, environmentally ‘friendly’ paints that are almost as good as the old ones, and OBD-II monitoring systems, I get all that stuff. When I pay for some leech’s electric car, he gets it. You say it’s not different. There are some important distinctions that you are unable to make.
Frankly, I’m glad Marchionne has the guts to say what everyone in the industry knows, but is afraid to say.
They’re afraid to say it because they know the average person doesn’t understand, or want to understand. They want a stylish, fully loaded car that does 0-60 in 5 seconds, doesn’t use a fuel they have to pull out a credit card to buy and they don’t want to pay extra.
They don’t care if it makes business sense, and they’ll cheer any politician who mandates and subsidizes it into their garage at the expense of the company and taxpayer.
Marchionne is right.
My point is that Marchionne just sounds like more of a cry-baby than anything. His disdain for the CAFE standards doesn’t have to fall into the context of “Oh, we’re giving this car to you because we **have** to…and don’t expect us to enjoy it, either.”
Well, how should they feel?
Do you expect them to jump up and down for losing profits? They have to make sacrifices to bring back technology that died in the early 1900s, that hasn’t had a decent market since that time.
You don’t have to be a masochist, nor necessarily a green fanatic. I know a number of people who own EV’s Leafs, Teslas (both Roadster and S), RAV-4, Volt and a couple of conversions S-10s and a Fiero. Their reasons run from it just saves them money to they are just into the latest technology to they just don’t want their money going overseas to purchase crude oil.
That would be true IF each costs as much as the other. But EVs and/or Hybrids cost tons of money MORE than conventional ICEs. So where are the savings?
A neighbor of mine put up a $40K solar array in the desert behind his ranch last year. Paid for it in cash! His electric bill is now about $50 each month, mostly in fixed costs, a savings of about $150 a month.
It will take 267 months for him to break even @$150/mo savings. That is a little more than 22 years; if all goes off without a hitch; he never has any additional expenses on the array; and he doesn’t account for the present-value loss of his $40K cash money that could have been used for other things.
The whole e-anything is a folly! The additional cost of anything electrical buys a lot more gas than it saves not buying gas.
Having said that, I also believe that EVs, hybrids etc, SHOULD be available for anyone who wants to buy one with their own money. But they should not be subsidized by the taxpayers in any way.
Out where I live, I see old people in electric Golf carts tooling around their desert property. Others use gas powered ATVs and the like. I use my Tundra if I have to go out too far into the desert for walking.
My point was that Sergio probably is right in stating Fiatsler loses a ton of money on each 500e, but he more than makes up for it through the sale of the best-selling Grand Cherokee and 300.
So where’s the beef? The Chrysler subdivision of Fiat will once again keep Fiat afloat this year so Fiat can pursue money-losing exercises like the 500e.
EV’s and Hybrids don’t necessarily cost TONS more than the alternative. I recently purchased a Hybrid for my Wife because in the long run it will save us money vs buying the non-hybrid version of the same car. Using the MPG we have been getting vs what is posted at fueleconomy.gov and fuelly.com for the most fuel efficient version of the same car I project a savings of about $5000 over the amount of miles we expect to keep the car, if gas is $3.75 per gallon. I payed about a $2500 premium. Of course if the price of gas goes up we’ll save even more if it goes down we’ll save less. It would take the price of gas going down to under $2 oer gallon for us to break even. That is not including the other savings like less frequent oil changes and brake pad replacements nor a potentially better retained value.
Now I did buy used but the price differential would have been very similar as difference in price of similarly equipped new models is about $3400. So the original owner ended up coming out ahead, since they only paid approximately $900 to save around $2500 in fuel.
I also considered a Leaf lease. The reason I didn’t was the 15K per year mileage limitation of the lease and the fact that our local and semi local driving averages about 20K per year cutting into the potential savings either by having to use one of the other vehicles in the fleet or paying the excessive overage charge. Having the title to a Nissan in my name was not an option.
Also what do you mean by the “best selling” GC since the last time I checked the current Explorer has outsold it every month since it became widely available.
I’m happy that an EV works for you, and that’s why I believe they should be available for sale to anyone who wants one, or two.
But your experience is the exception, not the norm, and losing $10K on each and every 500e is no joy for Fiatsler when they provide so little joy to so few people.
However, the best selling GC and 300 mitigate those losses. By best selling I mean that these two products are the best sellers with the greatest margin for Fiatsler.
I’ve been told that in the Albuquerque area the Jeep dealers sell 2 or 3 2014 Grand Cherokees each and every day they are open, and they don’t discount.
“It will take 267 months for him to break even @$150/mo savings”
You are assuming that the price of electricity will stay the same for the next 22 years. Let’s see who gets the last laugh.
Good point. With Obama’s war on coal, electricity will be a luxury good before too long.
Sorry, can’t reply because my comment has been marked as spam…………….
There was nothing spammish in my comment.
War on coal? Not that old chestnut again. Coal production has been increasing :
http://www.eia.gov/coal/annual/
Also there is, if you have missed it, an energy boom with natural gas. That is helping to displace coal in electricity generation because the market price for gas is cheaper than coal. Electricity supplies will stay cheap due to this boom in natural gas.
Sorry, should have specified Obama’s war on US located, coal fired power plants to curtail your parroting of Obama regime double-speak. Warren Buffet getting into the coal industry with help from Obama depressing valuations means that coal will be extracted and exported. Apparently, mining for US consumption was wrong, but mining to grow someone else’s economy is social justice and environmentalism wrapped up with a puppy.
Shouldn’t we wait for Kia to import the electric version of their new Chinese sub-brand? Yes, that’s right, the electric Horki DYK. Perhaps in this country they could call it the Vibe(rator). What, GM ain’t suing the name anymore.
The fact of the matter is that aside from the battery pack an EV costs less on an incremtal basis to produce than a ICE powered engine. The motor cost less than and engine and a simple 1-speed transaxle costs less than any style of automatic or a manual trans.
Now if they sold enough of them at more than the incremental cost it takes to produce then they could actually make money on them. However if you spend a million or two on design and tooling and then limit the number you sell or sell them at less than the incremental cost to build them then yes you are gong to loose money and potentially lots per unit.
Aside from the battery pack!? That’s the most critical part of an EV and the reason why they cost so much vis a vie ICE cars. You can’t simply ignore the battery pack problem as this is the principle challenge.
The battery also involves a scale problem. For larger and heavier vehicles that need more battery capacity, the cost quickly spirals out of control. Adding a larger engine & gas tank to an ICE car is pretty trivial and has little impact on the total vehicle production cost.
My point it is only the battery pack that causes an EV to cost more than an ICE powered vehicle every thing else that is different costs less or much less.
Aside from the Engine an ICE powered vehicle is no more complex than an EV.
Hmm…nothing says “we care!” or “please give us your business!” than a supercilious CEO raining contempt down upon an otherwise decent, likable product that would NOT EXIST had he not wanted it to (remember the US-bound Alfa Giulia?) because it isn’t making Ca$h Money for the company.
Wait, that doesn’t elicit those phrases at all. More like: “Here’s your stinkin’ Fiat 500 EV. We’re losing money on every one, so thanks a frikkin’ lot for buying (or leasing!) it. You can drive it straight to hell for all we care!”
It’s important for the public to understand they are wrapping a $10K bill around each one they sell, lest people think EVs are practical for the mass market.
$17.5K, really, when you consider the feds’ share.
I think you can throw in another $4K from California tax payers.
No that $7.5 and $4k is reducing the cost to the owner not reducing the losses to Sergio.
It may be keeping his losses down to $10K per car, since the taxpayers’ share helps him meet his quota of mandatory EVs by lowering the price to the point where supply meets demand. Otherwise FIAT would have to take a bigger loss to move their mandated electric cars.
Instead of Sergio losing $21.5K, he only loses $10; the feds lose $7.5 and the state loses $4.
It’s pretty clear that his dislike is directed at regulators who are forcing Fiat to develop a low-volume, money-losing product in exchange for access to the market.
I’m sure Nissan, Mitsubishi, Ford, etc. are losing similar money on their EVs. It’s just that Sergio’s the only one talking about it.
I like him, but what shocks me is how he derides a pretty good product developed by his own people. I know his annoyance is with the regulators, but it doesn’t come across that way.
He probably wouldn’t be whining so much if Fiat was in better financial shape.
With a 40k asking price and outsourcing the development and final assembly i doubt Ford is losing anywhere near $10k per Focus EV. If Mitsu is loosing that much then they are not long for this country, oh wait that was true before they introduced theirs and they are only selling 2 or 3 per month anyway. I’m pretty sure with the move to US production Nissan is to the point where they are making money or at least breaking even. Honda and Toyota are certainly losing money on theirs since they are compliance cars to them and are only leasing them in CA where they have the market share where those losses will far be outstripped by the profits form the Civic and Corolla let alone the rest of their lines.
Nissan, Renault, Tesla all make positive gross margins on their EVs.
But they can capitalize the development over the long term because they see vehicle electrification as strategic and inevitable. (and they are mostly conquest sales)
Nissan LEAF sets price that others try to match, just as intel can make a large profit, while AMD makes a large loss. So Nissan can make a profit and Fiat makes its equivalent loss.
Ford seems to be taking the opportunity to use it EV to prepare its dealers for PHEVs, and to highlight its Focus platform.
Mitsu has sold perhaps 30k iMiEV (Japan and EU) its just another kei car to ilk out some revenue and profit.
Unless Sergio said some additional things beyond the comments above, it doesn’t sound like he’s deriding his specific product to me – I just hear a man expressing frustration with absurd regulations.
“Come on down to Crazy Sergio’s Bargain Bonanza Superstore now! Look at this deal right HERE! It’s a brand new 2014 Fiat and I’m prepared to lose $10,000 on every one just to move ’em off the lot to make room for the 2015’s that are just around the corner! That’s why they call me Crazy Sergio—I’m so crazy I bought Chrysler!”
“That’s why they call me Crazy Sergio—I’m so crazy the US government paid me to take Chrysler!”
There fixed it for you.
One has to wonder what the cost benefit analysis of doing bussiness in Kalifornia looks like for the automakers.
Have to have specific set of emissions just for the one state
Have to develope a profit loser
Have to employ people to create such a monstrosity
If it were me, Id say adios to Kalifornia, The cost of doing bussiness there has to just about equal what any profit made there could be, and if they are allowed to get away with such regulations, it may get into the minds of other politicians.
With 17.5k loss, any other vehicle would be flying off the shelves, and certainly be safer for the environment then the mess involved with the creation and disposal of lithium batteries.
“If it were me, Id say adios to Kalifornia”
Yet no manufacturer has done that. What does that tell you?
I have had similar thoughts, and then I read somewhere a few years back that 40% of all Audis sold at the time were in the People’s Republic of Kalifornia. I suppose if your volume isn’t in the PRK, this argument makes a lot more sense.
It’s also probably only incredibly onerous by American standards. These are multi-national corporations that sell cars in even more backwards and socialist countries, where the governments use huge tariffs on cars to pay for their follies in the manner we tax alcohol and cigarettes. California was the 5th biggest economy in the world in 1984 and 1985, and the transformation to Kalifornia had only brought it down to 8th by 2009. It may well be in free-fall now though.
There are quite a few states of Californication and many of them are pretty populated, so not making a car that meets CA emissions would be suicide. My state WA is one of those that adopted CA emissions standards but unlike OR, who also adopted the standards, automakers do not have to honor the CA emissions warranty requirements.
Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, Arizona, Colorado, Florida, New Mexico, and Utah. Are all currently states of Californication or plan to be in the near future.
In theory you could design product to meet or exceed the potentially more stringent (or tyrannical) emissions standards and just choose to not see your product in Cali/Oregon/Wash State etc and miss out on being mandated to lose millions on low volume cars nobody wants. In practice, companies just pass the losses along to the sensible states.
Really what it comes down to is allowing unelected bureaucrats, state level bureaucrats no less, to push you around… so essentially whats happening in Europe right now.
50 state cars are becoming more and more common since other states started adopting CA emissions standards in 2009.
Doing some quick guestimating compared to the Abarth, that means he’s saying it costs them $18,000 – $20,000 more to produce the 500e than the Abarth.
That seems like a bit of an exaggeration to me.
How?
It requires new tooling
Contracts with numerous companies
new employees
Research
Developement
Testing
New model specific parts
Must change the body to accomodate the system
Must change the dynamics/handling to accomodate the weight shift and the likely +/- weight of conventional
Must change the way accesories work such as Hvac to that it works off of a battery rather than an engine
Must develope specific heater since the engine doesn’t supply the heat
battery protection and safety systems
Change braking system since the engine boost doesn’t create the pressure to brake.
Reroute a ton of already working components to manuever around existing platform
I could really go on if you would like…
All of those things you mention, are things which are incidental to low volume cars, not inherent to electric vehicles. So it’s not true that Fiat is losing $10,000 per car due to the EV mandate. It’s just that Fiat chooses to produce a low volume EV without the economy of scale.
Yes but low volume cars use already existing engines and demand a higher price because people WANT the car, therefore the additional cost is justified in the sale of the vehicle.
People aren’t demanding EV’s the extra money spent to create a EV isn’t recuperated in the sale of the vehicles as no one is willing to pay the additional cost.
It’s a form of blackmail against the automakers.
When he says they’re losing $10,000 on each one he’s talking about production cost, not R&D. If he was talking about R&D he would have said something like it will take us 50,000 units to recoup our R&D costs. However, if you do want to factor in the R&D costs over the number sold so far which I believe is 0, it would be significantly more than $10,000, but that number would also change with each one sold.
Thanks for the nice list.
They may be making that projection on the number they need to get out the door to meet the CA ZEV mandate.
It does not require new employees nor changing the body unless they want to.
No need for a new specific heater just put the resistive heater where the heater core would reside.
No need to change the braking system just add a vacuum pump to drive the same system as the ICE powered car.
Way exxagerated. Even if the battery pack is $10,000, it still wouldn’t add up to that much of a difference. Remember- the electric motor is a lot simpler than the turbo’ed gasoline motors, and there is no transmission.
Marchionne is just blowing hot air.
There is a transaxle, a simple single speed transmission but there is gear reduction there even if you cant change that gear reduction. But you are correct that the electric motor is much simpler with few parts and therefor less expensive than an ICE. Even though there is still a transmission w/o a torque converter or clutch and a single speed w/o a method needed to change gears it too is way less expensive than a trans needed for a ICE vehicle.
“Marchionne is just blowing hot air.”
And you’re talking out of your hat. The man is in charge of building the things, he’s got a pretty good idea of what they cost. Electric motors may have less moving parts, but are made out of far more expensive materials than those found in ICE vehicles.
If indeed they were somehow profitable, his quote wouldn’t have been made, this post wouldn’t have been written, and Fiat would have already happily sold thousands upon thousands of EVs and banked the cash.
They’re such a great idea, they had to be mandated!
EVs as loss leaders is nothing new in the industry and there’s been extensive writing on it, even in the mainstream media. But don’t worry, if you keep holding out, the tides will change and your Fisker stock will pick up.
The electronic controller that has to mimic the throttle between the battery and the electric motor is a decidedly non-trivial piece of equipment. The one in the Mini E was in a giant gold colored box.
Just goes to show that a great many commenters do not understand the implementation of an EV as they do a regular gas engine vehicle. They then apply this lack of knowledge to writing silly opinions about cost to manufacture that lack merit.
Sergio is correct. Having to make these 500e vehicles just to stay in business in California would piss me off too. The fact that Fiat did a proper engineering job rather than issue a Mitsubishi i-Mev or whatever that piece of rubbish is called is to Sergio’s credit.
Nissan meanwhile has built not only a US factory to make Leafs and battery packs, but also the same thing in the UK as well. Where are the customers for these things, Mr Ghosn? I think you’ve lost the plot.
EVs. An utter and complete waste of time in my opinion. If you happen to like yours, well bully for you. For one of the few times in history, the greater common sense has rejected these things.
If Fiat is losing so much money on each electric tin can they sell or lease, then they might as well take up an offer one used to see years ago on the back cover of comic books and sell seeds door-to-door…
See if that works better.
Seriously, though, the industry is still researching the technology, and it’s going to take more years to make a significant breakthrough that makes an all-electric vehicle palpable for the general market, where people who would normally buy only gasoline-engine cars like me would feel comfortable with this technology.
I’d still like a Volt, though.
Isn’t one option to pay the fines for not meeting CAFE? It’s something like $55 per MPG, right? The Germans have been doing this for years, as have some others. Is that more expensive than subsidizing a few EVs for Chrysler?
http://www.nhtsa.gov/cars/rules/cafe/FINES-COLLECTED-SUMMARY.html
Theyre all in the same boat. Some manufacturers saw the value in doing research and investing in new technology. Its called innovation, and Toyota did it well.
Fiat got up late for school, forgot they had a term project due, slapped something together and now theyre complaining about it.