Last month we noted that Tesla really outdid itself in 2Q 2017 by posting a record cash burn of $1.2 billion, or roughly $13 million every single day. Per the chart below, Tesla's Q2 cash burn was just a continuation of the company's money-losing trend that goes back at least 6 years and seems to be getting worse with each passing quarter.
But Tesla isn't alone in burning cash on "EV's" as pretty much every electric vehicle offered to customers loses money on a per unit basis.
At this point, expensive battery technology still makes them money drains. General Motors Co. loses about $9,000 on every Chevrolet Bolt electric car it sells. Tesla had record sales of its EVs last year — and still lost $675 million on $7 billion in sales. Fiat Chrysler Automobiles NV loses $20,000 on every electric version of its 500-model subcompact sold in the U.S., Chief Executive Officer Sergio Marchionne said in a speech in Italy on Monday. Battery-powered models should be marketed based on consumer demand and not depend on incentives, he said.
Of course, with statistics like that, it should come as no surprise that auto OEM's all around the world are tripping over themselves to introduce dozens of new electric models in the coming years. Even Bloomberg was somewhat perplexed to report that OEMs will introduce 50 new electric vehicle models over the next 5 years despite the industry's staggering cash burn.
Here are two facts that defy logic: By the end of the year, electric-car maker Tesla Inc. will have burned through more than $10 billion without ever having made 10 cents. Yet companies around the world are lining up to compete with it.
Almost 50 new pure electric-car models will come to market globally between now and 2022, including vehicles from Daimler AG and Volkswagen AG. Even British inventor James Dyson is getting into the game, announcing last week that he’s investing two billion pounds ($2.7 billion) to develop an electric car and the batteries to power it.
“Nobody doubts that the future will be electric,” said Erich Joachimsthaler, founder and CEO of brand-strategy firm Vivaldi, which works with German luxury carmakers. “The car companies dragged their feet with electric. Now they are being dragged into it by Tesla and by regulations.”
Meanwhile, as the race to add supply of electric cars goes into overdrive, Bloomberg points out that "there is little evidence that there is a lot of consumer demand for it." We'll have to check our notes from Econ 101 but we're almost certain that adding new supply to an industry that already loses money due to a lack of demand is a bad idea…
In North America alone, the number of electric vehicles will soar to 47 by the first quarter of 2022 from 24 in the third quarter of this year, according to data from Bloomberg New Energy Finance. China’s EV market will go to 80 from 61, and European buyers will have 58 electric choices, up from 31. Globally, there will be 136 EVs on the market by the end of that year, and that doesn’t even include the hybrid models or fuel cells.
That will make for a very crowded field in a nascent zero-emission car market that most consumers have yet to embrace and where financial losses loom large. In the U.S., electric car sales were less than 1 percent of the market last year, according to the International Energy Agency. They were 1.4 percent in China and in the U.K.
“Companies are committed to electric cars, but there is little evidence that there is a lot of consumer demand for it,” said Kevin Tynan, senior analyst with Bloomberg Intelligence.
Here are some of the significant new models coming to market:
- VW’s Audi brand will start building the E-tron Quattro, a luxury SUV, in 2018, followed by the Sportback coupe in 2019 and a third, unnamed vehicle by 2020.
- Porsche AG will sell a production version of its Mission E sports sedan concept car starting in 2019.
- In addition to BMW’s current electric i3 compact and i8 sports car, the German automaker will have an electric Mini in 2019, an X3 compact SUV in 2020 and 10 others by 2025, Chairman Harald Krueger said in a speech in September.
- Daimler’s Mercedes-Benz brand plans 10 battery-powered vehicles in its EQ sub-brand through 2022, while Volvo Car Group, which is owned by China’s Geely Automobile Holdings Ltd., has said any new models launched in 2019 or later will be offered only as hybrid, plug-in hybrid or all-electric versions.
- Tesla plans to build the Model Y small SUV in 2019 or 2020.
While we joke, the reality is that much of the blame for the auto industry's bizarre decisions on electric vehicles stems from the perverse, misinformed regulations imposed by various governments around the world. As the Sacramento Bee pointed out last week, California, to our complete shock, is leading the efforts to force higher losses on OEMs with San Francisco assemblyman Phil Ting promising to introduce new legislation in January that would ban all combustion-engine vehicles by 2040.
France and the United Kingdom are doing it. So is India. And now one lawmaker would like California to follow their lead in phasing out gasoline- and diesel-powered vehicles.
When the Legislature returns in January, Assemblyman Phil Ting plans to introduce a bill that would ban the sale of new cars fueled by internal-combustion engines after 2040. The San Francisco Democrat said it’s essential to get California drivers into an electric fleet if the state is going to meet its greenhouse gas reduction targets, since the transportation sector accounts for more than a third of all emissions.
“The market is moving this way. The entire world is moving this way,” Ting said. “At some point you need to set a goal and put a line in the sand.”
“California is used to being first. But we’re trying to catch up to this,” Ting said.
Of course, the irony of all of this is that no one is more happy about the shift to electric cars than the folks working in the coal industry who will supply the power required to keep them on the road.
