General Motors can’t seem to get the Chevy Volt off of dealership lots – the American automaker has recently suspended production of its plug-in electric for five weeks while it tries to unload its excess inventory of “advanced vehicles” onto consumers. In an effort to stimulate the sales of fuel-efficient cars like the Volt, President Obama has suggested that drivers receive a $10,000 tax credit for the purchase of hybrids and electric vehicles. This proposal comes as demand steadily grows for for long-haul trucks, which account for 20% of the nation’s fuel consumption.
The vitriol and malice found in the comments section of nearly any article on the subject might lead you to believe that the elimination of oil dependence is somehow a political issue. But put aside ideology for just a second, and let’s think this through. Cutting gasoline usage means lowering petroleum demand, which means lower prices at the pump. Lower fuel costs would lead to decreased transportation and shipping expenditures, which will ultimately lower the cost of all goods that are delivered by truck, boat, or plane. As electric batteries become more efficient at affordable prices, fuel independence glimmers on the horizon – which is great news for everyone except Exxon execs and Saudi princes. So why can’t GM sell more Volts?
Part of the consumer reluctance stems from the car’s sticker price. A Chevy Volt has a base MSRP of almost $40,000 – putting it in the same price category as a luxury-class automobile. To truly foster adoption of electric vehicles, OEMs will need to cut the price tag upfront. Some suggest that a consumer tax credit isn’t the answer. Instead of providing hybrid-electric buyers with a $10,000 credit down the road, Washington could credit GM instead, allowing the electric car to enter the market at a reduced price. After all, “$30,000” sounds a lot better than “$40,000 (with rebate),” right?
Of course, that’s assuming the price reduction will trickle down to consumers – and automaker money has proven to be notoriously sticky in the past. Ted Rubin, co-founder and President of ActivEngage, believes that any tax credits should benefit consumers directly. “A discount for the manufacturer might help create the inventory, but a discount for the consumer creates demand. Supply-side economics won’t work. You have to create the demand first.” Rubin also says that automakers already take advantage of a vast amount of government incentives – which oftendon’t translate into consumer savings.
So what lies ahead for the electric automobile? Rubin knows that OEMs already have the technology to develop purely electric vehicles – they just aren’t ready to spend the extraordinary development and production costs. Young, progressive carmakers like Fisker and Tesla Motorshave demonstrated their own battery-powered cars that can run for over 200 miles on a single charge. “If these companies can make them,” Rubin says, “so can major firms with billion-dollar budgets.”
Perhaps the only thing that will increase the electric adoption rate is time. Rising gas prices and improvements in battery technology will eventually provoke the American public into supplanting an inefficient, finite energy source with a low-cost, limitless alternative. Fuel independence is more than a divisive, political buzzword. It represents the way forward, the only logical future for automotive manufacturers and dealers. As the producer of the first purely electric car, GM has a huge advantage – if it can only shift out of neutral.
We need the opinions of dealers! If you have any thoughts about hybrid/electrics or how their introduction will affect your dealership, leave them in a comment at our blog!