Electric Car Company Tesla’s Founder Elon Musk just admitted something which is getting very little coverage and no explanation.
He announced that Tesla would no longer be selling the “affordable” $35,000 Model 3 he promised would be Tesla’s first mass-market electric car. Like so many of Elon’s promises, that one’s out the window, too.
The price of the least expensive Tesla just rose to $39,000.
Well, technically $38,990 to make it go down easier.
That’s still a $4k decrease in “affordability” and a reality check.
Elon is admitting that electric cars aren’t mass-market cars. That after all the glitzy assurances, after all these years, in the end, they are what they have always been: Specialty cars for people with the disposable income to indulge other-than-economic considerations such as “technology” and, as Elon loves to tout, the driving characteristics of electric cars.
There’s nothing per se objectionable about specialty cars — whether electric or powered by a high-performance boxer six, like a Porsche.
But there is a problem.
There is a hard deck limit to the number of specialty cars that can be manufactured. It is a small number because most people can’t afford to buy such cars. How many Porsches do you see vs. Corollas?
EVs are Porsches economically speaking.
Both are cars for people with the ability to spend more than twice the cost of a well-equipped economy car.
Now imagine the government decreed everyone must drive a Porsche. This might not be such a bad thing provided someone else pays for yours.
Who will pay for your electric car?
For everyone’s electric car?
Enter The Rub.
Electric cars aren’t just specialty cars built in small numbers for the small number of people with the means to buy them, as Porsches are.
The government has de facto mandated that electric cars be manufactured en masse by imposing regs that only electric cars can “achieve compliance.” The big one is the “zero emissions” reg, which makes a meaningless distinction between “emissions” emitted at the tailpipe vs. the smokestack.
Electric cars aren’t “zero” emissions. Not if they’re driven, at any rate. To move, they consume electrical power generated by the burning of natural gas and oil and coal, which produces plenty of carbon dioxide “emissions.”
But the idiocy of the “zero emissions” edict doesn’t change its power, the distortionary effect it is having on the car industry generally which is being forced to build lots of electric cars to “achieve compliance.”
Cars for which there is no market.
Or rather, cars for which there aren’t buyers.
Which has nothing to do with want and everything to do with afford.
Lots of people want a Porsche. The problem is that the least expensive one, the Boxster, starts around $50k (which is about what the Tesla 3
typically transacts for) and probably nine out of ten people can’t manage that, no matter how much they might want that.
This is why Porsche only builds a few thousand Boxsters every year and even fewer of its higher-end models like the Cayman and 911.
Back to Elon Musk.
He discovered that he couldn’t sell the Model 3 for $35k, as he promised to, without incurring unbearable losses on each “sale” even with the subsidies.
No one else can afford such losses, either.
It is one thing to mandate that electric cars be built. It is another thing to find buyers for them. People willing and able to spend what it cost to make them plus a profit margin for the manufacturer.
The car industry is in a jam. It has bear-hugged the electric car tar baby with both arms on the poltroonish neo-corporate maxim of go-along to get-along. To be seen as “green.”
But economic realities are going to set in, soon. Because soon, it won’t be a relative handful of Teslas chasing a tiny cohort of virtue signaling affluent buyers, but hundreds of thousands of electric VWs and everyone else’s trying to convince average people to sign up for a car they can’t afford.
Consider VW’s first electric car, the “e” Golf. It costs just under $32k to start ($31,895 to make it go down easier) vs. $21,845 for the same car without the electric drivetrain. That’s a $10k price bump to go “green” — which is greener than most people who buy cars like the Golf can afford, no matter how “green” they might want to be.
Put another way, the eGolf costs a third more than the non-electric Golf. This is typical of electric vs. non.
Nissan’s Leaf, for example, is essentially an electric Versa, Nissan’s compact economy sedan/hatchback.
But the Leaf costs $30k to start ($29,990 to make it easier on the gullet) vs. $15,650 for the Versa, twice as much green.
This is not sustainable.
Two-thirds of the car buying public can’t afford these cars, the financial/economic hard deck.
But the car industry is gearing up to build cars which two-thirds of the market is not financially capable of buying.
Why are they doing it?
Because it is the only way to “achieve compliance.”
Moving them off the lot is a whole ‘nuther thing. They can be “sold” at a loss, of course, as Elon has been doing, but only for so long. What was it Margaret Thatcher once said about other people’s money?
Eventually, you run out of it.
In addition to mandating them, the government will give people vouchers for them in addition to the existing subsidies. Realistically — economically, it’s the only way these specialty cars can ever become mass market cars.
But perhaps that has never been the object of this exercise. Perhaps it has been to make all cars specialty cars.
In order to reduce the number of cars.
In order to limit their possession to special people.
Elite people — like Elon.