Auto OEMs Plan To Flood Market With New Electric Car Models Despite Massive Losses

Tyler Durden's picture

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.

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spastic_colon's picture

there is no consumer demand but the subsidies are too hard to pass up........its their only form of revenue now lol

Umh's picture

Just classic, misallocation of funds caused by the government.

NugginFuts's picture

Sign me up for 10!...... subsidies, that is...... 

sickavme's picture

Suicide by subsidy...

 

The new norm I guess...

IH8OBAMA's picture

They had better start investing some serious money into battery research.  They need to make them lighter, safer (from fire) and most importantly increase the storage capacity and decrease the charge time.

 

Taint Boil's picture

Love it ..... electric cars charged from coal fired power plants. Just can't make this shit up.

Solio's picture

Even more, electric cars powered from npp! DUmobile anyone?

Kookoo!

glenlloyd's picture

Let's get this corrected now, these are coal powered vehicles, not EV's.

Just because you push your pollution back onto the power generators doesn't mean that it doesn't exist.

Just another leftist lie.

Coal powered cars people....

Trogdor's picture

That is absolutely what they WILL NOT do. You may see tiny advances in technology - a few percent here and there - but they will keep the batteries slow and expensive to charge and the vehicles will still have very limited range - while at the same time making EV's "mandatory" (can't wait to see an 'electric' tractor that can run a harvest). It's part of Agenda 21 and the desire of the "elites" to drastically limit people's ability to travel. They want to "re-wild" the US and confine the populations into 10 "super cities" (concentration camps) while they move onto massive, lavish, estates - far from the maddening crowd - complete with slave labor.

They aren't shy about this, either. Research "The UN Agenda 21" and look up a presentation called "The New Order of the Barbarians" for more details.

Omen IV's picture

The OEM - remind me of the owners of the .....NFL

They all have orders from the NWO- when something doesn't make sense - it does in another context

Maxter's picture

Does Audi realise what E-Tron mean in the french language?

Chauncey Gardener's picture

Don't worry, GM will make up the $9,000 loss per each Chevy Bolt with volume. Just like Elon Musk does.

 

Juggernaut x2's picture

Good lucking driving an all-electric car more than 150 miles on a charge in Midwest IL sub-freezing temps.

yomutti2's picture

Yes, EV's are money losers now. But battery prices are coming down rapidly, and will render them profitable soon. MEanwhile, people are willing to burn cash to establish market share. That's actually a pretty common outcome as a new technology enters the mainstream.

So Close's picture

I am a little tired of ZH beating the drum on Tesla's cash burn rate without mentioning it is a one off for increased manufacturing capacity, which will bring net production costs down as prodcution ramps up.

We can still have a logical discussion about the stock being way over priced (Which even Elon admits it is) without having to mis-state the ramifications of the obvious without qualifying those facts.  Unless you are just talking your book.

And by the way... this EV thing is here to stay.  Period.  It will become the norm and innovation will run rampant for a few decades.  Bitching about the (few) shortcomings in current best of breed (Read.. "Tesla") EV's discounts the MASSIVE technology leaps that are sure to take place now that BMW, Porshe, Volvo, etc. etc. etc. are getting into the game.

As a final thought.... Elon has said over and over and over profits are NOT his primary motivation with Tesla, getting the world to shift to renewable energy is.....   In other words.. now that the big boys are getting on board..  Checkmate.  And good on him for winning.

Juggernaut x2's picture

You can't go more than 200 miles in optimal conditions  without recharging a battery so it's a big fucking joke. Where are you going to quick-recharge a battery in the middle of Wyoming or Nebraska?

So Close's picture

Send me a picture of the MOST congested intersate in Wyoming and or Nebraksa and compare it with ANY loop or interstate in ANY of the 33 cities in the US with a population of over .5M.    Do you even consider the relative number of vehichles for the use case you suggest vs the US average of 36 miles per day?  Have you considered that of that average half the population drives less than that per day?  Pull your head out of your ass.

Shitonya Serfs's picture

Let's say there are charging stations everywhere. You like waiting 30-40 minutes charging your car? I prefer 8-10 minutes max to fill my truck from empty to full and move on.

So Close's picture

How often are most folks not going to be able to top there car off after their daily drive in their garage?  Answer.... almost never.

NoDebt's picture

When the horseless carriage replaced the horse in the early 1900s they didn't need the government to outlaw horses and provide the nascent auto industry with subsidies.

It's good to know that the entire developed world has completely given up on markets and competition.  All decisions will be government decisions now.  No market can have it's way without the government deciding what mix of penalties and incentives will make it balance where THEY choose to have it balance.

 

So Close's picture

Ride your horse downtown and see how long it takes for your ass to get tazed or shot and then tell me how horses are not outlawed as you are picking the gravel out of your face because you were "resisting" arrest.  Horses got outlawed rather quickly by the government.  Do you think before you type?

jcaz's picture

That's laughable, coming from you, snowflake- go spank off to your Elon pics, that's what this is really all about for you-  man-love.

Come back when you understand business.   

Teja's picture

People discussing the advantages of electrical cars over conventional cars and vice versa miss one major point - cars in general are giant space-consuming destroyers of living space. Drivers are isolated from their environment, becoming solipsists and sociopaths. Societies which rely on cars for mass transport of people tend to break down in the long term, with falling birthrates, destruction of formerly beautiful towns and villages, emptying of the countryside and of small towns, destroying cities by suburbanisation. 

If you think this is bullshit, give me an example to the contrary.

toady's picture

Dude! Horses are not outlawed! Whatever you're smoking is distorting your reality!

jcaz's picture

And I'm a little tired of Musk-slobberers trying to justify a losing proposition.  Cash burn IS cash burn, son-  it's the only way to rationally measure their business.  

It's not only that the stock is overpriced- the company will NEVER MAKE A PROFIT unless several laws of physics are repealed.  You don't think making a profit matters?  Which universe are you living it???

You suckers buy into crap from "Elon-  profits are not his primary motivation"-  oh really?????   Then how about Elon cash in his own overvalued shares and help out?   No- instead he's doing sketchy bond deals in order to preserve the overvaluation of his PERSONAL stock;

Wake the fuck up- THAT is what this board is all about.   

So Close's picture

One time expense are one time expenses.  Economies of scale are forever.  The only thing that is uncertain is geometric sales progression....   Tesla revenue in Millions.... 

2010 -  Revenue 117M  on loss of 154M

2011 - Revenue 204M on loss of 254M 

2012 - Revenue 413M on loss of 396M

2013 - Revenue 2013M on loss of 74M  (See a pattern yet?)

2014 - Revenue 3198M on loss of 294M  (Try dividing the loss by net revenue)

2015 - Revenue 4046M on loss of 889M (I know this 2nd grade math boggle the brain of some)

2016 - Revenue 7000M on loss of 675M (Geese... something is happening... what could it be)

2017 and beyond....   What happens when CAPEx goes to zero (Factories built) and sales continue to climb while new production cost continue to fall.....

Chart those numbers (and add just the smallest possible dab of business acumen) you dumb fuck and draw a line on the projected path.  Let me give you a hint.  y=x(x)   But perhaps I ask too much.  That is algerbra.

Magooo's picture

Electric vehicles in Hong Kong could be adding “20 per cent more” carbon to the atmosphere than regular petrol ones over the same distance after factoring in the city’s coal-dominated energy mix and battery manufacture, a new research report found.

Investment research firm Bernstein also claimed that by subsidising electric vehicle purchases, the government was effectively “harming rather than helping the environment” at the expense of the taxpayer.

“The policy is to encourage drivers to be green, but they are actually subsidising vehicles that create more emissions of CO2 and particulates from power plants,” said Bernstein senior analyst Neil Beveridge.

 

 

http://www.scmp.com/news/hong-kong/health-environment/article/1935817/electric-shock-tesla-cars-hong-kong-more-polluting

Omen IV's picture

Fuel cells better bet on operating cost especially considering reboot on battery replacement no matter what the advance in technology

NEOCON1's picture

Elon? You on first name basis with him? If so, you're just another hack. If not, then just a fan boy with a few shares of stock and a geeks passsion that ELON will save the world and get you affordable tickets to the moon.

Magooo's picture

Electric vehicles in Hong Kong could be adding “20 per cent more” carbon to the atmosphere than regular petrol ones over the same distance after factoring in the city’s coal-dominated energy mix and battery manufacture, a new research report found.

Investment research firm Bernstein also claimed that by subsidising electric vehicle purchases, the government was effectively “harming rather than helping the environment” at the expense of the taxpayer.

“The policy is to encourage drivers to be green, but they are actually subsidising vehicles that create more emissions of CO2 and particulates from power plants,” said Bernstein senior analyst Neil Beveridge.

 

 

http://www.scmp.com/news/hong-kong/health-environment/article/1935817/electric-shock-tesla-cars-hong-kong-more-polluting

alangreedspank's picture

Driving an EV in winter means choosing between having the heater or getting to destination successfully.

Chauncey Gardener's picture

Personal experience in several pre-owned Nissan Leaf lease returns last winter here in Portland, OR. When the temp drops, especially into the thirties, you want to run the car heater, right? Talk about sucking down the battery charge, you can count on AT LEAST a 30% drop in drving range on a full charge. That, when optimal, takes you from a realistic max range of 80-85 miles to 50-56. Ridiculous unless you are making very, very short drives around town. Then, back on the charger for hours, if you have the quick charge option, otherwise, you are dead in the water until the next day. Practical, my ass.

ToSoft4Truth's picture

The electric car may have worked had GM been allowed to go Tits up. 

 

 

JedClampIt's picture

GM up 4.5% today, so everything must be awesome there!!

Berspankme's picture

top must be near. and Fuck GM

kellys_eye's picture

So where will .gov get its fill of lost fuel tax revenue?  Oh.... they'll tax the electricity used to charge the cars, that's where. 

That AND your domestic electricity consumption - given it's all metered at the same point of use.

It's all geared to making everyone DEPENDENT on energy and therefore subservient to those that control it.

Don't forget the 'smart meter' roll out that's going hand-in-hand with all-electric transport......

NEOCON1's picture

Don't forget Warren Buffoon is buying up power companies and utilities. Guess he likes the low dividends and even lower growth./sarc off

LawsofPhysics's picture

Well, in fact, using the current "mark to fantasy" accounting rules, losses are actually good (no really banks do this all the time, move things from one side of the balance sheet to the other)...

Not at all sustainable, but so what...?

 

"Full Faith and Credit"

VWAndy's picture

 Aint fiat magic grand? Next thing is banning older cars.

toady's picture

Cash for clunkers, only mandatory.

And Elon gets the cash.

bub's picture

They're betting on the consumer to trade the vehicle before the battery fails.

Juggernaut x2's picture

Shitbag Motors- aka GM- up 4% today on upgrade by DB and sitting at multi-year high-  what a fucking joke 

Berspankme's picture

rather have a sister in a whorehouse than a brother who drives GM

kellys_eye's picture

If consumers can't stop this using their wallets they can stop it at the ballot box.

Of course, the shortage of actual electrical energy to charge these vehicles will be the handbrake on the policies well before then.

ToSoft4Truth's picture

We stopped Obamacare at the ballot box...  or did we?

Arnold's picture

Paying for the charge will be electrifying.

Currently, Tesla owners do not.

Magooo's picture

Electric vehicles in Hong Kong could be adding “20 per cent more” carbon to the atmosphere than regular petrol ones over the same distance after factoring in the city’s coal-dominated energy mix and battery manufacture, a new research report found.

Investment research firm Bernstein also claimed that by subsidising electric vehicle purchases, the government was effectively “harming rather than helping the environment” at the expense of the taxpayer.

“The policy is to encourage drivers to be green, but they are actually subsidising vehicles that create more emissions of CO2 and particulates from power plants,” said Bernstein senior analyst Neil Beveridge.

 

 

http://www.scmp.com/news/hong-kong/health-environment/article/1935817/electric-shock-tesla-cars-hong-kong-more-polluting

spastic_colon's picture

"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."

so they'll are also going to outlaw camping, hunting, boating etc?? cant wait for all those "autos" to explode trying to tow stuff.

Arnold's picture

If I only had a brain......