Automakers are rapidly embracing an all-electric future. But there’s a catch: Nobody has figured out how to make a profit on electric cars.
On Monday, General Motors pledged that it would unveil 20 new electric cars by 2023, effectively committing the company to an all-electric portfolio at some point in the future. GM Vice-President Mark Reuss said that the carmaker would be profitable in the undertaking.
At the moment, the industry is unclear on when those profits will arrive. And some automakers are losing money hand over fist as they struggle to read the crystal ball.
Reporting for Bloomberg, Tommaso Ebhardt pointed out that “[B]attery-powered autos have yet to become profitable” and noted that Fiat Chrysler Automobiles CEO Sergio Marchionne said in a recent speech that FCA is losing up to $US20,000 a car on the electrified Fiat 500.
The 500e sells in the US for about $US33,000 and can travel 87 miles on a single charge. On numerous occasions, Marchionne has complained about how bad a financial deal the vehicle is for the automaker. However, he also knows that FCA doesn’t want to be left completely behind in the EV game, so it’s not surprising that the 500e remains in the lineup.
The 500e also has value as a “compliance vehicle,” helping FCA meet government-mandated fuel-economy requirements for the automaker’s fleet that’s heavy on SUV and pickup-truck sales.
It’s not hard to understand why the 500e makes Marchionne, an accountant and finance professional by training: in 2017, the company has managed to sell anywhere from about 500 to more than 700 of the vehicle monthly. That’s enough demands to keep it around — and to keep facing the $US20,000 hit every time a customer drives off the dealer lot.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.