Proving the point that I have been making for the past couple of years, the Irish Times reports that BMW has decided to unplug any future electric Mini. It is very hard to justify for any rational manager inside the auto industry to produce an inferior (in traditional units like performance) yet more expensive product for an unproven market. Let's remember that the auto industry as a whole is set up to:

a. develop incrementally better products, 2% here, 3% there. Eliminating 15,000 parts (engine and transmission) is a radical change.

b. produce as many hundred thousands (or millions) of units per year as robotically possible, so that hopefully the minuscule profit per vehicle adds up to a good 4% ROI. In other words, volume is king, and no one has produced enough batteries (or motors) at the required volumes yet...

Is this the beginning of the end? Of course not. If Carlos Ghosn sticks around long enough, Nissan might have a shot at it. But he is just a CEO, and his whole electric adventure can end up like the one started by Lord Browne at BP at the beginning of the decade. Do you remember Beyond Petroleum and BP trying to be the greenest oil company out there, trying to be part of the solution? Ask Tony Hayward now.

Moving forward, the more I think about it, the more I see the market dividing itself into two segments:

a. the upper segment (Tesla, Fisker) will work because they have political and economical clout. With over $1bn in government loans, NUMI and the old Pontiac plant, they are both the EV-startup equivalent of too big to fail. I also believe that since they are dealing with high income conscious individuals, they will easily forget their $40k MSRP dreams and raise their prices to where they should be, considering their low volumes (15,000/year) and technical complexity. Keep saving guys, because there is no way they will sell their 4-door sedans under $60-70k (beers on me).

b. the lower segment, very price sensitive, I'm afraid will struggle to survive as pure electric, leaving the Volt and specially its cheaper successors as the only valuable alternative, if and only if the product and its launch are up to the highest standards. In other words: No Recalls.

In the long term, China and the rest of the BRIC economies will only pressure oil prices higher, so an oil-less future for land transportation is without question. But in the short/medium term, the only way forward to really democratize electric vehicles is to separate ownership from use, so that the initial higher investment is shared, and drivers only pay for the amount of battery they are really using. Once enough people sign up and get used to drive short-range vehicles (what 80% of us need 80% of the time), they might feel comfortable enough to actually buy a $20k EV.

But of course if we do our job well, they will never need to think about purchasing a car again.

 

UPDATE - July 02, 2010

Today's New York Times talks about BMW plans for their future electric city car, which has apparently been crash tested already and is halfway thought its developing process.

I'm sure it will be a beautiful product, but let's see: carbon fiber body, built from scratch motor, 150 miles range, premium sustainability... it sure sounds like Tesla Roadster to me, not something for us mere mortals.

Posted
AuthorJOSE PARIS