Has Obama's Electric Car Revolution Failed?

Last Friday's news that Fisker Automotive would lay off 75% of its staff after failing to find a buyer was yet another blow to the Obama administration's efforts to foster an electrified automotive future.

Fisker received $193 million in U.S. government money, and produced some 2,500 cars – but it never came close to turning a profit, and its short history was marked by a long series of missteps.

Electric cars haven't exactly taken the market by storm. President Obama's onetime goal of having 1 million electric cars on U.S. roads by 2015 now looks like a pipe dream. Was this whole idea misguided from the start?

Fisker wasn't even building proper electric cars
In a way, Fisker's failure isn't a fair test. Despite receiving millions from a Department of Energy loan program, Fisker's car, a luxury sedan called the Karma, wasn't even a true electric car, or BEV (for "battery electric vehicle"). Instead, it was a plug-in hybrid, a term that means a conventional gas-electric hybrid that can be plugged in to charge the batteries.

Plug-in hybrids can typically go a short distance without using any gas at all. That was a cutting-edge idea when the Karma was first shown way back in 2008. But nowadays, plug-in hybrids are pretty mainstream: Toyota's (NYSE: TM  ) popular Prius comes in a plug-in version, as do the hybrid versions of Ford's (NYSE: F  ) Fusion and C-Max and a number of other cars.

Several of the mass-market automakers also offer (or plan to offer) pure electric BEVs. Nissan's (NASDAQOTH: NSANY  ) LEAF is probably the best-known, but there are a few others. Ford offers an electric version of its Focus compact, and General Motors (NYSE: GM  ) will roll out an electric version of its tiny Chevy Spark in a few markets later this year.

The problem with electric cars
The LEAF and those other BEVs were introduced with much fanfare over the last few years. But the LEAF has missed its sales goals, and the Focus Electric has sold just over a thousand examples in its year-plus on the market – next to none, in other words, in the grand scheme of things.

There are several problems with electric cars – a lack of recharging stations is one – but a big obstacle is that the batteries are still too expensive. By mass-market standards, that means that electric cars that have enough batteries to give a decent range are too expensive for what they are. Or put another way, why pay almost $40,000 for an electric Focus when you can get a more useable gas-powered version for half of that?

That's something that the government hasn't yet figured out how to fix. But the only company that seems to be succeeding with electric cars so far, Tesla Motors (NASDAQ: TSLA  ) , has figured out how to work around it.

Does Tesla's success show that electric cars are only for the rich?
As far as pure electric cars go, Tesla's Model S is as good as it gets right now. It's a big, luxurious, powerful sedan that just happens to be electric. And it's priced like a big luxurious sedan: The Model S starts at $62,400 (after a $7,500 Federal tax credit). Fully loaded, the price can exceed $100,000.

That puts the Model S squarely in BMW (NASDAQOTH: BAMXF  ) territory, hardly "mass-market". But it's the only electric car so far that has real-world range comparable to the average gas-powered vehicle, about 300 miles in the top of the line version.

It's almost as if Tesla figured out how much it would cost to build an electric car with that kind of range – and then designed a car around it that would arguably be worthy of the price.

That has worked out well for Tesla, which is hitting its sales goals and is close to reporting its first profit. But even though it received (and to be fair, is paying back ahead of schedule) $465 million in government loans, Tesla's sales are barely a drop in President Obama's million-electric-car bucket: Tesla CEO Elon Musk says that his company expects to sell 20,000 cars this year.

That's an awfully long way from a million cars by 2015. And as of right now, there's nothing in sight that is likely to do much to close that gap.

Will Tesla's success continue?
Tesla's execution so far has been nearly faultless, but the road ahead remains a hard one. If Tesla shows that there's a market for electric luxury cars, will it be able to fend off its big-name competitors? The Motley Fool answers this question and more in our most in-depth Tesla research available for smart investors like you. Thousands have already claimed their own premium ticker coverage, and you can gain instant access to your own by clicking here now.


Read/Post Comments (28) | Recommend This Article (4)

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  • Report this Comment On April 08, 2013, at 8:06 PM, djplong wrote:

    Dig a little deeper. Saying that Tesla is only making cars for the rich is like saying personal computers are only for the rich - in 1976.

    Tesla's stated goal is to bring electric cars to the masses. In addition to partnering with several companies, their overall strategy of carmaking is as follows:

    - Start with the expensive Roadster.

    - Plow the proceeds from that into the company to build the Model S sedan (and sell 20,000 of THOSE per year)

    - Plow THAT money into the company to make the Model X SUV (costing BMW X3-X5 kind of money)

    - Take THAT money and make the Camry/Fusion-killer. Right now it's called "Gen 3" and it's projected to cost about $35K with improved batteries and technology that Musk says he can't talk about yet. The Gen 3 should start showing up later in 2015.

  • Report this Comment On April 08, 2013, at 8:24 PM, TulipSpeculator1 wrote:

    djplong is right on in his assessment of Tesla Motors. While it would be lovely if Tesla could immediately begin producing an all electric car for $20k, this is a company that needs to make a profit. Some have interpreted Tesla's actions as elitist arguing they favor the rich as the only ones who deserve electric cars. What they don't realize is the difficulty in building a car company from the ground up does not allow the CEO to go and produce any car they want, rather it involves a combination of hard work, luck, and massive amounts of capital. As the Model S begins to become more common on roads, Tesla will earn the money it needs to fund the development of a true 3 Series fighter and then less expensive cars after that. In effect, Tesla is doing what any smart company with an emerging technology would do: sell it to those who can afford it now so everyone else can afford it later.

    Long TSLA shares

  • Report this Comment On April 08, 2013, at 9:15 PM, Steven221 wrote:

    Failed, as have all the other green projects he invested our money in.

  • Report this Comment On April 08, 2013, at 10:54 PM, weiswar wrote:

    I've been a mechanic for most of my 45 years and I work in biogas, so I've worked on vehicles and machines with all kinds of fuels. Personally, I see public transportation for regular commuting and regular lead-acid battery NEV's for non-scheduled trips. Like the folding cars MIT is working on.

    Tesla and the high-end electric cars are failing to take advantage of the electric car's biggest advantage, which is it's simplicity. You look inside a golf cart there's an electric motor, batteries and a control panel. Period. People can buy an NEV for $5-$10k, fall in love with it and abandon their gasoline car. The key is getting vehicles on the street so people can see them and walk past them in the parking lot. Not just in Al Gore's 8 car garage.

  • Report this Comment On April 08, 2013, at 11:09 PM, tigerade wrote:

    I agree with djplong. The Model S will help build a solid foundation for Tesla to make it's Gen3 car, which will be the "low priced, high volume car".

  • Report this Comment On April 08, 2013, at 11:59 PM, NOTvuffett wrote:

    even if i bought the highest priced tesla, i would had to recharge it about 3 times to make the 600+ mi sojourn i make every year (or twice).

    ok, i get it. i need to spend about $80k just to drive around. go pick up groceries, etc.

    i can buy a very nice care for like $50k, tell me why i would be much better off buying a tesla?

  • Report this Comment On April 09, 2013, at 12:15 AM, TuesdayPrepper wrote:

    BATTERIES. It doesn't matter how much we invest in car design, concepts, drivetrains, infrastructure. When the battery that stores the energy to power my car runs out within 100 miles, and then takes two-six hours to recharge, that's unacceptable. Unless and until we discover a way to store energy more efficiently, the electric car is dead. Because on fossil fuel, I can go and go and go. And a fill up lasts 10 minutes, not two hours.

  • Report this Comment On April 09, 2013, at 12:23 AM, TuesdayPrepper wrote:

    I'll add this. I have a Toyota Landcruiser converted to diesel. With a 40 gallon tank and 8 jerry cans, I have a 2000+ mile range. I run it on 30/70 biofuel and pump diesel.

    I live in FL and my summer home is 1900 miles away in PA. No brainer. It even has a tent and a stove.

    Sure, around town an electric saves fossil fuels, and in FL where most of our power comes from nuclear, it doesn't burn coal either. But it's just not convenient. I go do errands, make it home and have to charge it for a few hours. But let's say that all of a sudden there's an emergency and I have to drive it again right when I get home. Nope.

    Just not practical yet, and it can't compete. Yet. We'll see.

  • Report this Comment On April 09, 2013, at 12:47 AM, Karly10 wrote:

    Why so much interest with the electric cars, there are many countries in the world that use NATURAL GAS. It is like 70% cheaper, it is clean and there is more reserved than you can imagine. I used it several years while living in South America, never had a problem.

  • Report this Comment On April 09, 2013, at 1:56 AM, btc909 wrote:

    Yes it has failed. I knew Fisker was a goner. But I'd keep an eye on Tesla, if they can keep the range over 200 miles for a decent price they have a winner. It's all about range & price. I-MiEv, Leaf, all failures for mass market sales. I still think EV's should incorporate a natural gas generator. GM needs to dump the dinky Cruze platform ASAP. Cramming technology into a small space drives up costs.

  • Report this Comment On April 09, 2013, at 5:14 AM, 4Deuce wrote:

    The first electric car was in 1912 and the first hybrid came along in 1917. They were popular with women because driving an electric car required no cranking to start the engine. When electric starters came along, women abandoned electric.... The issues with electric cars is battery efficiency and replacement costs of batteries. Add a lacking of any real charger infrastructure and long waits for recharging, and you can see these too as reasons for electric car failure. The US Navy has spent billions of dollars since WWII desperately trying to find a state-of-the-art breakthru in battery efficiency and they have come up a cropper. All of the severe limitations of electric cars - demonstrated for nearly a century - made any expenditure of taxpayer funds on companies like Fisker was just another way of flushing money down the toilet and one more demonstration of how bad the Government is at doing anything other than getting Social Security checks out on time.

  • Report this Comment On April 09, 2013, at 5:20 AM, MddMxx13 wrote:

    I don't know why everyone and their uncle wants to lay Blame on the president , it's the mongers of extreme wealth and profit that ruin our daily LIVES.

    Now I'm not a defender of the president, but give the man a break , he is doing what we allow him to do, no more no less.

  • Report this Comment On April 09, 2013, at 5:33 AM, vinnieboiblue wrote:

    Yes his Electric Car Revolution failed. As much as I like him and want him to succeed,the way he awarded federal funding, was too easy. He should have given them incentives and if those incentives prove successful, then he should have provided funding on a proven company and not no start up. You only reward when their products and technology has been proven to work and cost as little to produce as possible. The vehicles out now are so expensive even with tax credits. Like George Bush, the idea was good but the implementation and presentation was lacking accountability.

  • Report this Comment On April 09, 2013, at 7:48 AM, TMFMarlowe wrote:

    Tesla fans, listen up: Tesla isn't going to build a mass-market car with good range until the batteries that will permit it to happen come into being. I'm fully aware that that's the third stage of Elon's plan, but it ain't gonna happen until the technology is there to make it happen. And Tesla can't do that on their own.

    And what's more, once those batteries are on the market, Tesla isn't going to be the only company using them, and Tesla's future competitors have some HUGE advantages, namely that they're global automakers with huge R&D budgets and massive scale.

    John Rosevear

  • Report this Comment On April 09, 2013, at 8:03 AM, Jason87467 wrote:

    Some people think it is bad to try new technologies. If it were up to them, we'd still be living in caves. Morons can not think beyond their nose.

  • Report this Comment On April 09, 2013, at 8:10 AM, pwcjr wrote:

    What? Obama failed at something?

  • Report this Comment On April 09, 2013, at 8:41 AM, Caroll56 wrote:

    There is a reason sales are down. At least at the Ford dealers in MI and MN they are trying to not sell Electric and Hybrids.

    When I inquired about buying an Electric Focus the sales person told me they don't want to sell any because electrics and hybrids are not suitable for this climate. They didn't have any in stock and didn't even want to talk to me about getting one.

    I've also looked at the Leaf and the local dealer is out of them more often than they have one on hand. There are some of the MiEV’s at the Mitsubishi dealer and they were the nicest to deal with but I’m kind of hoping to buy something American made.

    The EV’s will catch on but the car companies are going to fight it all the way. The drive train last too long and if you can keep the rust off them the life expectancy will be much longer then a gas power car. Yes the batteries will need to get replaced for about the same cost as getting your transmission in the SUV fixed but that is the only thing that wears out in the drive train.

  • Report this Comment On April 09, 2013, at 8:43 AM, Lew3555 wrote:

    Electric cars were a fail right from the beginning. Reason:, The average Joe isn't able to afford one. If the plan is to have people driving electric cars, manufacturers have to find a way for the average guy to be able to afford one. By average guy, I'm thinking those that make $35K to $40K a year. I think that a good many people would go electric, if the price were right.

  • Report this Comment On April 09, 2013, at 9:03 AM, stanpasyt wrote:

    the evs will catch on and become a major part of our energy policy. The price of the electrics/hybrids

    will have to come down to appeal to the average persons income. We must watch the oil companies crooks trying to derail it, as they want to continue contaminating our air with their poisons. The younger generations will take up the reins as they are not averse to change. They are also more health and environmental conscious. The horse is out of the barn and is gaining steam silently, "believe me"

  • Report this Comment On April 09, 2013, at 10:51 AM, CluckChicken wrote:

    So the industry was working on this heavily prior to Obama taking office and there does not appear to be any let up on the investing now.

    This is just a sad instant gratification article that clearly ignores all the work the industry is doing to make a political statement.

  • Report this Comment On April 09, 2013, at 12:36 PM, Ken311 wrote:

    Tesla's execution has been nearly faultless? Hardly

  • Report this Comment On April 09, 2013, at 12:45 PM, StopPrintinMoney wrote:

    eh, looks like everything Obummer touches turns into pie of rubbish.....

  • Report this Comment On April 09, 2013, at 12:52 PM, Costanzawallet wrote:

    Obama's electric car revolution? Seems to me it should be America's revolution.

  • Report this Comment On April 09, 2013, at 1:21 PM, damilkman wrote:

    My take is that there has to be a breakthrough in storing charge. Storing energy in a stable chemical is right now way more efficient. The only way I see EV's being successful is running on fuel cells. The basic idea is generate power from the fuel cell. Thus recharging and the need for expensive heavy batteries could be discarded. Refueling would occur by replacing the used fuel to generate electricity. This could be Hydrogen or Natural Gas. In theory if it is Hydrogen, this could still be generated by a renewable process like using electricity from solar to break apart water. There of course are inefficiencies as I go from electrical to chemical back to electrical. But it sure beats having to lug several hundred pounds of batteries.

  • Report this Comment On April 09, 2013, at 5:48 PM, MariahRobertson wrote:

    While electric cars are a long term goal, we need open competition in the fuel market right now! There are a number of viable fuel options such as ethanol, methanol, and natural gas that, along with electric vehicles, can pave the way to ending America's oil addiction. This is something that appeals to both conservatives and liberals-- you should be able to choose what you put in your vehicle.

  • Report this Comment On April 09, 2013, at 10:28 PM, chris293 wrote:

    Government run businesses are doomed to fail much as 'death by commitee' where government workers and Congress are prime examples of self-interests leading to inept actions which costs the taxpayers billions of dollars. This is like Oregon and other states that have budget problems that cause poor performance in public services and the quality of education because the states leaders gave themselves their pay and retirement benefits mostly based on pie in the sky economic projections.

  • Report this Comment On April 11, 2013, at 12:58 AM, RussellL wrote:

    NOTvuffett wrote: "...even if i bought the highest priced tesla, i would had to recharge it about 3 times to make the 600+ mi sojourn i make every year (or twice)."

    Models S gets about 265 miles a charge. You would only have to charge twice during your drive.

    A Tesla owner has gotten 400 miles.

    vinnieboiblue wrote: "You only reward when their products and technology has been proven to work and cost as little to produce as possible."

    You have no idea how a new business starts.

  • Report this Comment On April 11, 2013, at 11:53 PM, NOTvuffett wrote:

    Hey Russelllee,

    i feel love, donna summer: http://www.youtube.com/watch?v=f0h8Pjf4vNM

    if the model s has a price of $87,400, and it has a battery capable of storing the advertised 85kWh, how many hours would you have to put it on a charger? maybe i should be more specific. if you had a dedicated circuit, 30amp@120v, how long would it take? my point is you can't plug it in just anywhere, and it is not fast.

    let us suppose you can plug it in just about anywhere, and the charging time is only about one hour. the journey i was telling you about has speed limits between 65 and 75 mph. when i know the road is straight and lightly traveled, i may go to warp speed if the mood strikes me. my question is, "how far down the road would i be without having to recharge?".

    i don't know why so many young people think that older people are adverse to change. one of these days there will be electric cars, but they need to be proven to be cost efficient. this is an industry in its infancy. i doubt that there is a person alive today more capable than elon musk to bring this goal to fruition. we are just not there yet.

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