There is nothing a company CEO hates more than not making a profit on a product, but as Fiat Chrysler CEO Sergio Marchionne knows, it is sometimes a necessary evil in the evolution of a new technology.
Speaking at Fiat S.p.A’s general meeting on Wednesday, Marchionne spoke frankly about his company’s involvement in electric cars.
“The economics of EVs simply don’t work. On the 500 that (Chrysler) will begin selling in the U.S. next year, we will loose over $10,000 per unit despite the retail price being three times higher”
The small four-seat retro-styled hatchback has a huge following in Europe, where the gasoline version was subject to a six month waiting list shortly after launch.
Atomik Fiat Abarth 500 Electric
Designed as a homage to the original rear-engined Fiat 500 made between 1957 and 1975 the current 500 is Fiat’s answer to BMW’s retro-inspired Mini.
Retro styling or not, Marchionne’s comments spell potential trouble for the automaker’s ability to sell the all electric version when it launches in 2012.
Based on the U.S. list price of the Fiat 500, the electric version could cost as much as $45,000 - an increase of over $12,000 based on Marchionne’s own price estimates from last year.
Despite the predicted losses, Fiat Chrysler plans to forge ahead with the 500 Electric rollout, hoping that its initial losses will be recouped in coming years as the cost of production and battery packs drops and the popularity of electric cars increases.
Still recovering from Chrysler’s bankruptcy and with an already scaled back plug-in and hybrid development cycle, Fiat Chrysler could be taking one gamble too many.
But there are success stories. It took king of the hybrid Toyota many years before it started to make significant profit on its iconic Prius, and Nissan is expected to take a similar amount of time before its investment in the 2011 Leaf pays off.
Ultimately, unless Fiat Chrysler can reduce the predicted sticker price of the Fiat 500 electric it will remain a very niche vehicle with competing electric cars of greater size and lower cost taking the majority of market share.