Buy a Bolt and Fund a Tahoe?

2017 Chevrolet Bolt EV


What if the fledgling electric car industry was just a ruse to sell more earth-polluting fossil fuel-powered trucks and SUVs? The federal government’s fleet fuel-economy requirements and the California Air Resources Board’s ZEV credits aren’t just creating a small market for EVs, they’re fueling the fire for gas-powered vehicles that defeat the purpose of EVs.

Case in point is the new Chevy Bolt, a masterpiece EV that finally makes a practical vehicle with a 200-mile range accessible to the majority of the car-buying population.

Those who buy one, though, may not be saving the planet, but subsidizing the sale of gas-guzzlers.

An article on Electrek says,

After meeting with GM CFO Chuck Stevens last week, JP Morgan analyst Ryan Brinkman released a note to clients claiming that the Bolt EV is part of an “improving array of electric vehicles from automakers which are pricing such vehicles with the aim not to turn a profit but rather to sell in sufficient volume to subsidize the rest of their more lucrative portfolios of internal combustion engine vehicles from a regulatory compliance perspective.”

The CARB program is well-intentioned in that it forces automakers to accumulate credits by selling zero-emission cars in order to keep selling gas-powered cars in certain states. The program may be backfiring, though, as automakers are willing to take major losses on the sale of each EV in order to rake in huge profits on full-size trucks, SUVs, and crossovers. Essentially, you buying a Bolt allows your neighbor to buy a Tahoe.

We wrote about the artificial market being created by such state-sponsored programs, but didn’t put the pieces together that such programs might actually hurt the EV market in the long run. Here’s the problem: If the EV market evolves only to support the existence of the combustion engine, what happens to the companies that don’t offer combustion engines?

A company like Tesla can’t afford to take massive losses on each EV and can’t lower its prices with the expectation that the costs will be recovered by gas-powered cars. If automakers complying with CARB requirements force unrealistically low prices on EVs, the public will gravitate toward the lower-priced cars and leave the ones priced appropriately to flounder.

The good news for Tesla is that it’s been able to support higher prices. The upcoming Model 3 will be priced similarly to the Bolt, but unlike the Bolt, the majority of its systems (and batteries) will be built in-house, which keeps costs down. The Bolt’s charger, batteries, infotainment system, drive motor, HVAC system, and more are built by tech company LG.

That’s an expensive way to build a car, but for GM the costs are worth it, because so many of us continue to demand high-priced gas guzzlers.

Would you rather buy a Bolt or a Tahoe?

-tgriffith

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