Falling Prices Spur Demand For Electric Cars

Reader Contribution by Joanna Hlavacek
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After going unnoticed at a Los Angeles-area dealership for months, three Honda Fits were snatched up by customers one Saturday morning in June.

The sudden enthusiasm surrounding the Fit even generated a waiting list for the previously low-selling electric car, surprising Jeff Fletcher, sales manager for Honda of Santa Monica.

“It’s incredible, especially since we haven’t had any foot traffic or interest in the car in six months,” he told the Los Angeles Times. “I’m not even sure we’ll have enough cars for the people on the waiting list.”

Fletcher’s situation is not unique. Dealerships across Southern California similarly experienced increased EV sales in early June, fueled in large part by reduced lease rates, according to the Los Angeles Times. Honda cut its lease on the Fit from $389 to $259 per month, while the Chevy Spark and Fiat 500e are leasing for $199 a month.

Price cuts by manufacturers, in addition to aggressive incentives from federal and state governments (the U.S. Department of Energy offers a $7,500 income tax credit for many models) have also spurred the new demand for electric cars.

It wasn’t always like this. For many years, electric cars failed to attract customers and impress critics, who cited pricey upfront cost and impracticality as the EV’s biggest shortcomings. Automakers sold about 12,000 pure-electric (as opposed to hybrid) cars in the U.S. through April, according to Ward’s AutoInfoBank and Tesla Motors. That’s less than one percent of the 4.97 million cars and trucks sold during the same period.

Last year, Nissan’s Leaf sold about half of what the company anticipated, echoing the longstanding industry trend of low sales. Things began to look up, however, after Nissan reduced the price of the new Leaf model by $6,400 earlier this year. Leaf sales tripled in the first five months of 2013, compared to the same period last year, reports the Christian Science Monitor.

Advocacy group Plug In America estimates that the 100,000th plug-in electrical vehicle was sold around May 20, 2013. According to HybridCars.com, sales of plug-in models in April 2013 were double those of April 2012. And, after this month’s Honda Fit shortage, the company even issued a rare apology, promising more cars on the market soon:

“We recognize that some customers have experienced frustration as they attempt to locate dealers with available Fit EVs,” said Steve Center, Honda’s environmental business development vice president, in a statement. “We sincerely apologize for this — though it should only be a temporary inconvenience. The good news is that more Fit EV’s are on their way to dealer showrooms.”

Despite this reassurance to Fit fans, Honda isn’t going to increase production on the model, at least not in the immediate future. Even with the recent spike in sales, the company doesn’t have much financial incentive — Honda actually loses money for each Fit manufactured (now compounded by the lease reductions), and what’s more, production on a specialized vehicle like the Fit is more difficult than a gas-powered car built on a large scale, reports the Los Angeles Times

For now, the automaker plans to produce only 1,100 of the Fit models for the U.S. market.

“We still think 1,100 is a realistic number for people who are really going to live with an EV,” Honda spokesman Chris Martin told the Los Angeles Times. “We don’t want it to be a rash decision, because then they might not be happy.”

Photo by Fotolia/joel_420

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