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The ugly economics of green vehicles

It's fair to say that most consumers would prefer a green vehicle, one that has a lower impact on the environment and goes easy on costly fuel (in all senses of the term). The problem is that most people can't – or won't – pay the price premium or put up with the compromises today's green cars demand. We're not all "cashed-up greenies." In 2013, the average selling price of a new vehicle was $32,086. The truth is that most Americans can't afford a new car, green or not. In 2013, the average selling price of a new vehicle was $32,086. According to a recent Federal Reserve study, the median income for American families was $46,700 in 2013, a five-percent decline from $49,000 in 2010. While $32,000 for a car may not sound like a lot to some, it's about $630 a month financing for 48 months, assuming the buyer can come up with a $6,400 down payment. And that doesn't include gas, insurance, taxes, maintenance and all the rest. It's no wonder that a recent study showed that the average family could afford a new car in only one of 25 major US cities. AutoTrader conducted a recent survey of 1,900 millennials (those born between 1980 and 2000) about their new and used car buying habits. Isabelle Helms, AutoTrader's vice president of research, said millennials are "big on small" vehicles, which tend to be more affordable. Millennials also yearn for alternative-powered vehicles, but "they generally can't afford them." When it comes to the actual behavior of consumers, the operative word is "affordable," not "green." In 2012, US new car sales rose to 14.5 million. But according to Manheim Research, at 40.5 million units, used car sales were almost three times as great. While the days of the smoke-belching beater are mostly gone, it's a safe bet that the used cars are far less green in terms of gas mileage, emissions, new technology, etc., than new ones. Who Pays the Freight? Green cars, particularly alternative-fuel green cars, cost more than their conventional gas-powered siblings. A previous article discussed how escalating costs and limited utility drove me away from leasing a hydrogen fuel cell-powered Hyundai Tucson, which at $50,000, was nearly twice the cost of the equivalent gas-powered version. In Hyundai's defense, it's fair to ask who should pay the costs of developing and implementing new technology vehicles and the infrastructure to support them.

GM admits Cadillac ELR no real competition for Tesla Model S

Last year, then-CEO of General Motors, Dan Akerson, made it clear that the company lookouts at the Ren Cen had California automaker Tesla in their sights. "If you want to compete head-to-head with Tesla, and we ultimately will, you want to do it with a Cadillac," he said. So, given the fact that the Cadillac ELR has a plug and sells for roughly the same price at the Tesla Model S ($75,000 vs $69,900, before incentives) and that Cadillac doesn't have any other electric vehicle on the horizon, you'd be forgiven if you thought that the way that Akerson wanted to challenge Tesla's EV success was with the ELR. Well, you'd apparently be wrong. "The ELR is a different car, it's a different price point. It's way-different technology." - GM's Mark Reuss Speaking yesterday in Detroit, GM's head of global product development, Mark Reuss, admitted that the ELR is not the Tesla competitor that Akerson promised. "People like to say the ELR is [competition for the Model S], but it's really not. It's a different car, it's a different price point. It's way-different technology." So, if we follow that logic to conclusion with Akerson's quote from last year, then the only way that Cadillac can eventually compete with Tesla is with a pure electric car, and that seems an outside chance, at best, for the foreseeable future. Through the end of July, Cadillac has sold 578 ELRs since it went on sale earlier this year. Tesla doesn't break out monthly US sales, but has sold 15,114 Model S EVs around the world in the first six months of 2014. For his part, Tesla CEO Elon Musk has already said that GM is headed down the wrong path with plug-in hybrids like the ELR or the Chevy Volt. Speaking about the Volt last year, Musk said, Chevy "sort of created something that's a bit of amphibian," which resulted in a car that's, "Okay but not great."

Tesla Model X to outsell Model S, 'devour' premium SUV market

It's still about a year away, but the arrival of the Tesla Model X is already expected to have a major impact on the premium SUV market. According to Morgan Stanley, the all-electric Model X, Tesla's third model following the Roadster and Model S sedan, is "ready to feast" on the current crop of high-end SUVs.
Not only does Morgan Stanley expect the Model X to do well against other vehicles in its class, it's expecting the new SUV to even outpace the critically acclaimed Model S, with the X accounting for a larger share of sales by the end of 2016. The sales boost provided by the Model X should also contribute to a healthy jump in Tesla's current $250 stock price. MS is expecting Tesla shares to hit about $320, and has called it a "top pick in US autos," according to The Los Angeles Times.
As for how Morgan Stanley is expecting such strong results for a car that literally no one outside of Tesla has driven, it cites Elon Musk's company's increased access to both money and technological expertise relative to the Model S project. The firm also points to Tesla's larger investments in the Model X project so far.