Published on May 28th, 2014 | by Zachary Shahan


Fiat CEO Acts Dumb, Still Hates EVs, Says Not To Buy Fiat 500e

May 28th, 2014 by  

I saw this story a few days ago and decided not to cover it, but then Chris went ahead and wrote up a good piece on it, so below it is. However, I want to make a couple of key points as well first:

1) It requires a lot of work and money to design a new car model. Even more so if its a totally different kind of automobile than what you normally design. In the latter case, you also have to set up new supplier partnerships, new services, new sales procedures, etc. So, when an automaker designs a new car, and especially its first electric car, it needs to sell a certain number of them before it regains the money put into all of that. You have to scale up to get… economies of scale. It’s common sense in businesses, especially in the automobile world. With that simply explanation out of the way, when the CEO of an auto company (aka Fiat) complains that the company is losing money on its first electric car but then doesn’t own up to the fact that the blame is 100% on Fiat, that CEO is acting like a moron. The Fiat 500e has actually gotten great reviews and would make it into the homes of many, many happy customers… if Fiat actually tried to sell the damn thing!

The fact is, Fiat hasn’t gotten the memo that the future of automobiles is electric. Or it got the memo and simply isn’t interested in moving into the future. When the company was essentially forced to produce an electric car in order to sell its other vehicles in the large California auto market, it actually created a great little electric car, but its chaperone (Fiat-Chrysler CEO Sergio Marchionne) has accompanied it into the market kicking and screaming. Furthermore, Fiat has kept the car in a tiny portion of the market and seems to have only produced the bare minimum required to keep selling its other cars in California. Either through idiocy or… well, idiocy is the only thing that comes to mind… rather than produce and sell the car at a scale where Fiat gets its money back and starts making a profit, Mr Marchionne has decided to bash electric cars and tell customers to not buy the Fiat 500e (as if they could anyway). Never mind that the 500e has been bringing many new customers into the Fiat brand.

2) Regarding Mr Marchionne’s comments regarding other electric cars on the market, they’re absurd. Renault-Nissan Chairman and CEO Carlos Ghosn is very bullish on electric cars and is happy to be the leader in electric car production. The Renault-Nissan Alliance has sold well over 100,000 elecric vehicles (including the Nissan LEAF, Renault ZOE, Renault Twizy, Renault Kangoo ZE, Renault Fluence ZE, and Nissan e-NV200). It’s not doing this out of charity or to be in compliance with California law. It’s making money on these vehicles. Even when the Nissan LEAF got a $6,000 price cut in the US, Ghosn was sure to note that this wasn’t a subsidy to consumers but that the production costs had dropped substantially when Nissan started producing the LEAF in Tennessee.

Anyway, that’s my rant. Here’s more info from Chris:

Fiat CEO: We Lose $14,000 On Every Fiat 500E EV We Sell

A few years ago, Fiat-Chrysler CEO Sergio Marchionne said the company will lose $10,000 on every Fiat 500E EV it makes. Turns out he was wrong…by about 40%. According to Marchionne, Fiat loses some $14,000 on every electric car it loses. His solution? Asking people not to buy it.

But don’t feel bad for Marchionne or his massive corporation, because they have had ample time to invest and develop EVs. Remember the Chrysler ENVI program? Killed shortly after the Fiat takeover. That was about five years ago. Imagine where their EV program might be today if they had just stuck with it?

Naturally, Marchionne blamed everyone but himself and his company for their failure to make money on EVs. According to the FCA boss, “…nobody out there that makes money on the electrification of vehicles, with the exception of Tesla, which only makes electric cars and sells them at a rather inordinate price.”

While I don’t know how true that statement is, it does sound like a load of bullshit to me, especially coming from the parent company of Ferrari and Maserati. Meanwhile, other automakers. including the two biggest EV makers, GM and Nissan, have slashed the cost of their EVs by at least $5,000, which all start in the same price range as the Fiat 500E. Are they just increasing their losses? Unlikely. Instead it sounds like Sergio was forced to make a car he didn’t want to, and did the worst job possible, expecting people never to buy it.

For Marchionne though, the Fiat 500E is a compliance car, and nothing more, and there are no plans to build anymore than necessary to meet CARB regulations in California. Unfortunately for him, demand of the electric Fiat is reportedly reaching a fever pitch. By most accounts, the Fiat 500E is an excellent vehicle that’s fun to drive, and with access to a conventional version of the 500 included in the lease price drawing customers into dealerships…only to have them leave when they encounter a months-long waiting list.

Instead of redoubling its efforts on EVs, which are proving more popular than predicted, Fiat is committing to diesels, and plans to offer a plug-in hybrid minivan capable of around 75 MPG. While I think both technologies have their place, Fiat-Chrysler is only putting itself further behind the curve by not developing a profitable EV of its own.

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About the Author

is tryin' to help society help itself (and other species) with the power of the word. He spends most of his time here on CleanTechnica as its director and chief editor, but he's also the president of Important Media and the director/founder of EV Obsession and Solar Love. Zach is recognized globally as a solar energy, electric car, and energy storage expert. He has presented about cleantech at conferences in India, the UAE, Ukraine, Poland, Germany, the Netherlands, the USA, and Canada. Zach has long-term investments in TSLA, FSLR, SPWR, SEDG, & ABB — after years of covering solar and EVs, he simply has a lot of faith in these particular companies and feels like they are good cleantech companies to invest in. But he offers no professional investment advice and would rather not be responsible for you losing money, so don't jump to conclusions.

  • Edwin Medina

    The board of directors really needs to SHUT HIM UP. Someone please explain to him that each car saves him $70k in CARB Credits.

  • Joseph

    Consider this talking out of my rear or just Internet opinion, I believe auto makers are frightened of what future lies in electric vehicles. Like what has been already mentioned, the bottom line is king. Vehicle leases bring in endless money that direct sales can’t match. Pay thousands of dollars to a company just to return your car to them 2-3 years later, just for them to resell it at 80% MSRP as a “certified” vehicle. Either way they make their money and then some. Affordable EVs will put an end to that cash cow. Why pay thousands to return your car when you can buy an affordable EV without the normal cost of ownership associated with a conventional car purchase? Seems very enticing once the market tackles range and logistics issues.

    For a company like Fiat, famous for small, fuel efficient cars that already lend themselves to thrive in an urban market, the 500e could also potentially affect the rest of their line-up. Perhaps they’re afraid of becoming the snake biting at its own tail.

    Should automakers be obligated to create alternative fuel vehicles? Yes, I believe so. It opens up more competition which leads to greater advances in technology and efficiencies in production. EA sports became the sole licensee for NFL gaming and the gaming experience stagnated. Completion is the source of progression.

    Should automakers be given a deadline to comply? Yes, within reason. Don’t force the hand and expect a product with a smile. Without the necessary infrastructure there will always be considerable losses. Tight deadlines generate hasty decision making and we wind up with Fiat’s losses.

  • Sara2

    Your matter-of-fact opinion that “the future of automobiles is electric” is both laughable and false. I have no doubt that OEMs will continue to push for greener technology but natural gas and diesel are both options. The first company to make electric vehicles profitable will make a lot of money, but the government should not be forcing something down the throats of companies before its time. If you think the government knows how a company should operate better than the company itself then there is not point in continuing… alas, I will anyways.

    For the record, the 500e is spreading to Oregon this month, so your discussion on the “idiocy” of one of the greatest CEOs of all time is miss-informed and continues to call into question the credibility of this article.
    While I do agree that the 500e has brought people to the fiat brand that otherwise would have bought some other brand, it does not make the technology itself profitable.

    Everything has startup costs; If you think Sergio Marchionne is looking at the startup costs vs. the sales and determining that the vehicle is a net loser, then I wonder how you justify publishing your opinion. The value in a product is largely determined by how quickly it can pay back the company that created it. Let’s do the math on this one: it cost billions of dollars to create the 500e, so, losing $14,000 per car means the vehicle will become profitable… ummmm….never.

    I am not sure the point you are trying to make by saying that “it does sound like a load of bullshit to me, especially coming from the parent company of Ferrari and Maserati,” but I do know that the CEO of an OEM is not going to make unfounded statements on the profitability of a product. If you take the time and money to invest in reading articles and financial reports on the technology you wouldn’t have to say you “don’t know how true that statement is” because you would know that it is entirely accurate.

    The 500e is a great electric car. That does not change the bottom line for the company. Electric vehicles are incredibly popular. Again, does not change the bottom line for the company. As Fiat Chrysler Automobiles tries to change its image in the public’s eye, you can guarantee that anything Chrysler and Fiat put out will be best in class. Investing more money in a technology that does not bring revenue to the company does not make sense… unless you want to put your tax dollars towards bailing out the company… again.
    The comment on the taxpayers not paying for this because Chrysler is now owned by Fiat is also false. Let me know when you plan to make a cross-country trip in an electric vehicle. If you can find a charging station, you can look in the mirror and find the person who paid for it. Any and all infrastructure that is in place or is being built was paid for by you and I.

    In short, if the government has to subsidize it, it’s not ready for market. If it’s not ready for market it will continue to be a “compliance car, and nothing more.”

    • Jacob

      Given the commercial sensitivity of the information, I doubt that it’s possible to get accurate figures on how much each EV makes or loses for its company or, in this case, although we’ve been given a figure, to know how it’s been calculated and what it does or does not include. If it includes sunk costs, it’s hard to see why the CEO is discouraging people from buying the product, but if it excludes them, I don’t know why they would be starting to sell it in Oregon, or anywhere else they don’t have to.

      I do agree that the California CARB regs mandating sales of EVs are not a good way to go about encouraging EV sales. It smacks too much of micromanagement by the state government, and is likely to produce what we see here, grudging, minimal compliance, where what is needed to get EV sales off the ground is an enthusiastic embrace by at least some car manufacturers. Much better to let those like Tesla who want to make EVs make them, and not force other manufacturers to make cars they don’t want to. It does make sense to tax ICE cars, to make up for the pollution and consequent environmental and health damage they inflict on the world at large.

      As for infrastructure, most roads are paid for by you and me too. Maybe that shows the world is not ready for cars at all?

      • Vivek

        Sergio is a past master at arriving at strong negotiating ground be it with the union, partners like GM or with the government, His bluster for sure has a lager agenda where he is probably working the press to get the government make policy changes that will make electric more mainstream before a company like FCA is able to invest more in a niche technology that none of us yet can realistically say is the future of the automobile industry

    • JamesWimberley

      “If the government has to subsidize it, it’s not ready for market.” By this standard, ICEs are not yet ready for market after 100 years.

      For the nth time: carbon pollution is an externality. Look it up. Since Coase markets in pollution rights (have I lost you already?) are impracticable, the only way to fix externalities is through government regulation – bans, taxes, subsidies, direct provision. The market is always in practice wrong, as Stiglitz and Greenwald showed in 1986 (link): “whenever markets are incomplete and/or information is imperfect (which are true in virtually all economies), even competitive market allocation is not constrained Pareto efficient”.

    • A Real Libertarian

      Let’s do the math on this one: it cost billions of dollars to create the
      500e, so, losing $14,000 per car means the vehicle will become
      profitable… ummmm….never.

      So if it’s not profitable from day 1, it shouldn’t be built?

      You people really have no clue what “investment” means, do you?

      Every model of car loses money at first, after it pays off the fixed costs of the RD and infrastructure, then it becomes profitable.

    • SeanThomes

      “Let’s do the math on this one: it cost billions of dollars to create the
      500e, so, losing $14,000 per car means the vehicle will become
      profitable… ummmm….never.”

      right, because costs can never be brought down through experience or economies of scale

      uh huh

      Toyota took a pretty hefty loss with each Prius it made. back in 1997. by 2002, they were making a small profit and now the car is quite profitable to the company. because the company stuck with it. improved the technology. improved its ability to more cheaply manufacturer it. and its ability to make money off the car.

      and billions of dollars to develop? you literally pulled that number out of your posterior.

      • Bob_Wallace

        Supposedly GM spent about $1 billion to produce the Volt.

        Since Fiat could purchase EVs from other manufacturers and reverse engineer them to create their EV it’s hard to believe “billions” in R&D.

        A billion in R&D is pretty common for new car models. Ford spent $2 billion (in current dollars) to develop the Edsel.

    • A Real Libertarian

      P.S. Upvoting your own comment is slimy as a Hagfish debating JFK.

  • I guess they have not built enough? Every new model takes higher production and several years to amortize the costs of development.

  • csmede

    I’d like to see any evidence pointing to GM actually making money on the Volt. I see (exagerated) reports that GM is actually losing $49k on each Volt they make. The truth is probably in the middle – e.g. GM is losing some money on each Volt they sell, but maybe in the $10k range.
    That being the case, it shows Marchionne is actually very smart. He knows the EV business is not yet mature. He knows a lot of money is going to be lost in trying to get it ready for prime time. And he knows FCA is still a dead man walking (or dead carmaker driving?). Therefore his conclusion is: let others lose the money and bring prices down (battery, electric motors, etc). And then, we’ll jump on the bandwagon once things gain momentum. It’s all about timing. First he has to resuscitate the dead man. Then he can feed him milk. Then it’s time for meat!
    As much as I love EVs, I’m not ready to buy one, yet. Financially, it doesn’t make sense. Yet I can’t wait for prices to come down sooner…

    • sault

      GM invested a certain amount of money designing the Volt and tooling up the factory / supply chain that was required to get production up and running. That is all sunk cost which gets distributed over more vehicles as sales numbers accumulate. Then there is the cost of parts, labor, O&M, etc. that are required to get each Volt out the Door. I’ve seen estimates (never hard figures) that show GM making $10k – $16k on each Volt after these recurring costs are taken into account. However, there is no credible way to determine how much money GM makes or loses on each Volt overall without knowing how many of them will eventually get sold because those sunk costs are distributed over the total number of vehicles that are sold. All you can go on are sales forecasts and even though GM hasn’t hit their sales targets, sales have been fairly good and seem to be somewhat constrained by vehicle availability and not low demand.
      Why GM would continue to support and invest in a vehicle that’s losing them money is beyond me. All of their actions instead show that they think the Volt will be a money-maker if they stick with it long enough.
      They also are in a unique market segment and have developed unique technology to bring the Volt to fruition. The Cadillac-branded Volt is just one of many ways they will be able to leverage their technology to pay off their sunk costs even faster.
      As for Fiat, they are resisting the development of EVs apparently. This is not some market segment that a company can “jump on the bandwagon” once others have proved it to be profitable. It takes a lot of hard engineering work, supplier development, brand building and public outreach to operate successfully in this arena. Even though the 500e is impressive, Fiat will miss out if they aren’t laying the groundwork right now to exploit the EV market segment. If this is just a petty attempt to ridicule environmentalists and spite state regulators for having the gall to tell automakers how much pollution they can pump into the air, it seems rather short-sighted and petty to say the least.
      EVs can make financial sense for a lot of people right now. Depending on the state you live in, you can get a LEAF for around $20k after tax incentives. Since electricity costs a fraction of the price of gasoline and EVs require a lot less maintenance, the total cost of ownership for an EV can be drastically lower than a gas car for many people. If your daily commute and other driving habits make an EV impractical from a range standpoint, the Volt might be able to accommodate your needs, but it still has many of the same maintenance issues that gas cars have. Just run the numbers with as realistic assumptions as possible and see if it makes sense.

      • csmede

        See my reply to Zachary for more details on the EV economics for my family.

    • I’ve run the numbers for many different ownership scenarios and been surprised to find that lifetime costs generally favor buying an electric car. Am curious:

      in which state do you live?
      how many miles do you typically drive each year?
      what gas car would you buy as your next car?

      • Sara2

        Lifetime costs? Show me a person who owns their vehicle for a lifetime. Let alone owning it for more than 10 years. In your lifetime costs did you take into account the $10,000 replacement battery cost?

        • Jacob

          I would presume that “lifetime costs” is referring to the lifetime of the vehicle, maybe 10-15 years, rather than human lifetime?

        • Mas

          It is the lifetime of the vehicle you dimwit.

        • Benjamin Nead

          @Sara2 . . . FYI, my 1995 Saturn is nearing its 2nd decade and was bought used in ’96 with about 10K miles on it (currently 130K+ miles . . . almost all in town driving) My wife’s 2004 Mazda van – another similarly low milage used car when purchased by us – is now over a decade old.

          Chances are the Saturn will go first (even thought the van actually has more miles on it, since it was the nominal long haul family road trip vehicle) and will be replaced with a low miles used OEM EV (Leaf, i-MiEV, etc.) that I’ll drive into my retirement years.

          Yes, the battery on that future used EV of mine will wear out before almost anything else. But most EV naysayers can’t get their heads around the fact that batteries are only getting cheaper and better.

          In much the same way we have had an aftermarket industry for professionally rebuilt gasoline auto engines and for almost as long as we have had gasoline autos, aftermarket traction battery packs for the already large (and rapidly growing) user base of OEM EVs is inevitable.

          Assembling a pack with new cells and BMS is a far simpler proposition than rebuilding an old engine block. Whether the owner of every last decade-old OEM EV will want to go this route will remain to be seen. But it’s naive to assume that this sort of thing isn’t on the horizon.

      • csmede

        Ontario, Canada. EV ranges drop significantly with cold temperatures.
        Also, I bike to work, year round (no, I’m not kidding!) Therefore, most of my driving is long distance, or about 10k miles/year. Oh, and we’re 5 in my family. The Volt only seats 4. I currently drive a 2005 Accord and 2011 Sonata, both manual. Tons of space in the trunk is a must for me (but can’t stand gas guzzler minivans).
        Now if you do run the numbers for me, remember the intangible health benefits I get from biking 4.5 miles every day, which will only show in the long term, both financially and environmentally (health care is not Carbon neutral!)

        • JamesWimberley

          Perhaps Nissan will market their ev minivan as a people carrier and not just as a delivery vehicle or taxi.

    • You should talk to EV owners! My brother and his wife each drive an EV, and so does my father. They cost just 2-3¢ per mile when you buy the electricity, and there is almost no maintenance.

      If you drive a Leaf for 100K miles, you can save about $17,000 vs a typical 23MPG car.

      And if you can put solar PV panels on your home’s roof, you save 50-100% of your electric bill AND essentially drive for 0-1¢ per mile.

    • “And then, we’ll jump on the bandwagon once things gain momentum.”

      Maybe that was what the directors of RIM (Blackberry) said when they first saw the iphone.

      • csmede

        That’s exactly what google did with Android. And they they’re winning. 79% worldwide market share in 2013 is dangerously close to monopoly.

    • Benjamin Nead

      Financially doesn’t make sense? After you get beyond the upfront purchase costs (that’s the only thing preventing me from jumping it right now,) your driving costs should drop from around 12 to 15 cents per mile to somewhere around 2 to 3 cents per mile. Many states provide purchase rebates beyond the federal one and other states, if they don’t do rebates, trim a significant amount off annual registration. Insurance companies also typically give a coverage discount to alternative fuel vehicles.

    • JamesWimberley

      I second sault. Moving second worked for Microsoft on both MS-DOS ans the Office suite, and for Boeing in civil jets (after de Havilland screwed up the Comet), but it’s very risky. You need to have more money to throw at the problem than the first movers, in order to overtake them. In the ev case, Renault/Nissan and GM are bigger than Fiat/Chrysler, and Tesla is now a large specialised ev company. BMW and Volkswagen are getting ready to join them. Toyota dominates hybrids. The outlook for Peugeot/Citroen and Fiat/Chrysler is bleak.

  • Benjamin Nead

    Fiat is a perfect example of a group of inspired engineers and talented assembly
    line craftspeople who are forced to be lead around by an management full of clueless dullards (or, if not all the suits, then certainly Sergio Marchionne.)
    This is the best writeup I’ve read regarding the frustrating story of the 500e.

    Thanks, Chris and Zach.

    • Thanks. Frustrating story, indeed. And I finally popped. Thing is: I love the car and think it could be a real contender, and it drives me crazy (no pun intended) that this guy won’t sell the thing… and then goes and complains that they’re losing money on it, which is specifically because they won’t sell the thing. Ugh, gets me going…

    • csmede

      A little bit of background on Fiat won’t hurt. When I say they are a “dead man walking”, I mean it. Their bonds are rated “junk”. They have a lot of debt, and still a lot of trouble ahead. They still have to fix Alfa Romeo to compete with Audi. They can ill afford to compete in an area where there is no money to be made in the near term. And Marchionne knows that all too well. That’s why he invested in muscle cars (Jeep, Ram), because that’s where the money is. And without that money, the taxpayer is on the hook again. All taxpayers where FCA has plants are on the hook. In 2009, Canada also bailed out Chrysler, although it’s not a canadian company.
      It’s sad that everything boils down to money, but that’s what capitalism is about. That’s why I believe governments have to do their part to make EVs more financially attractive. Cancel all tax breaks to big oil. Use the revenue for more incentives to EVs, Solar, Wind, etc. Once the ball gets running, no one can stop it. Meanwhile, I’ll bike. They can’t take that away from me…

      • Benjamin Nead

        Fair enough, csmede. But what frustrates me is that Fiat/Chrysler didn’t even take the more cautious route of developing more mainstream PHEV models these past few years. They are only now talking about rolling out a PHEV minivan and (this is an indictment towards all the other OEMs,) they’ll still probably have that niche all to themselves. If money is so tight for Fiat, why not sell off the Ferrari or Maserati (or both?)

        Agree with you that the feds could do more and that EVs are the inevitable future. Also off to work today on my bicycle . . .

      • Mas

        BS on Fiat Chrysler being a dead msn walking. You are no better than any other uninformed and biased hater.

  • Michael Berndtson

    I think this may be clandestine advertising. Like false flag/black ops kind of thing. Or Don Draper of Mad Men counter pitching. A Fiat bigwig tells the world its EV car is no good. He wants to be green, but can’t afford to. The whole “I’m running a business here – not an environmental NGO excuse.” Stirs up auto and green blogs. Gets press in traditional media outlets. Folks interested in EVs check out Fiat’s model. Like the product. Makes a purchase out of spite. Internal combustion folks feel comforted. In what, I’m not sure. Fiat wins.

    Or the guy simply wants to blow up the EV. Maybe the EV business plan was someone else’s idea and Sergio hates that person. Like Capulets and Montagues centuries old Italian families hatred kind of thing. And this is pure ego driven hubris based competition for alpha maledom.

    Or he doesn’t understand business outside of the rather emotionally charged Italian market.

  • JamesWimberley

    Fortunately for US taxpayers, it won’t be them but their Italian counterparts who will have to bail out Fiat when Marchionne’s inspired leadership drives it over a cliff.

    • sault

      We’ll still have to bail out their Chrysler arm or face a huge downturn in the auto industry as a consequence. However, despite Marchionne’s horrible leadership on EVs, he’s run the rest of the company quite well. Maybe his biggest mistake was that he underestimated his engineers that worked on the 500e and assumed they would make an inferior product. Maybe they wen’t balls out just to prove him wrong and now he refuses to eat the plate of crow his engineers have served up for him. It’s not going to taste any better once it gets cold…

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