The Tesla Roadster: Who could argue with its sex appeal? (Tesla photo)
The financial establishment is getting bullish about electric cars. I just talked to a Bank of America/Merrill Lynch analyst who told me that EVs will need "sizzle," or maybe the right phrase is sex appeal, to triumph in the marketplace.
"Cost is not the only factor driving the purchasing decision," says analyst Steven Milunovich. "EVs need to appeal to consumers on a psychological level, such as prestige and driving enjoyment." I totally agree. The good thing is that many EVs already have sizzle to burn. Or is sizzle already burning?
The car magazines are stuck in the past with high-performance dinosaurs, but most of the cars that attract buzz in the financial media today are green. The Fisker Karma, for instance, is a visual outrage--it makes Megan Fox look like a nun. And it's bristling with cool eco-features, including interior wood sourced from river bottoms and a rooftop solar panel to run the heating and cooling systems. And it's not surprising that Fisker is working on some kind of proprietary noise--a Formula One car crossed with a spaceship--so that pedestrians will know it's there when in battery mode.
The Tesla Roadster is, of course, off the charts in sizzle factor, and the forthcoming Model S is the Maserati of electric sedans. General Motors would love to pay for the positive publicity Tesla gets for free.
Another reason Wall Street likes EVs is that it can make money on them. When the battery company A123 (a supplier to Chrysler) went public, its stock--one of the few "pure plays" an investor could buy (most battery makers are either not public or part of large conglomerates) doubled in price on the first day.
Other financial analysts like the switch to cleaner cars, too. A very positive report from Citigroup Global Markets says that the automakers should actually applaud the stricter fuel economy/greenhouse gas standards they once fought (but now endorse). Why? Because the 35.5 mpg fuel economy goal (by 2016) will increase their profits. The report says that under the national program announced by President Obama last May, "Detroit's gross profits are likely to increase by roughly $3 billion a year, compared to an $800 million increase for the Japanese Three," the report said. "And sales are likely to increase by the equivalent of two large assembly plants for the Detroit Three."
Further, the report gets into the reason people buy cars. "Complying with the national program renders the vehicles in the majority of segments more cost effective for consumers," it said. And that's because the extra cost will be less than the fuel saved.
Carol Lee Rawn of the Investor Network on Climate Risk, representing over $8 trillion in combined assets, testified at a recent EPA hearing that the national standards are a key enabling strategy for the U.S. automakers to produce cars that consumers will actually want to buy, and that will be fuel efficient and competitive. "It is critical that American auto companies significantly change their business models to ensure that they are able to compete successfully in the 21st century," she said.
Finally, a University of Michigan survey that just crossed my desk shows strong consumer interest in buying plug-in hybrid electric cars. Some 42% of those surveyed said they might buy one--the acceptance rose as the cost came down, obviously.
A New York Times editor joked to me recently that, given some of the bizarre EVs we've seen recently, it seems anybody can slap up a web page and call themselves an automaker. Yes, it was that way in 1910, too, but the bad ones fell by the wayside and the cream rose to the top. The good thing is that good plug-in cars are already on the horizon, and people will want to buy them.
Test driving the sexy Fisker Karma (and talking to Henrik Fisker):
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