Honda Facing Quandary Selling More Fit EVs for Lower Price

SITUATION:

  • When Hon­da intro­duced its all-elec­tric Fit EV in July 2012, com­pa­ny set mod­est goal of deliv­er­ing 1,100 of the lease-only cars in 2 years.
  • As of May, only 176 of the plug-in cars had been sold.
  • Con­sumers weren’t inter­est­ed in pay­ing $389 a month for EV that can go only about 82 miles before it needs recharg­ing.
  • Gaso­line-pow­ered ver­sion gets 30 miles a gal­lon and costs half as much.
  • Gen­er­al Motors, with its Chevy Volt plug-in hybrid, and Nis­san, with its all-elec­tric Leaf, have also seen sales fall short of their goals.
  • One thing that’s work­ing: leas­ing cars at fire sale prices.
  • Hon­da cut its 36-month lease rate in June by about one-third, to $259 a month, with no down pay­ment and unlim­it­ed mileage
  • Demand for Fit EV has surged; with­in weeks, Hon­da went from bemoan­ing stock­pile of cars to apol­o­giz­ing to cus­tomers put on wait­ing list and promis­ing that more Fit EVs are on the way.

SIGNIFICANCE:

  • GM and Nis­san are also offer­ing steeply dis­count­ed leas­es on plug-ins and are oth­er automak­ers in the EV space.
  • Gov­ern­ment poli­cies, like in Cal­i­for­nia, requir­ing min­i­mum num­bers of plug-in vehi­cle sales is inher­ent­ly risky strat­e­gy, says Edward Cohen, Honda’s vice pres­i­dent for gov­ern­ment and indus­try affairs.
  • The man­date “directs man­u­fac­tur­ers to offer con­sumers tech­nol­o­gy options along a pre­de­ter­mined time frame and with spec­i­fied num­bers, notwith­stand­ing whether the tech­nol­o­gy and mar­ket are ready.”
  • Fit EV’s new­found pop­u­lar­i­ty will help Hon­da meet its quo­tas, but the low prices may not be sus­tain­able.
  • Rock-bot­tom leas­es like­ly mean lit­tle to no profit—Honda won’t say whether it’s los­ing mon­ey on the Fit—and con­di­tion buy­ers to expect the car to come cheap.

SOURCE:  Busi­ness­week

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