07.11.2013 - by Richard Kelly
Plug In Car Roundup: “Real” vs Compliance

Of course compliance vehicle sales are tiny; they’re supposed to be

In May 2012, John Voelcker published a great article where he proposed a “real car” test for BEVs:

  • It’s sold outright to consumers, not only leased; and
  • It will sell at least 5,000 or more a year in the U.S. or reach total global sales of 20,000; and
  • It’s offered outside the ‘California emissions’ states (states that follow California Air Resources Board, or CARB, rules), or will be within 18 months

Basically, these questions attempt to determine if a particular model is financed, marketed, and distributed like regular cars, or if the automaker is imposing artificial limitations.

At the time, John projected that the following car programs were “real”: Nissan LEAF, Mitsubishi ‘i’, Coda Sedan, and Tesla Model S. A little over a year later, only two BEVs have explicitly passed the test, the Nissan LEAF, and Tesla Model S. The Coda is no more. The Mitsubishi hasn’t sold in the numbers needed to qualify.

If we expand John’s criteria to PHEVs, we can add the Chevy Volt and the Toyota Prius Plug-in Hybrid to the list. Some plug-ins haven’t been in showrooms for a full year yet. Although many consider Ford’s plug-in models to be mostly compliance cars, the Ford C-MAX Energi is selling an average of 540 vehicles, so is on track to sell over 5,000 per year.

The Mitsubishi i-MIEV and the Ford Fusion Energi haven’t made the cut, but not necessarily for lack of trying. Mitsubishi, for example, seems to want to grow their i-MIEV sales, and the car is available for purchase across the nation. (witness the winner of the Plug In America 100K contest last month, who bought an i-MIEV in Alabama) i-MIEV sales may simply be suffering in comparison with the value offered by some of it’s larger battery capacity competition. The Ford Fusion Energi recently earned a five-star safety rating from NHTSA. But at an average of 317 sales per month, it just hasn’t ramped up yet to the 5,000 per year mark.

The Real Cars (by average sales)

Tesla Model S

  • Average monthly sales (last 6 months): 1,675 (estimated)
  • Total sales (through June 2013): 12,650 (estimated)

Top selling plug-in electric car in North America during the first quarter of 2013. 2013 World Green Car of the Year, 2013 Motor Trend Car of the Year, Automobile Magazine’s 2013 Car of the Year, Time Magazine Best 25 Inventions of the Year 2012 award, and Consumer Reports’ top-scoring car ever.

Chevrolet Volt

  • Average monthly sales (last 6 months): 1,643
  • Total sales (through June 2013): 41,313

The world’s best selling plug-in hybrid. 2009 Green Car Vision Award, 2011 Green Car of the Year, 2011 North American Car of the Year, 2011 World Green Car and 2012 European Car of the Year.

Nissan LEAF

  • Average monthly sales (last 6 months): 1,640
  • Total sales (through June 2013): 29,351
  • J.D. Power Predicted Reliability: 3 of 5

The world’s best-selling highway-capable all-electric car ever. 2010 Green Car Vision Award, the 2011 European Car of the Year, the 2011 World Car of the Year, and the 2011 2012 Car of the Year Japan.

Toyota Prius Plug-in Hybrid

  • Average monthly sales (last 6 months): 702
  • Total sales (through June 2013): 16,964

Sort of a Plug-in “Lite” (battery size is only 4.4 kWh). Toyota announced it wanted to sell 12,000-13,000 Prius plug-in hybrids in the U.S. this year, narrowly exceeding last year’s sales. Initially available in 14 states, but with a national rollout planned for this year. As of June 2013, the world’s third best selling plug-in car.

Ford C-MAX Energi

  • Average monthly sales (last 6 months): 414
  • Total sales (through June 2013): 4,856

The fifth top selling plug-in electric car in the U.S.

The Compliance Cars (by average sales)

Compliance cars are vehicles carmakers build just to satisfy a legislative requirement. Be it company ethos, projected profitability, or whatever reason, certain companies have opted to put out the bare minimum product to meet their obligations. So almost by definition, compliance car programs are low volume. They’re often designed and built expediently (perhaps on the same platform as other models), but due to low-volume production, the cost per car to the automaker is invariably higher.

One might think that these cars may not represent a company’s best efforts. However sometimes we see advanced engineering and quality in these vehicles that show off some real pride in these cars. According to Chad Schwitters, “even the automakers that are openly doing the minimum possible are producing quick conversions that reviewers are calling the best car in the line despite a conversion being a non-optimal way to make any car. The Fit, Smart ED, Fiat 500e and Toyota RAV4-EV have all been praised as the best car in the lineup. That alone should give the compliance automakers reason to rethink the benefits of electric drive. It’s not just about the green.”

Here are some vehicles that arguably could be considered “compliance”, and some notes on a few.

Mitsubishi i-MIEV (6-month average: 147)

Ford Focus Electric (6-month average: 150)

Ford plans to sell 1,600 through mid-2015.

Honda Fit EV (6-month average: 49) (J.D. Power Predicted Reliability: 4 of 5)

Honda did a good thing when it dropped the Fit EV lease price in late May to $259/mo, got rid of the mileage limit, and threw in a free charger. They did a great thing when they decided to share some of these benefits with their existing leasees. They did act a bit surprised, however, when buyers picked the lots clean. Honda apologized, and said that more cars were on their way. But the one thing they didn’t do yet is announce an increase in production. They still only plan to lease 1,100 vehicles over 2 years. That’s 45 cars per month. This unwillingness to adjust production to demand confirms the Fit belongs in the compliance car category. On the upside, the Fit compares favorably with its competitors, and buyers seem generally happy. New buyers seem thrilled at the new price and unlimited miles. But at this rate of production, getting one of these cars is like winning the lottery.

Toyota RAV4 EV (6-month average: 68)

Limited to California. Only 2,600 vehicles planned. DaveinOlyWA can’t even get one in Washington State. Recently discounted by $10K.

Honda Accord PHEV (6-month average: 33)

Based on the new 2013 Accord platform. First car to meet CARB’s SULEV20 standard. (20 mg of combined smog-forming emissions per mile)

Ford Fusion Energi (five-month average: 317)

Smart ED (first two month average: 57)

Called the “best Smart car yet” by Consumer Reports (thanks Chad).

Chevrolet Spark EV (27 sold in first month)

Based on the Chevrolet Spark. Only 5,000 vehicles planned. Limited to California and Oregon.

Fiat 500E (first customers have just started taking delivery this month)

Limited to California. Multi-part rollout will have car available in other CARB states in phase 2. There’s a lot of love out there for this hot Italian number. But hardly anyone has taken delivery of one, and they’re already reportedly “sold out” for 2013. It’s not clear whether Fiat will increase production to satisfy the demand, but based on pretty frank statements from Fiat, it seems unlikely.

The Bad About Compliance Car Programs

  • Automakers bewailing big losses on low-production vehicles
  • Customers needing repairs may need to follow special procedures. For example, only EV-certified Honda dealers are qualified to work on the Fit EV drivetrain.
  • Low sales numbers can paint a misleading picture of the overall plug-in market
  • Compliance cars are usually lease-only, which may not be the best financial choice for the buyer
  • Compliance car programs can allow carmakers to undercut real car prices, hurting their competitors more than they hurt themselves
  • Cars developed just to satisfy a mandate may receive little support from the manufacturer or dealer.
  • When each compliance program eventually expires, it could lead to bad publicity and a public impression of a failure of electrics in general. (thanks, Warren Tighe)

The Good

  • Brand conscious, company-loyal buyers get a model they feel they can buy. They will likely find that they love electric drive, and they can’then go on to advocate that the carmaker get more serious about plug-ins. Early participants in compliance programs can become the most vocal company champions for real car programs.
  • More model choices help build the market. Sometimes buyers find a compliance car is the best choice.
  • Compliance car programs can be a “toe in the water” for carmakers who may decide later to go all in. Their “test” programs may let them identify and fix issues and smooth the transition to the real plug-in program.
  • Compliance cars give drivers and cities the same benefits as “real cars”, cleaner air, cheaper running costs, etc..
  • Most importantly, compliance programs have resulted in more plug-ins on the road, which is after all the intent of the legislation behind them. There are over 6,000 compliance vehicles nationwide from seven carmakers that certainly would not be on the road today were it not for the CARB mandate. And certainly most of the “real” plug-in programs were influenced heavily by the 2009 CARB ZEV Regulation. So we can credit legislation with getting a large number of the more than 100,000 plug-ins onto American roads.

Compliance programs fulfill legislators’ goals of getting cars on the road. But they do so with a few possible drawbacks to the market and to customers.

As for the makers of real plug-in cars, I don’t want to be a Pollyanna. Companies don’t usually act altruistically. Real car manufacturers are in this game to make money. Chevrolet with their “halo” car. Toyota with their HOV-lane commuter. Ford with their “Prius-killer”. Nissan with its Carlos Ghosn epiphany car. And Tesla, of course, with Elon Musk’s bid to reinvent transportation (and the dealership model) entirely.

However, “real” plug-in automakers are to be commended for their vision. Those of us who are interested in seeing a modernization in transportation; we get excited every month when we see the new sales numbers. But it’s not the compliance car columns that excite us. We can usually guess that next month’s Fit EV sales will be similar to this month’s. What we appreciate is the unabashed capitalistic enthusiasm of the real car makers. There is uncapped possibility in the sales of each of these models. We appreciate seeing these companies go after new plug-in drivers with gusto. We hope and expect they will succeed.

13 comments on “Plug In Car Roundup: “Real” vs Compliance”
  1. Tesla Model S is getting applauded globally for their innovative and smart engineered strategy for the car. Other car makers like Nissan, Chevrolet are also taking the pace with the Tesla hybrid cars. Hybrid cars are now taking the market as these have many advantages over the other cars. Probably all the car manufacturers are taking the bold step to make hybrid cars as much as possible to meet the market demand. Hybrid vehicles have no of features that is forcing people to buy. That does not mean that other cars have lost their values, but these cars are gradually gaining the highest market share. We must find the best hybrid car service center so that our cars will be in the safe hand and also will not burn our pocket. So I always prefer to go the most trusted and fully experienced Hybrid car repairing center in South Florida and they set my mood totally tension free.

  2. Warren Tighe says:

    A major potential problem with compliance cars, not mentioned here, is the negative impression of EVs that will result from the future abandonment of these vehicles by their manufacturers. Headlines like “Ford and Honda Withdrawing from EV Market” and “EV Customers Left Stranded” will do even more damage than the misleading articles about EVs not being truly green or having insufficient range. Some manufacturers, and dealers, that are not heavily invested in EVs would love to see that market shrink due to bad publicity.

    1. Richard says:

      Good point, Warren. Added your point to the “Bad” list above. Thanks.

      1. Dr. Dana says:

        TESLA stats speak for themselves. No combustion line to fall back on. And building a charging grid AHEAD of the pack. So if you like EV, then SUPPORT THE LEADER! Full disclosure: I don’t own one…yet.

  3. rdp says:

    It’s widely understood that manufacturers sell “compliance cars” in so they can continue to sell high-margin gas guzzlers in certain states. I’d like to see real numbers that describe the economics of the trade-offs.

    For example: How many Ford Focus Electrics must Ford sell to offset the sales of how many F150s? How much does Ford lose on each FFE, and how much profit do they make on each F150?

    Are there any studies or papers that shed light on this?

    1. Richard says:

      I’d love to see these numbers as well. But I guess we have to be careful of what we wish for. Some studies have come out where analysts have rolled initial R&D costs into the first year of vehicle production, and come up with crazy high estimates per car. That’s not useful.

      This question is also important because it could clue us into dealer mentality. Are the lot salesmen properly incentivized to sell an electric, when a truck could be a more profitable sale? This is part of why Tesla is shunning the dealer model.

      If anyone knows of any good analysis of per-vehicle cost, please post a comment. Thanks.

      1. Dr. Dana says:

        There is almost NO maintenance on the EV as there are few moving parts. Every EV sold by the combustion manufacturer takes away a SIGNIFICANT money-stream from parts and labor away from both the manufacturer AND the dealer. TESLA knows that and thus they kept the dealer out of the picture, in turn, passing the savings onto the buyer. Tbis model scares EVERYBODY ELSE.

  4. Sherry Boschert says:

    An excellent post. This is the link I will give to people when they ask me, “What do you think of the (fill in the name of any compliance car).”

  5. Chad says:

    I appreciate the numbers update; and I had enjoyed Voelcker’s article when it came out too. I’d like to propose a slightly simpler way of looking at whether or not a vehicle is “compliance” or not: is it sold just like every other car? Or do they put restrictions (of any type) on it that will reduce the number sold? Volume is KEY in the automotive industry – it’s how you amortize fixed costs, reduce supply costs, and get profits. Automakers do anything they can to sell more cars. If they refuse to sell it outright (Honda Fit EV), or limit sales to four metro regions in a ZEV state (Toyota RAV4-EV), then it is clearly compliance. Some cases are harder to tell, like Ford. They offer three models in every state, will sell or lease and don’t have a fixed number they will build. But they did quick non-optimal conversions, they don’t seem to advertise them in non-ZEV states (almost nobody I meet even knows they are for sale here in WA), and if the local dealers got training, it didn’t seem to work because people that have tried to buy one have not been happy with the local experience. Ford is doing more than required, but less than they do for their gas cars, so the line between compliance and volume is a fuzzy one.

    1. Richard says:

      Good point, Chad. Voelcker’s three questions seek to determine if the dealer is imposing artificial limitation. But I suppose there are other ways automakers can limit sales. They can skimp on marketing or support, for example. Ford certainly appears to be in a middle area between “real” and compliance, which made me consider carefully before putting the C-MAX Energi in the “real” category. But _maybe_ this is what it looks like when an automaker’s compliance program is slowly shifting to “real”.

      1. Dr. Dana says:

        For the ‘Big Boys,’ it’s ALL about compliance. The bigger they are, the slower the change. But TESLA is steering the demand by addressing the biggest public issue: range anxiety. First: TESLA has the best range, BY FAR. Second: it’s using California Zero Emissions Rebates proceeds to invest in the national charging network that EVERYBODY can use. Except everybody but TESLA owners will have to pay to use it. Mund is PURE GENIUS. Note: I do NOT work for TESLA. I want one. And want TESLA to succeed. Once it does, THEN the Big Boys will follow.

  6. Chad says:

    Great topic, Richard.

    I too have mixed feeling about the ZEV laws and compliance cars. I hate having things mandated; when they are you often get no more than you mandate, even when more is possible. That said, I don’t think we’d have the cars without the ZEV laws, and the cars sure are great to have around. Someday we won’t need the laws.

    Actually, my personal feeling is that the automakers have been able to make great plug-in vehicles for years, and owners have loved them like no other cars. The market potential has been large, but the issue is that the dealers have no incentive to sell them. It’s easier to sell a gas car, and they make more money. Either the manufacturers need to incent the dealers (larger spiff on plug-ins!) or perhaps the ZEV laws could be replaced by a ruling that allows manufacturers to sell plug-ins direct (which would also be incentive to the dealers to push them like regular cars).

    1. Richard says:

      Another good point, Chad. I don’t want to understate the effect of legislation on plug-in availability. Certainly a chart of ZEV laws vs plug-in vehicle sales would show a strong correlation. Development and production ground to a halt after the CA ZEV Mandate was gutted in 2003. Tesla broke the logjam in this period with the start of Roadster development. Nissan deserves a lot of praise for their vision in 2008 when they started the LEAF program. No wonder Nissan and Tesla are at the top of the “real” cars category. They’ve earned it. Many of the other cars above came from the CARB 2009 ZEV Regulation.

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