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An Electric-Car Business Model Built on Sand



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European governments’ move to slash their subsidies for renewables in order to reduce their debt exposure is making automakers nervous. Like the power industry, automakers have wagered huge new investments on electric cars thinking that perpetual government subsidies would soften the odds.

Nissan, for example, has based its Leaf electric car business model on taxpayer largesse. In Europe, those subsidies are expected to take the edge off a $37,000 base price. In the U.S., starting this December, that base price is lower (customers won’t pay a premium for gas sippers as in Europe) though still a pricey $32,780. But throw in a whopping $7,500 in federal tax credits and that price becomes $25,280. Another $5,000 tax rebate in Greece-on-the-Pacific California and it’s a $20-grand car.

But will it last? Nissan is publicly reassuring that, even if subsidies run out in three years, they will have achieved a predicted 10 percent of global market share for electrics and the economy of scale that goes with it.

But many industry experts scoff at the 10 percent figure. “The uncertainties about battery longevity, inconvenience of limited range and lengthy charging times mean that electric vehicles are likely to remain a niche product for the foreseeable future,” says Mike Tyndall, an automotive analyst at Nomura Securities.

Their evidence? Despite being on the market for a decade, hybrid-electric sales in the U.S. are lass than three percent of sales.



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