LLC’s unexpected unveiling Tuesday of three fully operable electric vehicles, with a salable version from the trio by 2010, may have shocked the industry, but experts warn time is not on its side.
“I’m stunned, surprised. It’s one of the industry’s best-kept secrets,” says Aaron Bragman, an analyst at Global Insight. But, he adds, “The question is, canlast long enough to get this technology to market?
“It’s great that they’ve done this. If it were coming this year, it would be even bigger. But they still have to work on getting the base product right, and that means small and midsize cars.”
Like cross-town rivalsCorp. and Motor Co., Chrysler’s sales have been under siege this year by rising oil prices, the collapse of the U.S. housing market and ensuing fall of prestigious Wall Street lending firms the government now is seeking to prop up.
Record gasoline prices this summer saw consumers abruptly switch from the Detroit Three’s bread-and-butter pickups and SUVs to smaller, more fuel-efficient passenger cars and cross/utility vehicles. Chrysler’s sales slid 24.4% through August, with cars off 20.0% and trucks down 25.7%, Ward’s data shows.
The industry is on track to sell between 14.3 million and 14.6 million units, a low not seen since 1993, according to a Ward’s forecast.
AtCorp., concerns over slumping vehicle sales and whether the auto maker has enough to cash to weather the storm raised fears of bankruptcy earlier this year. Its stock has lost 76% of its value over the last 12 months, and last week the auto maker tapped $3.5 billion in credit to shore up its liquidity.
Experts widely consider privately-held Chrysler, which does not make such information public, to be under similar pressures. But Vice Chairman and President Tom LaSorda dismisses suggestions the auto maker may not have the financial strength to push an EV to market.
“Bottom line is it’s a tough market,” LaSorda tells Ward’s in a conference call late Tuesday with journalists to detail the EVs. “But we’ll be there to provide and to fund programs to bring (the technology) to the market in 2010.”
Chrysler Chairman and CEO Robert Nardelli told the cable television network CNBC earlier in the day the auto maker continues to meet its financial targets, with a keen focus on right-sizing its operations and improving productivity.
But like other auto makers hoping to bring an EV to market, Chrysler also finds itself racing against the rising cost of oil, which in July pushed pump prices to a record $4.11. On Tuesday, the national average stood at $3.73 per gallon, or $0.92 ahead of year-ago.
Some experts say the combination of dwindling oil reserves and rising demand in both developed nations and emerging markets will continue to drive up global prices, which would create further economic malaise and keep the average American from being able to afford an EV.
“I’m very nervous,” says Paul Scott, co-founder of Plug-in America, a coalition of EV owners. “Millions of people are in dire straits already. And if things get worse, they’ll never be able to afford an electric vehicle.”
Frank Klegon, executive vice president-product development at Chrysler, says the auto maker knows where it would need to price an EV and hopes demand will improve economies of scale and make the electric cars more affordable.
“We need to have volume at the end of the day,” he says. “Volume will drive the costs down.”
LaSorda says Chrysler could approach pricing from a number of angles, perhaps suggesting the $25 billion in government loans currently under consideration in Washington could defray production costs.
“We know in very, very low volumes where the pricing might be,” LaSorda says, drawing a parallel with custom-made cabinetry. “When you’re doing one-of-a-kind, you’re paying a lot more. We know that’s going to be an issue. We also know there are other business models to approach this.”
Klegon says the auto maker configured the propulsion system of the two extended-range electric vehicles (EREV) in the trio to make the cars more affordable.
The Chrysler Town & Country minivan and extended wheelbase Jeep Wrangler both use a lithium-ion battery for 40 miles (64 km) of emissions-free, zero fuel-consumption travel. After 40 miles, a small gasoline engine powers a generator to produce electricity and deliver up to 360 more miles (579 km) of range.
GM recently made a similar decision with its Chevrolet Volt EREV, which as a concept 20 months ago intended to use a backup internal-combustion engine to replenish the battery.
GM argues the generator approach allows for 40 miles of full-electric driving without engaging the engine, and means owners can draw power for the battery from the electric grid, which is less expensive.
“From the consumer perspective, the cost of (EV) ownership will be much cheaper for them to do the recharge of their battery on the electric-grid system,” Klegon says.
Chrysler also pulled the wraps off a Dodge performance car, which will operate on electricity only. The 2-passenger, rear-wheel-drive sports car has a continuous driving range of 150-200 miles (241-322 km) – more than triple the average daily commute of most consumers, the auto maker says.
Jim Arrigo, co-chairman of the Chrysler Jeep dealer council and owner of Arrigo Dodge Chrysler Jeep in West Palm Beach, FL, says it’s an exciting time for dealers selling the Chrysler, Dodge and Jeep brands.
“If you didn’t know where we stood with our EV program, you do today,” he says. “Dealers around the country are relieved to know where Chrysler is in developing electric vehicles.”
Arrigo says he wants to see Chrysler launch the Dodge minivan EV first, in part because of his market in Florida. “But a dealer in Colorado probably wants to see an electric Wrangler first,” he says. “I’d still like to see the technology in the minivan first because it’s the segment we own.”
The electric vehicles are nice, Arrigo says, but he believes Chrysler needs to be aggressive in all areas of fuel economy. “I’ll give everything I’ve got to get more fuel efficient in (other areas besides) the electric segments,” he says. “That to me is the bigger market.”
Arrigo says Chrysler is on the right track launching seven vehicles next year with better fuel economy than their predecessors.
Dealer council members say they saw some of the EV plans a month ago in Detroit, but admitted the breadth of Tuesday’s announcements was surprising.
“They dropped a bomb, didn’t they?” says one Midwest dealer, referring to the EV plans.
In webcast meetings with dealers Tuesday, held in movie theaters around the country, Chrysler executives laid out future-product plans in addition to introducing the EVs.
Slated for 2010 is the small B-segment car Chrysler is developing withMotor Co. Ltd. Dealers say the auto maker did not provide a name for the vehicle, but hinted it would be named after the Hornet concept car by saying, “It will sting the competition.”
Other vehicles include the upcoming Dodge Journey, a new Charger and Jeep Grand Cherokee, all of which dealers say are spectacular.
“The interiors are/Audi-esque,” says Ralph Martinez, CEO of Town and Country Dealerships in Milwaukie, OR. “Only they have a little bit more Americana.”
Dealers say the meetings were upbeat, with Chrysler executives claiming the auto maker has more than enough cash to survive. Executives provided a window into company financials, telling dealers the auto maker has lost $400 million so far this year.
A strong fourth quarter likely will mean 2008 is a wash, one dealer tells Ward’s. Chrysler is rightsizing itself to sell 2.5 million units in this market, instead of trying to be one that sells 4 million, he says.
“They seem confident,” Martinez says of Chrysler’s management team. “They’re showing their stuff. I’m impressed. But their credibility will be in hitting the launch dates for the (new) vehicles.”
– with Cliff Banks