All of a Sudden, There Aren’t Enough Electric Cars to Keep Up with Demand

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Electric vehicles like the Nissan Leaf and Honda Fit EV used to languish on dealership lots for months. A pricing war with aggressive incentives and cheap lease deals has changed all that.

Last year, Nissan sold about half the number of Leafs it had anticipated, marking two years in a row of disappointing sales for the electric car pioneer. One of the factors holding the Leaf back from appealing to the masses has been the upfront price premium drivers have had to pay for the cars, when compared with similar vehicles that run on plain old gas.

But in early 2013, Nissan tried to cut the knees out from this part of the anti-EV argument. The automaker dropped base prices on the Leaf by $6,400 for the new model, making the idea of buying an electric car for under $19,000 a reality, when state and federal incentives are factored in. And once lease deals, tax credits, and gas savings are considered in the equation, word has spread this spring that it’s basically possible to drive an EV for next to nothing.

Nissan’s EV competitors have followed with compelling deals of their own, including $199-per-month lease specials for the Chevy Spark EV and Fiat 500e. Mitsubishi and Toyota have also dropped prices dramatically for EV models. As CNET pointed out, the Honda Fit EV might be the best offer of all: a three-year lease for $259 per month, with no money down, unlimited miles, a 240-EV home charging station, and auto insurance included. Honda’s previous lease deal was $389 per month, a price point that failed to get consumers excited.

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But within days of Honda dropping the special lease price by $130 in early June, dealerships in California were sold out and customers had to compete to get on the waiting list for more, per the Los Angeles Times:

“It’s incredible, especially since we haven’t had any foot traffic or interest in the car in six months,” said Jeff Fletcher, sales manager at Honda of Santa Monica. “I’m not even sure we’ll have enough cars for the people on the waiting list.”

Last week, Honda issued an apology for not having Fit EVs available, and promised more were on the way. “We recognize that some customers have experienced frustration as they attempt to locate dealers with available Fit EVs,” reads a statement from Steve Center, Honda’s environmental business development vice president. “We sincerely apologize for this – though it should be only a temporary inconvenience. The good news is that more Fit EV’s are on their way to dealer showrooms.”

Low-price deals have also given the Nissan Leaf a boost this year, tripling sales of the vehicle in the first five months of 2013, compared to the same period last year. Meanwhile, sales of the Chevy Volt—the gas plug-in hybrid that doubled the Leaf in sales in 2012—have been fairly flat thus far in 2013. Unsurprisingly, last week Chevrolet entered into the electric car price wars with a $5,000 cash back incentive.

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Naturally, all of these deals will help automakers sell some cars. But are these aggressive incentives good for business? At this early stage of the EV marketplace, automakers appear be to focused on getting consumers to want these cars. Dropping prices in such dramatic fashion will certainly drive up interest. What’s unclear, however, is the extent to which the automakers truly want to sell large quantities of these vehicles at cut-rate prices. Earlier this year, Chrysler CEO said that his company, which owns Fiat, will lose roughly $10,000 for each Fiat 500e sold, according to the Associated Press.

While Honda says that more Fit EVs are on the way, the automaker doesn’t seem particularly interested in selling the vehicle by the tens of thousands—not yet anyway. For the time being, Honda is sticking with a plan to sell (or rather, lease, because they’re not selling the vehicles outright) a maximum of just 1,100 Fit EVs in the U.S. As the LA Times put it, “there is little financial incentive to increase production” on the Fit EV because Honda loses money on each of the cars it builds.

The goal, it seems, is to drive up interest in EVs with price breaks and limited supply—and then hope that interest remains high even when automakers raise prices down the line. Hopefully, these vehicles will soon see improvements in driving range in the near future — most can be driven only for about 75 to 80 miles before they need a recharge — which would make them more practical and help boost interest further.

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While all of the lease deals and price slashing is obviously intended to woo potential new buyers, one Automotive News columnist writes that all of the recent wheeling and dealing may wind up inadvertently angering the early adopters who believed in the technology first and may now feel foolish for paying top dollar:

If I bought, say, a Nissan Leaf, it’s bad enough that my EV’s resale value is much lower than that of a hybrid. But if I paid full price for it in February, before it was discounted 18 percent, I’m feeling stupid. And I’m feeling that I have been played.