Honda throws cold water on electric cars

This will be a very long post, so I apologize in advance...
We're throwing around a lot of data as facts here. I read once a quote that I liked "All generalizations are false, including this one".
Now several comments.
1) You don't have to have $7500 in income tax liability to get the benefit of the tax credit. Two alternatives: 1) buy a used low miles vehicle that has already been reduced in value as much as the tax credit (there are a bunch of used Claritys out there with low mileage priced in the $25k range. The high reduction in price is directly linked to the $7500 tax credit value of a new car for a lot of people as compared to the used car with no tax credit.
2) GM and Tesla already have cut their tax credits due to sales. I was able to get the dealer to recognize this and reduce the price of a 2019 Volt accordingly when I bought after the credit was cut in half. I even got them to understand that in 2 weeks the credit would be cut in half again and the value of the car would again be reduced if they still had it on their lot on October 1st.

There are a lot of ways to save money with EVs and PHEVs that vary by person and by location. Some utilities have rate plans that are advantageous as compared to standard plans that are only available if you have an EV or PHEV. Some states add additional incentives and pricing from dealerships can vary by state as well.

As to whether manufacturers make a profit on BEVs or PHEVs, it's not really that important to me if I can buy the product I want at the price I want to pay. True, the product may not be out there the next time I want one, but that isn't nearly as important to me as what I can buy now, considering I tend to keep vehicles at least 6 years. Those manufacturers that stay in the game will figure out how to make a profit. They generally are looking at long run economics and believe that the line has positive effects for the company or they wouldn't have started producing it in the first place.

You can't just look at MSRP and Tax credits to think about the economics of PHEVs or BEVs. Many other factors come into play. Ability to get discount pricing at dealerships is a big one. Savings from electricity as compared to gasoline (especially if you can charge for free at work and/or other locations) is another. Savings from reduced maintenance is another thing to consider. Breakevens are often calculated for PHEVs or BEVs starting from MSRP and including Tax credits without considering specifics that may apply to many customers. As an example of this, I'll paste something I threw together to describe economics of the two Volts I have purchased:

2012 Volt Pricing
MSRP $ 43,475.00
Dealer Discount and rebates $ 11,495.00
GM Card $ 1,000.00
Discounted Price $ 30,980.00
State Tax $ 490.00
County Tax $ 91.88
Fees $ 249.00
Total Price OTD $ 31,810.88
Tax Credit $ 7,500.00
Price after Tax Credit $ 24,310.88
Diminished Value payment from collision $ 3,000.00
Savings from Electric Vehicle over 6 years $ 7,500.00
Final Cost of 2012 Volt prior to consideration of residual Value $ 13,810.88

Trade for 2019 Volt

2019 Volt Pricing
MSRP $ 36,515.00
Dealer Discount & Rebates $ 11,627.20
GM Card $ 3,243.27
2012 Volt Trade In allowance $ 5,000.00
Total Price after Trade-in $ 16,644.53
State Tax $ 539.56
County Tax $ 101.17
Fees $ 606.45
Total Price OTD $ 17,891.71
Income Tax Credit (bought after loss of half of credit) $ 3,750.00
Price after Tax Credit and trade-in $ 14,141.71
Net Out of Pocket Cost for Both Volts up to September 2019 $ 27,952.59
Probable Electric Savings for 2019 Volt (reduced from 2012 Volt since less driving and shared with Clarity) $ 3,500.00
Final Possible Out of Pocket Cost for Both Volts $ 24,452.59
Future Residual Value of 2019 Volt after 6 years $ 7,000.00
Approximate Total cost of both Volts after 12 years $ 17,452.59

I'll note that the $7500 savings for the 2012 Volt is approximate, but it is pretty accurate as I generally got mostly free electricity for that car and had reasonably long commutes daily and during some of that time gasoline was more expensive than now. Also I included what I believe to be maintenance savings for the car as I never did anything but change oil 4 times, and that was cheap. For the 2019 Volt, the estimated savings are reduced as my commute is cut in half (still get free electricity, just don't use as much). The GM card savings are somewhat questionable, but the credit card gives 5% rebates which are generally about twice that of most credit cards and the rebates have to be used toward new GM vehicles. The Volt was the only vehicle I was interested in and the rebates roll off after 7 years, so I was running out of time to use them when I bought the 2019 Volt. But you could argue that only half of this is really savings since half of the rebates could have been gotten with something like a double cash back card (2%). Also, the residual value of the 2019 Volt is pretty up in the air. I just felt like if I could pull off getting $8k for the 2012 Volt at trade-in (including the diminished value payment - Carfax was awful with severe damage and airbag deployment), that I could probably count on $7k for the 2019 Volt in 6 years. Anyway, I am trying to show that there are a lot of ways to make BEVs or PHEVs be economic solutions. Back to trying to tie this to the Clarity, the discount I got from the dealer for the Clarity certainly helped me to pull the trigger on that purchase as well.

Sorry if reading this was a waste of time for anybody... I know it was too long.

 

Sure. My apologies for bringing politics into it.

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My family doesn't have that much income, but we took advantage of the tax liability incurred by converting regular IRAs to Roth IRAs. That's how we worked out the $7,500 tax credit for our Clarity PHEV. If the politicians don't kill the federal EV tax credit, we'll do it again next year for our Honda e, er, I mean our electric MINI Cooper.

 

Good Quote

You make a good point that all costs and savings are specific to a person based on location, usage habits, governmental and non governmental subsidies, community help, state of economy (including gas prices) etc. Usage patterns are specific to the person, gas prices to the local area. The subsides can cover many things, from what the governments give, to what the utility gives to what employers give. A company I consult with has a few chargers on campus, which is free for employees to use. They do not pay employees for gas, but do give free charging. In my state of Arizona, there is little by the way of direct payments (no utility or state government or local government credits), but vehicle tax is less and BEVs (not PHEVs) can get HOV plates. A friend of mine values the BEV for just that, he can save about 15-20 minutes each way on his daily commute to down town. As they say (YMWV) your mileage will vary (pun intended)

You also make a good point about say buying used. Here again the market is local. In California you get better discounts on used BEVs/PHEVs compared to Arizona, as there is more supply there. I have been looking for a used one and find that there is not much locally. I would hazard a guess that it is the case in several other states.

That said, it does not mean generalizations do not give a reasonable though not exact picture of the situation. Your example is a specific to you. Similarly, if we take a 1000 others who use BEV/PHEV and 1000 who do not use this (based on standard statistical sampling principles) and look at their savings, usage, demographics, we can get a pretty good idea on who the BEV customer and who is not, and what the expected economic benefits are etc. So I would not dismiss generalizations as long as they are based on fact and data.

 

Thank you, and I completely misread your statement as saying BEV’s are profitable. It’s good to hear it from sources that have done the research rather than just repeating what is posted on forums.

 

Good example of how generalizations may not work in every case.

The tax code is complex (am I making an understatement ) and there are many ways that income in a particular year might cross threshold. Your grandmother may have left you a piece of land or you may have won a lottery etc. So the statement that an annual income of $113,000 per family with 2 children will trigger a federal tax liability of $7,500 is a reasonable generalization. Some families with incomes lower than $113,000 may have a federal tax of $7500, some may have other exemption that allow them to have an income greater than $113,000 and a lower tax liability. As an example, not all married families have 2 children for whom they can take tax credit, some may have more or less. Again this is based on 2018 tax rates. In 2019 it will be a little different.

The point I was trying to make was that your income has to be much higher than the median income in the US to take full advantage of the credit. The median income in the US for 2018 was about $62,000 (https://www.census.gov/library/stories/2019/09/us-median-household-income-up-in-2018-from-2017.html). Hence BEVs or PHEVs that are priced significantly above a comparable ICE, may not affordable by a majority of the population as many of them cannot take full advantage of the tax credit.


If you look at the chart below, you can see the median taxes and income by state. In many states the median Federal Income tax is less than the maximum tax credit for EVs.

https://en.wikipedia.org/wiki/Household_income_in_the_United_States#/media/File:Median_household_income_and_taxes.png

 

Good semi random thoughts, and I would like to add a little to them

As I pointed in another post, the ability to use HOV lanes, at least in my state, is another time saver for a few. My friend saves 30 to 40 minutes a day due to this

Yes, but as I have posted it varies from area to area, state to state. The median income for the state of Washington is less than half of that (about $72,000)

True that there are less moving parts, less assembly costs and less precision parts (some engine parts are extremely precise with very tight tolerances). The confounding factor is the battery pack. Compared to the batteries in a ICE, the battery in an BEV could be 30 to 40% of the cost of the vehicle.

Yes, move to BEVs, will change a lot of the labor requirements and hence UAW is concerned. Jobs will shift to battery manufacturing, but overall jobs will reduce. The other aspect of job reduction is the less maintenance (your point number 1). Many of the roadside mechanics and the quick oil change (Jiffy Lubes and like) will find their work reduced.

And yes, unless their is a breakthrough in material technology (a stronger, cheaper, light weight material that withstand high temperatures), any improvements in ICE efficiency are going to be both marginal and costly. And the advantage for BEVs is that as you pointed out the cost of electric power trains is dropping and so is the cost of batteries. Both together can be significant.

Hmmm. Sometimes you have to see it to believe it. In the US, their offerings are limited today and possibly for the next 3 years. Audi E-tron does not have much traction compared to S/X, the VW offerings such as Golf are not selling much or are being discontinued, the Taycan has yet to hit the market and ID3 may not be sold in the US.

VW group sells a little more than 10 million cars a year. So if they have to sell 1.4 million EVs in 3 years time, that will be 14% of their total sales, from less than 1%. If you look at the chart below, no VW car is in the top 10 EVs in 2019. Also most of their growth has to come from Europe (I do not know if they can gain traction so quickly in China, and the US market is not going that rapidly and VW offerings so far have been lackluster).

So I am finding it difficult to see from where where they will get such volumes (across all the brands) in the next 4 years. May be they have thought this thoroughly and have a plan to execute it flawlessly. I am little a skeptical they will achieve this goal, but I am prepared to wait and see how they actually deliver to this target. They Taycan for example is proving a lot more popular than I thought, so I could definitely be wrong.



http://www.ev-volumes.com/country/total-world-plug-in-vehicle-volumes/

 

I think we are pretty close to agreement. I was just trying to make the point that I despise statements that something can't be done or isn't the right economic choice as general advice to a group of people (like prospective buyers of PHEVs or BEVs). They need to investigate their own situation and make their own informed decisions utilizing all their potential abilities and options for optimization. Yes, any information that aids them in making the informed decision is good. Information that tends to dissuade them from investigating a good opportunity for them (specifically), is not good. This reminds me of another quote of "can't never could".

 

Absolutely agree with you. Broad generalizations without boundary conditions are misleading or even false. In California there are a lot of incentives for BEVs and the gas prices are much higher than in Arizona, where there is no direct tax credits for BEVs except reduced vehicle tax. Regulations are different and hence manufacturers may be ready to discount cars in CA but not in AZ and hence the purchase price may be less. Smog and pollution patterns are different. So what may make sense in California may not make sense in Arizona. Even within CA, what makes sense to a person in an urban county like Santa Clara (where San Jose is located) but not make sense to some one in the Imperial County, CA. Or what makes sense to a person with a $200,000 taxable income may not make sense to someone with a $90,000 taxable income.


Hence, unqualified general advice is often wrong.

 

Yes, I think we are really close to agreement. I will add:
Or what makes sense to one person with a $200,000 taxable income may not make sense to another with $200,000 taxable income and that
What makes sense to someone with a $90,000 taxable income may not make sense to another with $90,000 taxable income.

I'd make the same comments about location of residence. "what makes sense to a person in an urban county like San Jose but not make sense to some one in the Imperial Valley."

I'd alter that to What makes sense to a person in an urban county like San Jose may not make sense to another person in San Jose and
What makes sense to some one in Imperial Valley may not make sense to another person in Imperial Valley.

Yes, I'll agree that in all these areas you have mentioned that most may fall into one bucket or another, but I think it is really important not to throw everyone in a bucket just because the majority are in that bucket.

It's a LOT about their specifics and what options they have to make the deal make sense specifically for them. Things like ability to negotiate dealer discount, how much free or discounted charging they can utilize, you mentioned need or desire for HOV access, etc. People shouldn't think they are in a particular "bucket" just because we have told them that they are based on generalizations.

I walked away and then reflected and thought I'd add...
As to why I'm so picky about this, I live in Alabama and believe pretty strongly in PHEVs and BEVs as great car options. I'm definitely in the minority with that position here. But that doesn't mean that BEVs or PHEVs aren't great options for those who will do the math even in Alabama (and maybe lean a little toward being green and reducing dependence on foreign oil). I even believe that BEV and PHEV penetration into the marketplace may even drive toward more and more renewable energy being added to the bulk electric supply (and to individual households). Yes, I am somewhat naive, but I like to try to believe it is optimism about this topic.

 

We are in agreement. In a multi-criteria framework, it is a question of trade-off between the various factors. And yes, a person with $200,000 income in Santa Clara County, CA (I had corrected my post to reflect San Jose is in Santa Clara county) may find that BEVs make sense to him or her as opposed to another person to whom it does not, even though the other has about the same income and also lives in Santa Clara Country. So every person has to make a decision based on macro and micro factors and as each person has different needs and priorities.

And yes, BEVs may make sense to someone in Alabama but unless the person analyzes it objectively, you will never know.

 

My head just exploded. That’s a lot of words to say “everyones situation is different.”

In general, would you 2 agree that we should maybe think twice before offering basic advice to someone who is curious about a BEV/PHEV unless we know every detail about their finances and driving habits?

 

Most people who have driven an EV would want one but until our charging infrastructure gets better and the prices come down they aren’t going to sell. I happily took the $7500 credit. It went a small way towards making up for losing most of my state tax deduction last year!

 

No, I don't. We can make recommendations based on certain general stated guidelines or conditions, and it is up to the person to decide how much the general guidelines/conditions apply to him or her. I can say, "My recommendation is based on a daily commute of less than 40 miles and utilizing the $7500 tax credit". The reader can disagree with the recommendation as in his/her case, the tax credit does not apply and/or their daily usage is vastly different.

 

Yes, I can and did.

If you recall, you accused me of providing misleading information. So I list 10 vehicles, that you agree above, support my statement, and you dismiss them as irrelevant because you can list a couple of vehicles that fall outside of my parameters.

This is a Clarity forum and the topic of this thread is about Honda’s decision to pour cold water on electric vehicles, which in my opinion is a misleading title, and a discussion of Tesla vehicles keeps popping up, which isn’t misleading, it’s just irrelevant to the topic.

 

Landshark said: ↑
My head just exploded. That’s a lot of words to say “everyones situation is different.”

In general, would you 2 agree that we should maybe think twice before offering basic advice to someone who is curious about a BEV/PHEV unless we know every detail about their finances and driving habits?

I really do agree, we need to be open that this is a relatively important decision and is beyond simple recommendations based on "certain general stated guidelines" and that they really need to do appropriate research to decide what is best for him or her. I'd stay with trying to give them as much information as he/she is interested in getting, but make it clear that I can't recommend what they should do without a reasonable amount of specific information. I do like sharing how much I like the Clarity and believe in PHEVs based on my own experience.

 

Where did I dismiss them as irrelevant? Oh that’s right, I didn’t. The vehicles I listed were within your parameters (40-80k & 85-150 range), not outside. Do you just like to argue? And since the discussion, is at least in part related to electric cars, a discussion of Teslas seems to be relevant.

 

A generic question will get a generic answer, more specific the question, more specific the answer. If someone asks "Is Clarity a good car to buy at $30,000 (just using a number)?", an acceptable answer would be "Yes, I have had a Clarity for the last 12 months and I love it and it is a great deal considering the tax credit".

If the person asks, "I am considering the Clarity and having a hard time deciding, what should the factors I should consider?", then you can ask questions and give more directed answers based on the specific circumstances.

 

You sound like someone that would make a good defense trial lawyer. Don't answer the question providing any more information than you have to.

 

No, I am not a lawyer and have no legal training. I have been in consulting for a very long time and I have learned some lessons the hard way. Including the fact that sometimes more information does not lead to better decisions and it is better to stick to the point.

And you may have heard this joke about consultants

The Golden Rules of Consulting

There are Two Golden Rules in Consulting

1. Never tell anyone all you know

[pause] … and I would be breaking the first rule if I said anything else!