Honda losing money on the Clarity?

[Hobbesgsr]

Most manufacturers lose money on low volume compliance cars like the fuel cell and electric versions of the Clarity.

Even with the wide availability of the PHEV version, the Clarity is still being manufactured and sold in low volumes. I imagine the cost of the engineering this new body structure with high strength steel, aerodynamics enhancements, the 17kWh battery with active cooling and heating, motors, all the aluminum body and suspension components they can’t be making too much profit if any.

 

[PHEV Newbie]

In the Clarity threads, another forum member provided the following link on the Japanese launch:

https://insideevsforum.com/community/index.php?threads/clarity-phev-launched-in-japan.2656/

In Japan, the MSRP of a Clarity is about US$52,000. The Vezal lists on the Honda.jp website for less than US$18000 while a less well equipped HR-V (the US name for the Vezal) LX 2WD, has a MSRP of US$21,465. Based on that, it is highly likely you bought a $52,000 luxury car for about half price after Federal and State incentives and dealer discounts (which are huge because the Clarity is so unpopular). The car is such an incredible buy that people should be camped out Honda dealers trying to buy one. Just goes to show that good common sense is in short supply in the US (Not so up north, our Canadian neighbors have to wait for theirs).

 

[jeff10236]

I don't know if they are losing money or not. As PHEV Newbie pointed out, this car is not just a U.S. car but it is on the international market. Electric and PHEV vehicles sell better in other countries than they do in the U.S. So, it is always possible that it is making money internationally. Even if it isn't, it shares a platform with the Accord, Civic, and upcoming Insight. The battery cooling tech will probably be used in future cars and not just this one. The Infotainment system is from the last generation Civic. So, the costs of many of the new (and old) components that went into this car, will be/are shared across several other vehicles.

 

[Michael Borquez]

You are completely correct, the Clarity is a money loser, but the car wasn’t really built to make money. Honda is using the Clarity as a stepping stone to gauge how people drive these cars. Our cars are reporting back everything we do and don’t for that matter. They are gathering this data to determine the best way forward on their path to a 2/3rds electric fleet. A lot of companies sell products at a loss in the beginning to gather data and plan for future products. I think we all got a steal for such a well built vehicle.

 

[Pushmi-Pullyu]

I'm always leery of claims that so-and-so auto maker is "losing $XXXX on every car".

1. Most new car models lose money in the first year of production. Selling cars, unless they are "premium" or "luxury" cars, is a business with thin profit margins. Most cars are only going to make a profit starting in the second year of production.

2. Claims like "GM is losing $9000 on every Bolt EV" are completely ridiculous. It's a kindergarten level of analysis, and worthless. That would be taking the entire cost of developing and producing a company's first BEV drivetrain, and applying it to just one model for just one year of production. The money invested in that development will benefit the company on all future BEVs, so charging the entire cost against just the Bolt EV is ridiculous. It's also ridiculous to apply it all against just one year's production of the Bolt EV. If the Bolt EV is produced a second year, then by the same kindergarten-level of accounting, the R&D costs will "magically" drop to half, or less than half if more Bolt EVs are produced during the 2nd year!

3. Since nobody would know in advance how many years a model will be produced*, nobody could possibly say how much money the auto maker is making or losing on the entire model, until production and sales end and you can total everything up.

Even in articles aimed at a general reading audience, writers should separate sunk costs from unit costs. Once a car actually enters production, the costs of developing and tooling up to make the car are sunk costs; money already spent and irrecoverable. Whether or not the auto maker should keep a car in production depends only on the unit cost -- the actual cost for making just one unit of the car (I think that's more or less the same as the "marginal cost"?) -- as compared to the selling price of the car. We can be pretty sure that the cost to make one Bolt EV isn't $9000 less than the selling price of the average Bolt EV!

*Unless it's a limited production model which the auto maker decides in advance will only be in production for a very few years

As PHEV Newbie pointed out, this car is not just a U.S. car but it is on the international market.

Sales started in Japan just 8 days ago, on 20 July 2018. Odd that in this case, a Japanese made car went on sale in the U.S. before it did in Japan!

Is the Clarity PHEV also sold in other countries, besides the USA and Canada?

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[jeff10236]

Sales started in Japan just 8 days ago, on 20 July 2018. Odd that in this case, a Japanese made car went on sale in the U.S. before it did in Japan!

Is the Clarity PHEV also sold in other countries, besides the USA and Canada?

I don't know where/if it is sold internationally yet, but my understanding was that this was to be an international model and not just for U.S. sales.

 

[Viking79]

The Accord Touring Hybrid is about $36,000 and presumably profitable. Figure the Clarity battery costs Honda about $3000 more, meaning consumer price more like $5,000. That would put it more like $41,000 if an Accord. My hunch is Clarity platform is more expensive, however the PHEV likely offsets the costs of the fuel cell as I have mentioned before, and ZEV credits offset some cost for Honda.

Another consideration is winning customers. Honda wouldn't have sold any other vehicle to me. Volt won many customers from Honda/Toyota for GM, Honda might want those buyers back.

 

[Pushmi-Pullyu]

The Accord Touring Hybrid is about $36,000 and presumably profitable. Figure the Clarity battery costs Honda about $3000 more, meaning consumer price more like $5,000. That would put it more like $41,000 if an Accord. My hunch is Clarity platform is more expensive...

Making one unit of the Clarity PHEV undoubtedly costs Honda more than one unit of the Accord Touring Hybrid, simply because the Accord platform is made in very high numbers by Honda, so making the Accord car body will benefit a great deal from the economy of scale. The Clarity body is made in much smaller numbers, so will have a significantly higher unit cost. I don't know how much that eats into Honda's profit margin on the Clarity, but I assume it would be at least several hundred dollars, and quite possibly several thousand.

On the other hand, the price for the Clarity PHEV is substantially higher than the price for an ordinary Honda Accord gasmobile, so perhaps Honda isn't losing money on the Clarity PHEV. If they are losing money, my guess would be it's not much on a unit basis. If Honda is selling it outside CARB States in the U.S. -- and they are -- then that's a pretty strong sign to me that they're not losing much money on making and selling the car. This is more than just a California compliance car!

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[Michael Borquez]

The more I look at the old Crosstour, the more it looks like they used that as there starting basis of design. Using existing structural plans they could have saved a lot of money.

 

[V8Power]

In the Clarity threads, another forum member provided the following link on the Japanese launch:

https://insideevsforum.com/community/index.php?threads/clarity-phev-launched-in-japan.2656/

In Japan, the MSRP of a Clarity is about US$52,000. The Vezal lists on the Honda.jp website for less than US$18000 while a less well equipped HR-V (the US name for the Vezal) LX 2WD, has a MSRP of US$21,465. Based on that, it is highly likely you bought a $52,000 luxury car for about half price after Federal and State incentives and dealer discounts (which are huge because the Clarity is so unpopular). The car is such an incredible buy that people should be camped out Honda dealers trying to buy one. Just goes to show that good common sense is in short supply in the US (Not so up north, our Canadian neighbors have to wait for theirs).

I agree, the Clarity with rebates is the best deal in the auto world especially for those switching over from gas guzzlers like us. In Ontario, Canada with the $13,000 rebate for the car and $1,000 rebate for a Level 2 charger/power line installation, it was such a good deal that we bought 2 Clarities - his & hers ! The Ontario rebate was just cancelled by Doug Ford, our new Premier of Ontario, and set a delivery deadline of Sept 10. At this time, there are no Clarities available anywhere around here - last call for EV rebatecohol! After Sept 10, it's a whole other EV world in Ontario unfortunately...

 

[Roy2001]

It is a experimental platform that could be the base for future Honda vehicles, Honda is losing money for sure, but that is not unexpected.

 

[mcdull]

Making one unit of the Clarity PHEV undoubtedly costs Honda more than one unit of the Accord Touring Hybrid, simply because the Accord platform is made in very high numbers by Honda, so making the Accord car body will benefit a great deal from the economy of scale. The Clarity body is made in much smaller numbers, so will have a significantly higher unit cost. I don't know how much that eats into Honda's profit margin on the Clarity, but I assume it would be at least several hundred dollars, and quite possibly several thousand.

I believe the unit cost is more than Accord not just because of Accord has economy of scale.
I think it has been saying Clairty uses a lot of high-grade materials rather what they usually use for their other regular cars. The unit material cost should be much higher than Accord.

 

[Pushmi-Pullyu]

I believe the unit cost is more than Accord not just because of Accord has economy of scale.
I think it has been saying Clairty uses a lot of high-grade materials rather what they usually use for their other regular cars. The unit material cost should be much higher than Accord.

Yes, but in that post I was just comparing the cost of the car bodies.

You are certainly correct to say that some of the other equipment in a PHEV, most notably the battery pack and the electronics -- especially the power electronics such as the inverter -- will make the Clarity more expensive than the Accord, and would even if the Clarity was made in higher numbers.

Legacy auto makers have had more than a century to bring down the cost of gasmobiles. It's going to take awhile until they can bring down the cost of BEVs to a similar extent. PHEVs may always be more expensive, but I see them as only an interim measure, a bridge to replacing gasmobiles with BEVs. In another human generation, there's not going to be much need for anyone to drive a PHEV in any region with a reliable electrical grid. PHEVs may continue to have a market in remote areas where EV charging hookups are hard to find.

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[weave]

I agree with the assessment that they are taking a loss on these, but with an eye to the future. I think it's obvious to all car makers -- and even motorcycle makers, that electric is the future. They either figure out the tech now so they are in a good position to offer a range of vehicles and options when the time comes, or they get left behind.

Hell, even Harley Davidson understands that -- and that's the last manufacturer I thought would go electric.

The other problem is lack of charging stations, but that too will change as demand goes up. Heck, I'm already basing a lot of decisions on where the wife and I shop, eat, and stay the night based on availability of chargers.

But it's going to take time. Like where I work (a church). In my state, employers/businesses get a 75% rebate on charging stations. I offered to personally pay the other 25% to get us some stations -- and they wouldn't bite. It's frustrating. An electric car owner who goes to church will certainly use that availability as one of their reasons to regularly attend that place, and they could ask for a voluntary donation for the public to use it, to get people to walk into the front door to throw a buck or two into the donation dropbox.

 

[su_A_ve]

One thing is a loss leader, when the true cost to build the car is higher than the selling price (ie invoice). At least based on my recent purchase, it's much worse, since I bought the car for $2900 BELOW invoice. All cars at the dealer have been sitting there for a few months. That's correct. My price for the base was $29K plus protection package ($300), tax and title.

And 0.9 for 5 years... Honda is really loosing money on this car...