Electric cars are clean, but can they be profitable? New report casts doubt

A flood of new electric-car models is washing into the market in the next year as automakers scramble to meet regulatory demands for electric cars around the world—not to mention scrambling to compete with Tesla.The challenge, as with Tesla, is whether they can sell those cars at a profit.

A new report by AlixPartners, a worldwide business consulting firm, shows the transition to electric cars is coming at a steep cost to automakers.The company pegs the cost of building new electric cars at almost $9,000 more than conventional cars, and plug-in hybrids at an additional $5,700.

Worldwide, the report says, established and startup automakers are spending $255 billion to develop more than 200 new electric models that are expected to hit the market by 2022.

Many of these will be low-volume models that will not make a significant dent in the development costs for new powertrains, the report says.Further, the number of new models is likely to exceed customer demand, the report says, meaning that intense competition among these new electric cars may force automakers to sell them at a discount. This hit to automaker profits could be exacerbated by ride-sharing and autonomous car fleets, which would buy cars at fleet prices.

As if to confirm the report, BMW cheif executive Bernhard Kuhnt told Bloomberg Friday, “Tesla is now ramping up their volumes, and it’s putting pressure on that market segment.”

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