Business Update with Mark Lacter

The evolving electric car industry

KPCC's business analyst Mark Lacter says one of the most prominent players in the electric car industry is having trouble.

Steve Julian: Electric cars seemed so promising. What’s happening?

Mark Lacter: It’s Tesla Motors, Steve - (the company that was founded by the billionaire Elon Musk, and which has its design operations in Hawthorne). Tesla has run into some serious production holdups – and that means it's been selling fewer of its cars than expected. And that means revenues will be lower than expected. The company is raising a bunch of cash by issuing more stock, and that should allow the place to keep operating. It also has amended loan terms it has with the Energy Department (you might not realize this, but the government has almost half a billion dollars riding on Musk and his all-electric car). The good news for Tesla is that the auto experts love the car. The bad news for Tesla - as well as for the other electric car companies - is that consumers don't seem that interested.

Julian: They're too expensive. The Tesla sedan's base price runs close to $80,000, doesn't it?

Lacter: That’s right, and even the cheaper cars from other companies aren't all that cheap, and if it's all-electric - as opposed to one of those plug-in hybrids that can switch to gas power if the battery runs out - there's still the matter of where to recharge, and how long it's going to take (some Nissan Leaf owners are complaining about the duration of the charge). Maybe their biggest problem is that the internal combustion engine remains stiff competition.

Julian: It's become a lot more fuel efficient…

Lacter: And no worries about filling it up. Electric cars are a tough sell, Steve, because you have start out explaining to consumers why they should buy one. It's been a tough sell even for existing carmakers like Nissan and Renault, and they already have an infrastructure for research and development, production, and distribution, and marketing. The one success story so far in the Chevy Volt, which is a plug-in hybrid that can use gasoline. Sales did not meet GM’s expectations, but at least the numbers are increasing.

Julian: So, if electric cars aren't the answer, what about ones that drive themselves?

Lacter: That’s the more interesting story. Last week, you had Governor Brown signing into law legislation that basically calls on the DMV to draft regulations so that motorists will be able to use these “autonomous” or “driverless cars." Anyone who's been following this knows that Google has taken the lead in this technology - it has a fleet of about a dozen driverless cars that are equipped with all sorts of sensors and computer navigation. These cars already have driven a few hundred thousand miles throughout California with remarkably few incidents. (One of the cars went from San Francisco to Santa Monica on the Pacific Coast Highway, which - as you know - can be very curvy and hazardous.)

Julian: And not at 5 miles per hour, apparently.

Lacter: No, normal speeds. Keep in mind that much of the technology in driverless cars is just an expansion of what's currently available on many conventional vehicles. That includes letting the car handle parallel parking, having it drive a safe distance from the car ahead (and then putting on the brakes if you're getting too close), and using the same kind of collision-avoidance technology that's standard equipment on all commercial aircraft, so you’ll be warned when you're backing out of a space that traffic's approaching).

Julian: But, you can buy an electric car. You can't buy a driverless one.

Lacter: True, but they might be available by, say, the end of the decade. And, it really changes the dynamics of transportation by reducing the number of accidents because electrical sensors are much more reliable than the human kind. It also reduces traffic congestion because machines would do a better job of navigating the amount of space between cars, and the beauty of that is you'd be able to use the same basic roadway grid. Very exciting stuff.

Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


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