Honda addresses Fit EV shortages, but the real story is EV price errosion

Honda's 33% price cut to move its Fit EV worked - too well - but the real news is that all the mainstream electric vehicle makers are now slashing prices to move cars.

Just last month we brought our readers the news that Honda had slashed the prices of its new Fit EV lease. The program worked too well and frustrated customers have had trouble finding a Fit EV at the limited Honda dealers who market the vehicle. In order to assuage potential buyers fears that they will need to move on to another of the many similarly sized and similarly priced EVs in the market, Hona issued a press release promising more Fit EVs are on the way.

The Fit was launched in March in limited markets (notably those with Zero Emissions Vehicle mandates) as a lease program. Honda is behind the ZEV curve in California, just as many automakers are, and needs to build and ship electric cars in order to avoid paying for credits from Tesla. The initial price point for the Fit was danger close to the much more practical Honda Accord Plug-in Hybrid. Last month, in order to boost sales, Honda announced a new price for the Fit that was 33% lower than the initial price of just a couple months earlier. In order to prevent angry owners of new Fit EV's from throwing soy chia lattes at dealership windows, Honda extended the program retroactively to include the early adopters that had bought in at the much higher initial price.

The Honda announcement that more EVs are coming included the statement; “While many of our dealers have reported leasing their available inventory of Fit EV's since our late May announcement of the lower lease price, we are still producing a consistent rate of Fit EVs per month for the U.S. market and shipping them to dealers as quickly as possible. This is a temporary inventory issue, not a question of being "sold out." The announcement went on to say “Still, we recognize that some customers have experienced frustration as they attempt to locate dealers with available Fit EVs. 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.”

Apparently, the new low, low price worked and the customers Honda knew were out there all showed up all at once. Good news for Honda, and a promising sign for the EV market overall. Or is it? With no money down, and a price of $259.00 per month, the Honda Fit EV over a 39 month lease will generate just $10,360.00 for Honda. Honda is losing money on each Fit EV in this program, unless one factors in the ZEV credits that Honda would have had to buy from Tesla, or some other provider.

Price cuts on EVs are not limited to Honda. After long being the top selling EV in the market, the Chevy Volt has been passed in recent months by the Nissan Leaf. In response to this Chevy has slashed the cost of the Volt by offering incentives to buyers to move the cars. This new success by the Leaf is due in part to its new low price announced just 6 months ago. At that time, our reporter titled his story on the Leaf “2013 Leaf price falls to $29k, almost as low as the hybrids.” Nissan and other companies have to do something to make the EVs more attractive to buyers since other green vehicle choices, such as the Prius, offer very good green-transportation credentials and also a very low per mile cost to operate.

Honda’s announcement that its lease program is now moving a lot of Fit EVs is an interesting tidbit, but the underlying themes of EVs being sold below cost to compete with other green car options and to offset ZEV credits is the real story.