Economics article 1

Given what you have learned in class read the article “Electric vehicles in short supply” and give your assessment as to why the supply of electric vehicle is running low.  Cite specific examples that explain why this is occurring and describe why do you think the suppliers are behaving in this manner?  Finally, do you agree with the supplier’s actions, why or why not?

Electric vehicles in short supply

Lease-price war spurs a run on battery- powered cars. Some sell out in Southland.

June 05, 2013|Jerry Hirsch and Brian Thevenot

If you've been enticed by the recent spate of cheap lease deals on electric cars, good luck finding one.

Southern California dealers are seeing heavy demand for battery-powered cars, now leasing for as little as $199 a month. Fiat dealers have waiting lists for the new 500e even though the car hasn't hit their lots yet. And Honda dealers have already sold out of the Fit EV since a $259 lease was announced Thursday.

The reaction revealed pent-up demand for electric vehicles -- as long as the price is right.

Until recently, most consumers have rejected the cars at sticker prices that can be double those of gas-powered rivals, before $10,000 in state and federal incentives. But a lease-price war appears to have brought electric cars to a tipping point, engaging average consumers who shop on price in addition to eco-conscious buyers looking to make a statement.

Three electric-blue Fits sat gathering dust for about three months at Honda of Santa Monica -- until Saturday morning, when customers snapped them up and competed to get on a waiting list.

"It's incredible, especially since we haven't had any foot traffic or interest in the car in six months," said Jeff Fletcher, sales manager at Honda of Santa Monica. "I'm not even sure we'll have enough cars for the people on the waiting list."

It seems like a good problem for the automakers to have, but surging demand also puts them in an awkward position -- especially given the losses they'll take on the sale of every electric car because of high development costs. Honda and other automakers must now walk a fine line between limiting short-term losses and creating long-term goodwill in a fledgling market, said Jeremy Anwyl, vice chairman of auto information company Edmunds.com.

"This is basically a government-created marketplace," Anwyl said, referring to California rules that essentially mandate that automakers build zero-emission cars. "So you see car companies trying to limit their costs associated with meeting these mandates."

And yet Honda and others have a big marketing opportunity. "The idea that electric vehicles are desirable -- that would be a wonderful notion to get out in the marketplace," he said. "This is a fine balance."

Honda had plans to build just 1,100 Fit EVs in this model year and the next combined, releasing them in a trickle to select dealers in select states. It sold only 176 from its introduction in July through the end of May, according to Honda spokesman Chris Martin.

In addition to dropping the lease payment to $259 from $389, Honda eliminated an annual limit of 12,000 miles and threw in a free home-charging station. The lease also offers free maintenance and collision and vehicle theft coverage.

"The big question is, did they go overboard? You don't come up with offers like that unless you really need to," Anwyl said. Scott Shachter, an optometrist from Pismo Beach, started his futile search for a Fit EV on a visit to Los Angeles on Saturday. He hadn't the faintest notion of buying an electric car before reading about Honda's offer.

"It seemed like a no-brainer," he said. "My wife drives the kids around town in a Suburban. We spend about $500 a month in gas."

After surveying several dealers, Schachter has little hope of getting the car. "They don't have the supply, but they still put out this amazing deal. It's disappointing, but I'm not going to get too bent about it."

Vern Lindholm, by contrast, is quite bent about it. The retired business owner, who lives in Los Feliz, said he was told by Scott Robinson Honda in Torrance that he could come pick up his Fit EV on Sunday. Then he was told later, he said, that no cars were available.