LOS ANGELES -- Disappointing sales of electric vehicles have plunged the segment into an old-fashioned price war -- one that some EV proponents fear could erode acceptance of the technology in the long term.
With the first wave of early adopters all but exhausted, carmakers are chasing a wider EV audience -- and not without some success. Sales of the Nissan Leaf more than tripled those of the previous months in March and April after Nissan slashed the price 18 percent.
Honda joined in last week, cutting the monthly payment on its zero-down, 36-month lease from $389 to $259. And by month's end Honda will increase the number of dealerships that will carry the Fit EV from 36 to more than 200.
That comes after discounting from Ford, Toyota and Mitsubishi, as well as low-ball pricing from Fiat and Chevrolet as they launched EVs this year.
But selling cut-rate EVs won't help carmakers determine the natural market demand, executives say. Despite Honda's price-cutting last week, Steve Center, American Honda's head of environmental business development, says discounting won't work in the long term.
"What concerns me most is that we'll have a situation of excess supply, creating artificially low prices, and [attracting] people who might not be best suited for an EV," Center said.
"Then you will get a certain percentage of people who are going to be dissatisfied with the EV experience, and that will damage that option going forward," he said.
What's holding back EVs? Steady gasoline prices, range anxiety, wariness of new technology and the acceptance of gasoline-electric hybrids as "green enough." And the initial high price of entry for EVs hasn't helped.
And as more automakers join the fray and supply further outstrips demand, there is little recourse but to cut prices.
"Once you scoop all the early adopters off the top, then it's the general market, and that's more competitive," Center said. "If all the electric vehicles are perceived as similarly competitive, and one competitor lowers their price a lot, that's how the market reacts."
Honda's sales expectations were modest when the Fit EV was launched 10 months ago -- just 1,100 over three years. To date, Honda has sold only 161 units.
Sales of the Ford Focus EV also have been underwhelming. Ford sold 685 units last year -- well short of the 1,627 units it produced. Ford responded by cutting the sticker price by $2,000 and offering cut-rate financing.
C.J. O'Donnell, Ford group marketing manager for electrification, said Ford does not have outsized ambitions for its EV. Building the Focus EV on the same line as the standard Focus and C-Max Hybrid gives the plant flexibility if EV sales falter.
"Our competitors have business models that commit significant resources, particularly in plant capacity and commitments to suppliers, that require them to meet volume targets, whether natural market demand is there or not," O'Donnell said.
GM is playing low-ball from the start, pricing its Chevrolet Spark EV at less than $20,000 after a $7,500 federal tax credit is applied. California buyers can qualify for additional tax credits and incentives of as much as $2,500. GM also is offering a $199 per month, 36-month lease with $999 down, matching the lease deal of the rival Fiat 500e.
But the first volley in the price war came in January from Nissan, the segment volume leader. In 2012, Nissan sold fewer than 10,000 Leafs, or half of what it had hoped. Nissan slashed the Leaf EV price to $28,800 before shipping and tax credits, an 18 percent reduction from its original $35,200.
In short order, Mitsubishi began selectively offering dealer incentives of as much as $10,000 to move the i-MiEV, and Toyota dealers have cut $10,000 off the sticker price of the RAV4 EV in certain markets for limited periods.
Nissan said local production and a low-content base model were the main factors in the price cut. But it also was a clear signal that Nissan wanted to cut the price of EV ownership.
"Nissan's strategy has always been to bring zero-emission cars to the mass market," said Erik Gottfried, Leaf chief marketing manager, "and part of that is bringing the price of Leaf in line with similar gas-powered cars."