Given what you have learned about supply and demand, 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 you think the suppliers are behaving in this manner? Finally, do you agree with the supplier’s actions, why or why not? Be specific.
Electric vehicles in short supply
Lease-price war spurs a run on battery- powered cars. Some sell out in Southland.
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.
The reason why the supply of electric cars decreased throughout the year is because the previous demand for it was extremely low, and as a supplier, you are not going to waste money on making something that will not give you money in return. Because of this low demand, suppliers felt as if they have wasted money and make less amounts of car. The new benefits that the consumers see of the electric car are now 12,000 miles and an at-home car charging station. A factor that helps push people to buying the car, is that gas prices are high as well. Scott Shachter claims that an electric car is better for his family in a way that he won't have to spend as much money a month to drive his children around. I agree with what the suppliers did at first, when the demand for electric cars was at a low point, but I feel they shouldn't have cut it down to a number where it couldn't be sold in the future. The suppliers should have predicted everyone's interest in going green, and spending less money on gas, or not spending any money at all.
ReplyDeleteThe supply of these electric cars is running low because consumers were not really buying these cars until there was a good price on them. These cars have extremely high development costs so their "sticker price can be double those of gas-powered rivals". This leads to low demand and a surplus in these vehicles. In order to help sales, dealerships started making lease deals that were appealing to many consumers. Once these deals were released all of the electric cars were getting bought and there ended up being a shortage. "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." The manufacturers cannot just make a larger amount of these cars because they end up losing money when these cars are leased at such a low price. Therefore the car manufacturers should continue to make a limited amount of these vehicles and they should raise the price slightly to lower the demand of the consumers. I do not entirely agree with what the manufacturers are doing because they could meet the demand of the consumers but I understand that they can't lose money and these cars are expensive to make.
ReplyDeleteSupply and Demand has various types of combination outcomes depending on the economy status. In the case of this article Electric Vehicles In Short Supply, there is a high demand on electric cars, but the supply is decreasing, so therefore, there's a shortage. The majority of the economy posses gasoline powered-cars. According to the article "most consumers have rejected the cars at sticker prices that can be double those of gas-powered rivals" but because these types of cars are hurtful to the enviornment and gas prices are increasing, less people aren't so impressed or not so much in favor of them, so they shift their focus on something alternative, a more advanced technology, the electric battery-powered cars. These new types of cars are more favorable because they are environmental friendly and you save yourself from using gas by charging it. Having the economy want your product at a high demand is quite an accomplishment. However, this puts the company in an "awkward position" as the article states, because they may lose some consumers who would have bought their product. Its a disappointing situation for both sides; the one producing and the one consuming. According to the article "there is little hope of getting the car" because of its immense price. However, "they still put out this amazing deal" for society and their product is still desired because of its various benefits. The demand increases as the supply decreases; and although it has a high price and people are wanting it, there's a low amount of people buying this product.
ReplyDeleteThe article mentions "the recent spate of cheap lease deals on electric cars". Since electric cars' price decreased, the demand for them is high. The author of the article states this by saying "good luck finding one". Due to the fact that these cars are so cheap there is a shortage for them. Consumers are happy with the deal but there are many who wish to buy an electric car and are disappointed when they find out they don't have the supply. The suppliers are behaving in this manner because they mention how most consumers reject the cars at sticker prices that can be double those of gas-powered rivals. I can see why they are doing this. They only wish to sell their product. I think I agree with the suppliers' actions although I wouldn't want to be that consumer who can't buy the supply due to shortage.
ReplyDelete"As the gas increases in price, more people demand for cars that are not so expensive in the way they use gas sug as small cars like the Honda brand, and some peoole demand for electric cars which is a high demand among peoole, but most companies dont consider in buying one, they see this offer as a goverment market rather than a brand market opportunity, some companies are limited in supply and some dont, this Honda offers a good deal but they find it unnecessary and not good enough, this new innovation would benefit the environment because most of the gas empowered cars contaminate the atmosphere and aldo is a good way to improve the economy as well "
ReplyDeleteThe reasons why the supply of electric-powered vehicles are running low is because of the high demand for them by the consumer. The reasons for the high demand is because fuel prices are not getting any cheaper, people are beginning to become more concerned about the environment and the effect gas-powered vehicles is having upon the environment, and the biggest reason being the price of these electric powered vehicles is finally becoming affordable, unlike before. In the article, Electric Vehicles In Short Supply, authors Jerry Hirsch and Brian Thevenot, inform the reader about the sudden demand for these vehicles. "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." These incentives of $10,000 and the lease-price has made these once undesirable vehicles, desirable. However, the issue lies in the lack of supply of these electric vehicles. The suppliers (automakers) are acting in this manner because of the losses they take on the sale of every electric vehicle. "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." The article stated. The automakers (e.g., Honda, Fiat) are losing money on the electric vehicles, which is why there is a lack of supply. In essence, the marketplace for electric vehicles would be non-existent if it were not for it being mandated upon them by the government. The automakers are just meeting the minimum requirement mandated upon them by the government. Thus, the shortage of supply and the high demand for electric vehicles.
ReplyDeleteI agree with the supplier's actions. The supplier is a business and the point of a business is to make a profit and if these vehicles are not making a profit and the consumer does not want to pay more for the supplier to make somewhat of a profit. Why supply more?
"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"...."Three electric-blue Fits sat gathering dust for about three months at Honda of Santa Monica".
ReplyDeleteBased on this excerpt, there was initially insufficient demand for electric vehicles. Because of the large toll required, the sales of electrically powered cars never grossed. With the stakes so low, car industries began reducing price and including special deals to dispense of all the electric vehicles that wouldn't sell.
"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."
This new deal mentioned in the article, canceled the setbacks of low demand which lead to a drastic increase in consumer interest in this particular product. At the time, Honda was still trying to get rid of old electric cars that had over the course of no demand, piled up. By the time of the large sale out, production for these vehicles was very low, and really it was a limited offer that had been instilled. New customers had arrived at stores in search of the same offer, but with low production, the supply for this product was little to none. I believe the suppliers are making the right decision. The cost of the dealership to maintain a consistent production of electric cars, and sustain the price cuts and deals would be a massive toll on the car company. They must first test their customers to see how far they are willing to go in terms of price, if the customers disagree, then the company has to retire from production of electric cars because their is no benefit on their behave.
The reason to why there's a shortage in electric vehicles is that dealerships have advertised "leasing for as little as $199 a month" to "Honda eliminating an annual limit of 12,000" and offering "free maintenance and collision and vehicle theft coverage." Now, what person wouldn't take advantage of offers such as these? Due to too many people wanting an electric vehicle, dealerships have gone into a shortage! In the beginning, "Honda had plans to build just 1,100 Fit EVs" but only sold 176 vehicles throughout the months of July and May. In desperation, dealerships began advertising them for a much less lease plus other benefits. Although it might have seen like a good strategy, it backfired. I don't totally agree with how they dealt with this situation because they could've used a better way. Even thought they were able to sell the vehicles, the demand for them grew immensely leading to the shortage.
ReplyDelete