Is The Electric Car Industry Still Viable? – General Motors Company (GM), Tesla Motors Inc (TSLA)

Nissan Motor and its Nissan Leaf is leading the way for all electric cars as it has recently passed the 50,000 cars sold worldwide. The sales of the Leaf have risen and in February the company sold 653 cars – a 36.6% gain from February 2012. Since the beginning of the year the company sold 1,303 Leaf cars while the total number of cars sold was 108 thousand, which means the Leaf brand account for only 1.2% of Nissan’s total car sales.

The company has recently announced the price of the new brand will be slashed by $6,400. This decision could encourage buyers to buy this car especially considering the tax breaks buyers receive for buying an electric car. The decision of U.S policymakers to push forward the demand for electric car by providing tax benefits for electric car owners has yet been proven as a sufficient incentive to augment the electric car’s market share. The tax benefits are not only federal. They could come to $7,500 in tax credit on a federal level; in certain states including California the tax credit could come to an additional $2,500. For a car such as the Leaf that has a sticker price of $28,800 could come down after the tax incentives to only $18,800. Such a price is competitive with other regular car but doesn’t put the car much cheaper than a regular car that doesn’t have the constraints an electric car has (in terms of battery).

The drop in the Nissan Leaf price might cut the company’s profit margin, but this company might be among the few making money off its electric car. If it does make money from its electric car, the profit margin might have shrunk after the updated price at the expense of augmenting the market share of the car.

The bottom line

It could be a very long time until the electric car will play a significant role in the auto industry and conquer a significant market share. The losses of several leading auto makers in this industry are likely to impede the progress of the electric car, until it will become economical and perform just as a regular car. Until such a day, sales of the electric car will continue to rise but won’t take a large portion of the total sales of cars.

The article Is The Electric Car Industry Still Viable? originally appeared on Fool.com and is written by Lior Cohen.

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