SparkEV, you are NOT a compliance car

I didn't want to discuss this, because it was so obvious, but it seems some (many?) have mistaken notion that SparkEV is a compliance car. This post is to show some evidence that isn't the case.

Compliance 101

For those not aware, few states in US mandate few percent of total car sales must be zero emission vehicles (ZEV). They also create a market for it such that car companies that sell more ZEV than required can sell the excess sales figure as "ZEV credit". Some gasbags claim that Tesla is making out like bandit for selling ZEV credit than actually selling cars; if you can't see the flawed logic in this argument, please, read it over again. (hint: you must sell ZEV to get ZEV credit!)

There used to be one ZEV mandated state: CA. Then OR joined. Now supposedly there are several ZEV states operating as co-op where credit sold in those states can be applied to over all pool.

Definition of compliance car

As such, the definition of compliance car is simple. It's cars only sold in compliance states (CA and OR for now) only for the purpose of getting ZEV credit for them to sell more gas cars. The reason they don't sell outside of compliance states is due to cost. Even though the car maker can buy ZEV credit from their competitors (eg. Tesla), it does nothing for them while boosting the competitor's bottom line. Even if they're losing some money (or lots of money) by selling ZEV in compliance states, it'll at least bring the people into their dealers and keep the money out of their competitors' bottom line.

One famous compliance car is Fiat500e. Sergio (Fiat CEO) famously said that he hopes people don't buy the 500e, because the company loses $14,000 for every car sold. Whether this is reverse psychology is debatable. But the little Fiat is a down to a tee (cee?) example of a compliance car. Supposedly, the CEO had such disdain for BEV that much of the drive train of 500e were not made by Fiat, but contracted out to Bosche. As such, there's no hope of making money by selling another company's car, especially if that car must use biggest (and most expensive) available battery among mid level EV at the time.

You dirty compliance car!

Some consider compliance cars as a dirty word. They see them as taking away from "true" EV and helping the evil gas car maker that'll make even more CO2. It's like they have some religious aura about disliking compliance car outside of logic and reason.

The simple fact is, compliance cars are just as much EV that doesn't use imported oil. If the compliance car performs better and cost less than "true" EV, by all means, I whole heartedly recommend compliance cars. If they didn't offer this better and low cost EV, would consumers buy more expensive and crappier "true" EV or would they simply buy gas cars? Most would probably buy gas cars, making the situation (imported oil and CO2) far worse.

Compliance cars would be losing money for the car maker. If they made money, they'd have wider sales (see below why not always the case). If the evil car maker is only selling compliance BEV to be able to sell more gas cars, and their BEV is good / cheap, it's all the more reason to buy them. Buying their compliance EV and hurting them financially is a good thing if you happen to dislike the car maker.

Here's an example. Fiat 500e is pretty much the definition of compliance car. But if it came with DC fast charging and cost comparable to SparkEV ($26K, $7K less than current 500e price), it would be a great tiny car: 0-60 in bit over 8 seconds, almost 2 seconds quicker than Leaf, and it comes with 6.6kW L2 instead of SparkEV's 3.3kW. Personally, I like the taller head room of SparkEV, but for smaller people who like "cute" cars, it would've been the best EV. It'd even be a great choice for people who live in areas without much DCFC now (will be coming), but many L2. Compliance or not, such car would be a great buy.

SparkEV compliance test

SparkEV is sold in limited number of state, CA and OR in the beginning, also in MD as of third quarter of 2015. Hmm. Smells like compliance car.

Lesser known is that SparkEV was also sold in Canada to fleet customers from the beginning. Starting in 2016, SparkEV will be sold retail as well in Canada.

http://media.gm.ca/media/ca/en/gm/news.detail.html/content/Pages/news/ca/en/2015/Apr/0409_Spark.html

SparkEV also has been selling in South Korea since the beginning.

http://insideevs.com/sales-of-chevy-spark-ev-now-officially-underway-in-south-korea/

SparkEV is also sold in Mexico.

http://www.chevrolet.com.mx/spark-ev-vehiculo-electrico.html

Just from the fact that SparkEV is sold in places outside of compliance states of US means SparkEV is NOT a compliance car.

SparkEV pricing

Mexico is an interesting link. The price in the web site in Mexican Peso converted to US dollar result in $24K while it's sold as $26K in US. If it's only for compliance to meet ZEV credit in certain US states, why would Chevy sell SparkEV in Mexico for even lower price than US and lose even more money? Are they insane? Or more insane than usual? hint: Iron Duke Camaro!

Most likely, Chevy probably isn't losing money by selling SparkEV, but making money. Otherwise, why offer for sale in places that do not mandate it? Based on Mexico price, they're probably making $2K to $3K per car in US. This could be more than 10% profit, a profit margin that even Carlos Ghosn, the legendary CEO of Nissan, would be proud of.

By the way, Carlos will be a historic figure, and all those who's shaken his hand or have some memorabilia from/about him is well advised to keep them safe; they will become valuable to your grand kids. No, I'm not suggesting that you cut off the hand that shook Carlos' hand, but don't wash it. Ever!

https://en.wikipedia.org/wiki/Carlos_Ghosn

Even without knowing Mexico pricing, let's deduce how much SparkEV would cost. SparkEV is basically Spark gas version converted to EV. Much of the car's body and chassis is the same, adding only minor cost. Electric motor is made by GM, a derivative of  Chevy Volt motor. Then the gas engine swapped with electric motor is only minor cost difference, if any. Biggest addition is the battery. Assuming $300/kWh, 19kWh battery would cost $5700; let's round up to $6000.

Spark gas 1LT costs $15,000. Assuming 10% extra for swapping gas engine for electric motor and adding $6000 for battery,

$15,000 * 1.1 + $6000 = $22,500

Well, well, what do you know? It's $1500 less than MSRP in Mexico, and $3500 less than MSRP in US. Those are some healthy profits for Chevy!

Why not sell SparkEV throughout US and the world?

From above, it should be clear that Chevy is probably  making money by selling SparkEV. Then the question becomes, why not sell it everywhere? Why only in few markets (some outside compliance states)? Indeed, Chevy had announced much wider sales in the beginning, only to cancel them later. They wouldn't have done that if it was compliance only car. This involves guessing, so I'll present a few.

One reason could be the US federal tax credit for EV. Each car maker is allowed 200,000 EV sold before the tax credit is sunset. Chevy has already used up about 100,000 with the Volt and Cadillac ELR. If they use up all the tax credits before their upcoming Chevy Bolt is released, the fear is $7500 higher price than the competition (Tesla Model 3, new Nissan) will doom the Bolt sales.

SparkEV sold about 950 cars in Apr. 2015 in only 2 states, probably much of it in second half the month when they announced price reduction. Subsequently, they have been constantly sold out in much of the dealers, so the sales figure is less and hard to gauge the demand. But if 950 car in 1/2 month in 2 states (about 20% of US population), nationwide roll out would result in 950 * 2 * 5 * 12 mo = 114,000 cars per year. That'll pretty much wipe out the entire tax credit even before first Bolt rolls out of the assembly line. Even considering 1/5 of that figure (about 35,000 cars sold for 1.5 years before Bolt), that'll eat into tax credit in significant numbers.

Another reason could be that Chevy is being cautious with all battery EV by testing the waters with SparkEV. In case it doesn't hold in limited markets, they're not likely to lose out much. Indeed, releasing in hot climate (Mexico) and cold climate (Canada) is just such test, and it doesn't cost Chevy a dime while they gather valuable data on their BEV performance in the real world. In fact, they probably make some good  profit from conducting the test. And SparkEV drivers benefit from being able to drive what is the best BEV for the money available in the market today. Everyone benefits without too much risk for Chevy.

Then there's the gloomy reason: Chevy isn't serious about BEV, and SparkEV is a ploy to keep green naggers off their back. In Mexico with the awful air quality in some cities, selling SparkEV would be a ploy to get people to Chevy showrooms. In Canada, well, there are some crazy Canadians who dare drive EV there, too (hi Andrew!). MD is where SparkEV motor is made, so that'll be a good PR for them. Basically, Chevy's main reason for SparkEV is meeting compliance requirements, and doing very little else to keep naggers at bay. But even so, having the best EV in the world available at some places is better than not having it at all.

It could be combination of reasons, different reasons, no reason at all, who knows? But above try to make some semblance of reasons why Chevy is doing what it's doing with SparkEV limited release. Sometimes, human mind just keeps asking, "why? why? why?"

But one thing is clear. Mr. Maury Povich, take it away.

SparkEV, you are NOT a compliance car.

Edit Nov. 19, 2015

If SparkEV is a compliance car, how many cars would Chevy need to sell to qualify? We don't know exactly, but we can get some clues from other compliance car sales. According to insideeves.com, Oct 2015 sales report, Fiat 500e sold 5539 cars while SparkEV only sold 2311 cars.

http://insideevs.com/october-2015-plug-electric-vehicle-sales-report-card/

SparkEV is selling for about $7000 cheaper, leasing for $1600 cheaper, it's quicker, it has DCFC. One would think that SparkEV has some other major problems, and thousands of them are sitting at dealer lots. But that isn't the case. SparkEV is constantly sold out. In fact, I'm surprised that they managed to sell even 177 cars in Oct. 2015. Where are they selling? It's not in SoCal as it's been sold out within 250 miles of here for since June of 2015.

Fiat 500e is selling more than twice as many as SparkEV, a car that supposedly loses $14,000 for each sold and their CEO famously quoted as saying they won't sell a single car more than necessary. That suggests Chevy should make lots more SparkEV to meet the demand to meet compliance; having it sold out makes no sense.

Then why not sell more SparkEV? Demand is certainly there judging from sold out dealers. There is no way to know for certain unless you're the decision maker at Chevy. But the clues seem to indicate that they are trying to save federal tax credit for the upcoming Bolt. It's the only logical explanation for selling fewer SparkEV than Fiat 500e.

But then, GM hasn't always been logical, such as when they scrapped the EV1 program that included hybrid models after spending billions on research. Meanwhile, Toyota went on to become the world leader in auto sales, probably thanks to the positive perception brought by the Prius, which was probably crappier than EV1 hybrid.

GM has great engineering talent as shown by EV1 (many Tesla engineers previously worked on EV1), and now the SparkEV. Let's hope that GM executives have caught up to their engineering talent and do the right thing this time and not let the almost sure thing slip through their grasp again.