Fisker Karma electric hybrid car is a gold-mine – for someone

As Fisker recalls all its Karma cars because of a fire risk, I observe that it represents yet another case of the fundamental failing of subsidies.

1. Fisker has received government subsidies of $528million

http://jalopnik.com/5851735/how-fisker-got-500-million-in-government-loans-for-a-fuel-economy-flop?tag=fiskerkarma

The $528 million loan from the U.S. Department of Energy was split between $169 million for the Karma and $359 million for Fisker to launch Nina production at General Motors’ old plant in Delaware. The announcement for that came way back in October of 2009 — and Vice President Joe Biden was even there in attendance. Whether some other company might have used that money to build a better electric car that came to market faster will never be known.

2. A Fisker Karma electric hybrid car sells for about $106,000

http://www.thecarconnection.com/cars/fisker_karma#mainReview

The Fisker Karma sedan is priced at $106,000, with most buyers eligible for a $7,500 credit on their Federal income tax returns. Additional body styles using the Karma platform, including a “shooting brake” sports wagon model called the Surf and a two-door model with a retractable hardtop, the Karma S or Sunset, are planned as follow-on models

3. So far Fisker has sold some 2,400 Karma cars

http://insideevs.com/2400-fisker-karmas-recalled-cooling-fan-defective/ ... perhaps the most interesting thing to come out of this incident, is that apparently we can put a number on how many Karmas have been sold by Fisker, as Reuters reports “some 2,400″ have been voluntarily recalled.

4. The Fisker Karma does not work anywhere near as well as it was supposed to

http://jalopnik.com/5851044/fisker-finally-gets-epa-approval-sells-first-karma Fisker announced the EPA had rated the Karma for 32 miles of all-electric range, and a “combined” rating of 52 mpg when both gasoline and electric power is put together. That’s far lower than the 100 mpg Fisker once promised and the 60 mpge from the Chevy Volt. When running its 2-liter engine, the Karma gets just 20 mpg — comparable to what a BMW 740i manages.

The real effect of the subsidy is counter-productive

Suppose that the Karma actually reaches the “projected” sales of 10,000 cars  (in total and not per year) . This may take another 3 years or so. The customer pays some $100,000 per car. The subsidy – just for the Karma – will then be about $16,900 per car (or $70,417 for each of the 2,400 sold so far).  Even assuming that the sales price is at zero margin, the profit for Fisker lies almost entirely in the subsidy and – in order to protect their profits – the sooner they can cease production the better.

The subsidy effectively provides a real incentive for Fisker not to make the car work or to sell more cars but to cease production as soon as practically possible without incurring any risk for repayment of the subsidy.

Related: Even subsidies fail to stimulate electric vehicle sales in Europe

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