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Fiat-Chrysler's Electric Car Gamble: First Drive

Stocks in this article: F GM NSANY TM

NEW YORK ( TheStreet) -- In 2013, sales of plug-in cars in the U.S. are estimated to total 125,000.

That's only 0.78% of the 16 million cars and light trucks that will be sold in the U.S. this year. But the percentage of plug-in cars is not evenly distributed across the country.

The largest share of plug-in vehicles is sold in California, and inside California the highest density is in Silicon Valley -- the area from San Francisco to San Jose. That's where Google (GOOG), Apple (AAPL), Facebook (FB), Intel (INTC), HP (HP), Yahoo! (YHOO), Oracle (ORCL), Tesla (TSLA), Salesforce.com (CRM) and most other major technology companies are based.

Anyone visiting the parking lots of these companies and the downtown centers of the towns surrounding them will come to the conclusion that almost half of new cars in some segments sold this year have been plug-in electric cars. In those neighborhoods, I estimate there are close to 15,000 electric cars on the road, a large part of 2013 new car sales -- dramatically higher than the 0.78% nationwide average.


The same thing happened with iPhone adoption in 2007. When the iPhone went on sale on June 29, 2007, adoption was not uniform across the country or even inside California. In the first weeks, it was already a big product in Silicon Valley, whereas the rest of the country and the world caught up in the next few years.

If the explosive growth in U.S. electric car sales continues at the percentage rates it grew in 2011, 2012 and likely 2013, there will be millions of electric vehicles on U.S. roads within a decade.

Fiat-Chrysler probably doesn't want to cede this opportunity by being viewed as a luddite company in Silicon Valley. Although Fiat-Chrysler may be using Nvidia CPUs and GPUs for design-engineering and infotainment in future years, that's not nearly enough.

It is against this backdrop that Fiat-Chrysler is making its first bet on the electric car market in California. It's even going so far as to establish an electric car distribution center in the San Francisco Bay area, which will be deliver all configurations (colors, trims and options) to area dealers within 24-48 hours. In addition, it establishing a second such distribution center in the Los Angeles area, where some electric cars are also sold.

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