After the Volt? The Chevy Spark

NEW YORK ( TheStreet) -- Over 17,000 plug-in electric cars were sold in the U.S. in 2011, the first year of any plug-in electric car sales worth talking about. My optimistic estimate for 2012 that I published here in early January was 130,000, but a nice round 100,000 is probably more realistic.

At somewhere close to 100,000 units for the U.S. market alone, the plug-in electric car market would be two-thirds of 1% of the entire U.S. car market, which is estimated to approach 15 million units this year. Some will look at that and say "at or just below 1% is peanuts."
Chevrolet Volt

Other people will look at that and say "In 2007, the iPhone was also at or below 1% of the global cell phone market." And now, a few short years later, are people laughing at the Apple iPhone? Um, maybe not.

While 2012 will be a very strong growth year for plug-in electric cars, 2013 to 2015 should be dramatically stronger. One car that will contribute nicely to unit growth volumes will likely be the Chevrolet Spark Electric, to be launched some time around April 2013, plus or minus a couple of months.

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In order to understand the Chevrolet Spark, you have to understand how it differs from the Volt. The Volt, which has now sold approximately 10,000 units in the U.S. and where European sales just started this week, is a "zero-compromise" performance car that competes mostly with cars that are much more expensive.

The Chevy Volt drives 25 to 50 miles on pure electric power, after which a gasoline generator kicks in to take you are far as any regular gasoline car -- until you have the time and opportunity to plug in the Volt again. In the Volt, you can take that 600-mile road trip to Vegas in the comfort equivalent to a $90,000 Porsche Panamera, but achieve the fuel economy not too far behind a Toyota Prius, which in its highest-end trim costs almost exactly the same as a Volt.

According to the sales configurator on Toyota.com, a loaded Prius plug-in costs $39,525, compared to a loaded Chevrolet Volt at $44,575. Then adjust for a $5,000 difference in the federal tax credit in the Volt's favor, and you're left with almost the same price.

For those longer road trips, after the first 35 gas-free miles, driving the Volt at a speed of 70 miles per hour, mileage will be closer to 35 MPG than 40 MPG. That's a little bit behind the 47 MPG a Prius will likely yield at that kind of speed. Still, getting 35 MPG or more will handily beat the Porsche Panamera.

GM ( GM) made the mistake in launching the Volt by branding it a Chevrolet. It should have been a Cadillac, given that it's a premium construction car competing mostly with cars costing a lot more. Anyway, the Cadillac version of the Volt arrives in early 2014, in conjunction with what is expected to be the updated Chevrolet Volt 2.0.

Some people, however, aren't considering a car at those price levels. Some people would only consider an electric car if it cost under $30,000 before any tax incentives. As a reminder, a plug-in electric car with a battery 16 kWh or larger is eligible for up to $7,500 in a federal tax credit, as well as $1,500 from the state of California, if that's where you live.

And the largest number of electric car drivers live in California. Surprise, surprise.

Therefore, once that sticker price falls below $30,000, the net cost to the consumer starts to look a lot like it's hitting $20,000. That's below the average new car price in the U.S. today.

Chevy's Next Star

The net price of a base Volt is $30,995 today ($39,995 minus $9,000 in tax credits), but what car could shave that by third or even more?

The Chevrolet Spark, due approximately one year from now, that's what!

With the Chevy Spark, GM will try to undercut the Nissan LEAF, the Ford Focus Electric, and the various BMWs that are and will be in the market in the next two years, such as the current BMW ActivE and the upcoming BMW i3. I predict that the Chevy Spark Electric, when it hits the U.S. market by the second quarter of 2013, will cost no more than approximately $29,000 before any applicable tax incentives.

Unlike the Volt, the Chevy Spark will of course not be a zero-compromise performance car, but rather compete with the small all-electric cars with limited range. The EPA-certified ranges of the LEAF, Focus and ActivE, respectively, are 73 miles, 76 and 93. There is no good indication yet as to the range of the Chevy Spark, but it will most likely be a lighter car that has the potential for breaking the 100-mile barrier, perhaps even 110 or 120 -- or 140.

A hundred or 120 miles, you say? Isn't that peanuts compared with the Tesla Model S, which will offer perhaps 160 miles with its base version, and 300 miles for the premium model? Yes, of course -- but the Tesla is a much more expensive car. The 160-mile base Tesla is $57,400, and the 300-mile version is $77,400. Add all the options and we're talking around $100,000.

In other words, the Chevy Spark, while obviously being a much smaller and simpler car for sure, will arrive at approximately half the price of the most basic Tesla Model S. Then subtract the same $9,000 in tax incentives, and we may be comparing a $20,000 car with a $50,000 car. That's 60% less. These two cars have something in common, but they aren't the most direct competitors.

Spark Vs. LEAF

A more fair comparison for the Chevy Spark Electric would be the Nissan LEAF and Ford Focus Electric. Those cost mostly between $35,000 and $40,000 -- at least $5,000-$10,000 more than what I expect for the Chevy Spark Electric. That price premium would be justified because they are slightly larger cars, but perhaps mitigated if the Chevy Spark can achieve a meaningfully longer range.

I find that most Nissan LEAF owners with whom I speak are concerned with the limited 73-mile average range -- even though the theoretical maximum exceeds 130 miles. With no safety margin, a 73-mile average means "range anxiety" for a lot of people. Many of these Nissan LEAF owners are regretting they didn't buy a Volt instead, which of course is not subject to any electric range limitation. I hear stories of a handful of LEAF owners trading them in for a Volt.

Many of these Nissan LEAF (and Ford Focus Electric) owners would gladly have traded some vehicle size for meaningfully better range. Therefore, if Chevrolet can achieve over 100 miles, perhaps even 110 or 120, worth of range, GM will put a fat dent into Nissan's LEAF sales. Of course, one can always surmise that Nissan is deep down into the LEAF 2.0 development, and the chief objectives of that car will of course be cost reduction and an improvement in the meager 73 mile average range.

Meanwhile, however, GM now has the opportunity, at least for a while, for a "smack-down" if it can deliver a $29,000 (or less) Chevy Spark that is awarded a 100+ mile EPA range certification. An all-electric 100-to-120-mile car is obviously still not for everyone -- duh! -- but it would fit the needs of millions of car buyers, and be a class leader if launched with those specs as early as possible in 2013.

The Chevy Spark's main electric traction motor will be 85 kW (114 horsepower) and be built close to Baltimore. That's less than the Volt's 111 kW (149 horsepower) motor, and of course it lacks the Volt's generator that can be combined for even greater power and efficiency at higher speeds. As such, the Spark is unlikely to match the Volt's top speed of 100 MPH. Perhaps 90 MPH is more realistic. Hey, at least acceleration is certain to be very strong, as with all of its peers.

Battery Size

The main unanswered question about the Chevy Spark's specs is the size (capacity) of the battery. The two main class benchmarks here are the Nissan LEAF and Ford Focus, at 24 kWh and 23 kWh, respectively. Given that the Spark will most likely be a lighter car, it could do with a smaller battery and still achieve the same range.

However, if GM is smart, they would ensure that the Spark achieves an EPA-certified range of at least 100 miles, as discussed above. That likely means that it must have a battery of at least the same size as the LEAF and Focus. Perhaps something closer to 30 kWh.

A light car such as the Spark should be able to get almost four miles per kWh, so a 30 kWh battery would yield 120 miles, which would be a sweet spot for this car, beating its main competitors in the market today. Let's hope Chevrolet achieves it.

Here is the mystery question for GM: Given the solid experience with the Volt, why isn't this Spark Electric hitting the market one year earlier than it will? It ought to be in the market right now -- not 10 to 16 months from now. The only legitimate excuse must be that it achieves a superior efficiency of meaningfully more miles per kWh than any other similarly sized competitor. If Chevrolet doesn't achieve that target, it is likely to be viewed a failure.

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