Fiat pulls the plug on Chrysler's electric car program

Before you go, we thought you'd like these...
Before you go close icon
After announcing some impressive plans to develop electric cars earlier this year, Chrysler has provided few details lately, and now we know why: the company has disbanded its crash program to produce vehicles running on electrons. Chrysler has also backed off a bold January 2009 pledge to manufacture 500,000 conventional and plug-in hybrid electric vehicles by 2013. Reuters reported the sad news late Friday in an interview with Fiat CEO Serigo Marchionne.

Fiat, reportedly aghast at the horrific condition of its newly acquired U.S. subsidiary, decided to pull the plug on the speculative but exciting effort to add some green to Detroit's also-ran brand. The move is another step in Marchionne's efforts to shake up personnel and organizational structure at Chrysler. Marchionne declared U.S. car sales "a disaster" in September, according to the Daily News in New York.
Chrysler spokespeople have stated that some electric and high-efficiency vehicle development will continue at the company. But it appears that Fiat has ripped the guts out of the core electric vehicle programs, says Edmunds.com's Green Car Advisor blog. Most notably, Chrysler's ENVI group, created in 2007 to build design lines of electric vehicles for all three Chrysler brands, has been broken up.

The Dodge Circuit, a hot-little two seat electric sportster designed to compete with cars from Tesla and Fiskar, has been axed, says Greentech Media. Efforts to make a fleet of over 100 types of electric and hybrid cars have been halted. So what's likely to remain? A few high-efficiency hybrid Fiat models and maybe an electric delivery van for the U.S. market.

Alas, this is only the beginning of what will likely be a bloodbath in the electric vehicles market. Battery maker A123 (AONE) could suffer dearly from the Chrysler pullback. The battery provider had inked a deal with Chrysler in the spring to supply high-capacity batteries for hybrid and electric vehicles. With that deal gone, A123 is likely prowling for new customers to fill the hole. Many other electric car companies, such as Elon Musk's Tesla Motors, have received generous loans or subsidies from the U.S. government as part of a massive stimulus program that doled out $2.4 billion in grants and loans for battery makers alone.

At the same time, the federal government and many states have offered generous tax credits for purchases of hybrid or electric vehicles. The federal credit can eclipse $5,000 for the most efficient cars. Both the stimulus and generous tax credits, however, will likely diminish as both Uncle Sam and the states grapple with ongoing fiscal distress resulting from the severity of the recession and the slow recovery of economic activity.

More broadly, there are at present literally dozens of companies trying to crack the electric vehicle market, including small startups like Tesla, Fiskar, Coda and giant multi-nationals such as Honda Motors (HMC), General Motors (with its Chevy Volt) and Toyota (TM). Even Indian startup Reva has made plans to enter the U.S. electric vehicle market. As the history of any maturing market shows, the chaos of the early days always shakes out. Dozens of companies produced cars in the early days of the automotive industry but only the Big Three (and, to some degree, American Motors) survived the shakeout.

The Fiat decision to scuttle its American subsidiary's electric cars could signal the industry shakeout is already underway. One major problem is the inability of battery makers to bring down prices or increase performance quickly enough to allow the electric roadster to compete on equal footing with the gas slurping status quo. To be fair, Marchionne does plan on making some electric and hybrid cars. But he expects those types of vehicles to total less than three percent of Fiat's total production runs by 2014, a paltry 60,000 or so vehicles. In a nutshell, 440,000 electric cars just died and the toll will likely continue to rise.

Alex Salkever is Senior Writer at AOL Daily Finance covering technology and greentech. Follow him on twitter @alexsalkever, read his articles, or email him at alex@dailyfinance.com.
Read Full Story

Markets

S&P 500 2,259.53 13.34 0.59%
DJIA 19,756.85 142.04 0.72%
NASDAQ 5,444.50 27.14 0.50%
DAX 11,203.63 24.21 0.22%
HANG SENG 22,760.98 -100.86 -0.44%
NIKKEI 225 18,996.37 230.90 1.23%
USD (per EUR) 1.06 -0.01 -0.57%
USD (per CHF) 1.02 0.00 0.12%
JPY (per USD) 115.38 0.02 0.01%
GBP (per USD) 1.26 0.00 0.03%

From Our Partners