General Motors is joining the electric-car price war with a lease deal on the Chevrolet Spark EV at $199 a month.
The deal, announced this morning, follows the recent offerings of $199 leases on Nissan's Leaf – a big price drop after two years of slow sales – and the newly released Fiat 500e.
The Spark EV will be available at select dealers in California and Oregon starting in mid-June, according to Chevrolet. The growing number of EVs and the price competition should help all automakers sell more cars in the segment, said GM spokesman Kevin Kelly.
"We welcome more entrants into this space as it only helps everyone when more options are available for the consumer to consider," he said.
First drive: Chevrolet's tiny Spark
Expect more cheap lease deals as automakers seek to comply with California clean-air regulations by selling zero-emissions cars that most consumers have so far rejected as too expensive.
"They're all going to do it – it's the only way they're going to move them," said John O'Dell, who analyzes the green car market for auto information company Edmunds.com. "It's affordable to the buyers, but only because the cars are being heavily subsidized by the automakers."
That's in addition to the subsidies from taxpayers, including a rebate of up to $2,500 from California and a federal tax credit of up to $7,500. In electric car leases, the company typically keeps the federal credit but California consumers still get the state rebate.
The leases have become essential to growing the tiny plug-in car market segment, said Mike Ferry, transportation programs manager for the California Center for Sustainable Energy. The nonprofit center manages the state's clean-car rebate programs for the California Air Resources Board.
The leases allow consumers to take "full and immediate" advantage of the federal tax credit, Ferry said, rather than waiting to claim it on their taxes. The lease also removes the risk for some buyers that their tax situation will preclude them from collecting the full $7,500.
About 40% of plug-in vehicles, including hybrids, are currently leased, according to the center's data. But that proportion is expected to rise with the slate of new and cheaper lease deals, Ferry said.
It all adds up to tantalizing offers for consumers on the automakers' dime, O'Dell said. "If you're looking at $199 a month, and you look at what other cars lease for that, certainly they're not making a profit," he said.
The rush to sell the new slate of electrics, even at a loss, results from a complex set of regulatory and market incentives.
California's regulations essentially require automakers to sell a zero-emissions car and awards them zero emissions vehicle, or ZEV, credits for each sale. Automakers can then use the credits to satisfy state regulatory obligations related to their sales of gas-powered cars, or they can sell the credits to other automakers that need to meet the state requirements.
The Air Resources Board has set a goal that zero-emissions vehicles will account for 15 percent of all new cars sales in the state by 2025.
Moreover, automakers are competing to establish brands in the burgeoning market for plug-in cars – in markets here and overseas – and to hone their research and development efforts, O'Dell said.
"They cry and moan about it, but they have to have this technology," O'Dell said.
Automakers must be prepared, O'Dell said, if the electric car pans out as a mass-market vehicle, even if that's far from certain now. He drew a parallel to the early 1970s, when U.S. car companies got caught flat-footed by the oil crisis and ceded the economy car market to Japanese automakers.
Right now, sales of electric cars, not including hybrids, represent less than one percent of the U.S. car market. Chevrolet sees the Spark as very much a niche product sold in just two states, at least for now. But it also has international ambitions.
"We picked California and Oregon not only because of the regulation related issues, but because both of these states are at the forefront when it comes to infrastructure deployment," Kelly said. "We have also announced the vehicle will be available in Canada, Korea and Europe."
The Chevy Spark lease runs for 36 months and requires a $999 down payment on a car with a sticker price of $27,495. It includes a limit of 12,000 miles annually, after which drivers would pay 25 cents a mile.
That tracks closely to the deals recently promoted by Nissan and Fiat. Nissan dropped the entry-level price on the Leaf to by $6,400 to $28,800, and paired that with a $199-a-month lease and a $1,999 down payment.
The lease on the new Fiat 500e, which stickers at $32,500, is $199 a month with a $999 down payment.
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