Fiat 500 EV Prototype (© Fiat Group Automobiles S.p.A.)Click to enlarge picture

A prototype of the Fiat 500 EV was shown at the Detroit Auto Show in January 2010.

Chrysler Group LLC will lose more than $10,000 on every battery-powered Fiat 500 its sells, Fiat-Chrysler CEO Sergio Marchionne says.

That heavy financial hit won't stop the automaker from launching the Chrysler-built electric version of the minicar in the United States in 2012, underlining the pressure automakers face to improve fuel economy and remain competitive in the race to offer alternative powertrains.

"The economics of EVs simply don't work. On the 500 that (Chrysler) will begin selling in the U.S. next year, we will lose over $10,000 (per unit) despite the retail price being three times higher" than a version of the minicar with an internal combustion engine, Marchionne said on the sidelines of Fiat S.p.A.'s general meeting on Wednesday.

Read:  Chrysler to Build Electric Fiat 500

Marchionne said that Fiat would lose a similar amount on the Fiat 500 EVs it will get from Chrysler's Mexico plant once the Italian company starts the car's European sales, likely in 2013. Chrysler has a license from Fiat to build the fuel- and battery-powered versions of the 500, which means the U.S. automaker gets all the profits — or losses — from North American sales of the cars. Fiat has a 25 percent stake in Chrysler.

Chrysler unveiled a concept of the 500 BEV (short for "battery-electric vehicle") at the Detroit Auto Show in January 2010. The gasoline-powered 500 starts at $15,500 in United States, which means the electric version would cost more than $45,000, based on Marchionne's comments.

When a near-production concept the Fiat 500 EV was unveiled last year, Marchionne said the production model would start at $32,000, with the batteries accounting for half of the minicar's cost.

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Low Volume, Possible Benefits
Although the per-unit loss is high, the automaker's total financial hit should be minimal because Fiat-Chrysler, without being more specific, said it would produce a low volume of the electric 500.

The company said that the primary reason for launching the EV was to enhance the company's electric mobility expertise, which it hopes will lead to advancements in its future gasoline-electric hybrid models.

Added benefits of the electric 500 include lowering Chrysler's average U.S. fuel consumption total and cutting Fiat Group's fleet CO2 in Europe, where every EV sold in 2012 and 2013 will count as 3.5 cars in the automaker's total. Fiat Group has the lowest fleet CO2 in Europe, 125.9 grams per kilometer, according to market researchers JATO Dynamics.

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While Fiat and Marchionne are skeptical about the future of EVs, alliance partners Renault SA and Nissan Motor Co. see a bright future for battery-powered transportation.

The alliance partners aim to have a combined 1.5 million EVs on the road worldwide by 2016. The first model to come out of the alliance was the Nissan Leaf compact hatchback, which was named 2011 European Car of the Year.

The Leaf will be joined later this year by the full-electric Renault Fluence mid-sized sedan and Kangoo car-derived van. Renault-Nissan wants to have annual production capacity for 500,000 EVs by 2015. The partners have invested a combined 4 billion euros to develop EVs and batteries.