Free advice to automakers: Start making golf carts
There is an easy billion dollars on the table
You may have heard that President Trump has said that he will abolish the Electric Vehicle (EV) mandate upon being sworn in as President on January 20, 2025. If Trump follows through on his promise, then automakers will no longer be forced to sell a certain percentage of its vehicles as EVs, eventually reaching 100%.
In 2024, approximately 9% of cars sold in the US market were EVs. In Europe, it was around 13%. With the EV mandate going away, automakers will no longer be subsidizing EVs, and gasoline cars will carry a lower price because they will no longer need to subsidize those EV sales numbers.
As a result, with EVs becoming much more expensive (no subsidies from gasoline cars) and gasoline cars becoming less expensive (no need to subsidize EVs), then fewer people will buy EVs. We can speculate how many fewer, but the bottom line is that it will be fewer. Forget about any increase from 9% (USA) and 13% (Europe).
As a result, automakers have a problem: Too much production capacity for EVs. Clearly, some of this production capacity will be switched to making gasoline cars, but there will still be stranded investment: Battery plants, electric motors, power electronics.
What to do with it?
Golf carts today are ridiculously expensive
Most Americans are unaware that simple golf carts sell for far more than you would think. Club Car, which is perhaps the largest brand, starts around $11,500. That’s for an extremely basic one. Perhaps they are discounted sometimes and sell for under $10,000 in extreme circumstances, but that is still shockingly expensive.
For a golf cart that has better suspension and build quality, Garia has variants for you that you would be hard-pressed to find under $20,000. Just go to Garia.com and configure your own.
Even a Garia isn’t that special compared to the most basic automobile, and can cost $36,000 without coming close to the capabilities of a $20,000 car. You can buy a car for under $6,000 in emerging markets such as India and China that can do a lot more than this $36,000 golf cart:
Golf carts should be dramatically less expensive
A golf cart should be dramatically less expensive than even the most basic regular car for several reasons:
No need to crash-test.
No need for heating, A/C or insulation.
No side or rear windows.
No need to test doors or trunk or sunroof.
No need for long range.
No need for driving at highway speeds.
Basically, you would need a couple of thousand dollars worth of parts, assembly and sales/distribution. A golf cart should really not sell for more than $4,000, and that’s for a reasonably nice one.
Yet, today they sell for easily more than twice that amount, and it could be up to ten times that amount. That is crazy and makes no sense. Golf carts are severely mispriced when compared with the regular automobile market.
Automakers could easily compete in this market
One gets the impression that the golf cart market either is spectacularly inefficient or is benefiting from a concentrated market with way too little competition. For example, Club Car acquired Garia in 2022. Either way, there appears to be a shocking amount of margin involved, that more competition should be able to drive down.
Automakers are in an ideal position to outcompete the existing golf cart makers. They have access to better batteries, better assembly lines, and better components overall. This should make the components less expensive, and the assembly less expensive too. Automakers already have a superior retail network, and they are used to having to provide a quality product, unlike most current golf carts that feel and sound like they are shaking apart even without being driven over the slightest speed bump.
The market size for golf carts depends on how widely it is defined, but generally ranges from $1.5 billion to $3.0 billion for 2024. Clearly that is peanuts for the big automakers, but there could be room for innovation to expand this market, especially with the R&D and production expertise that those companies have.
At a minimum, there seems to be a realistic billion dollars on the table for them to grab with great ease.
Here is a market study:
And here is another one: