Volt: More Questions Than Answers

by Nigel Bolton-Shaw on September 10, 2012

Reuters just posted an article entitled, “Insight: GM’s Volt: The ugly math of low sales, high costs.” It shows us the Volt is seemingly failing as a commercial enterprise.

First, as the article states, GM is selling the Volt for around US$40,000, but according to Reuters, the actual car is more than double that … something that has not been revealed to the buying public, much less the taxpaying one that is footing the bill for all this.

Between inexpensive lease offers and generic government incentives (give backs), Reuters tells us that some are giving GM as little as an astonishing $5,050 to spend two years in a car that may have cost up to US$90,000 to build.

Losses may diminish as more are sold, but competition (such companies as Ford and Honda) is increasing. Reuters quotes Dennis Virag, president of the Michigan-based Automotive Consulting Group, as explaining that, “GM’s basic problem is that the Volt is over-engineered and over-priced.

Other companies with their own “over-engineered” cars are piling into the market as well, including Nissan, Honda and Mitsubishi. They haven’t done any better than GM in filling what may be a nearly non-existent demand.

Competition, as we mentioned above, is increasing, but that doesn’t mean demand is expanding commensurately. GM has apparently invested some $1.2-billion in the Volt and that’s a big ROI to realize!

The high tech of the Volt, including its lithium-polymer batteries and fancy hybrid electronics have made buyers wary. Charging the Volt is NOT a brief affair apparently, though a $2,000 commercial-grade charger can speed things up.

Sales are not there. GM shut down its Detroit-Hamtramck Volt assembly plant not once but twice this year. Estimates are that Volt will continue to bleed dollars even into the “next generation.”

Here’s some more from the article:

The independent cost estimates obtained by Reuters factor in GM’s initial investment in development of the Volt and its key components, as well as new tooling for battery, stamping, assembly and supplier plants — a price tag that totals “a little over” $1 billion, Parks said. Independent estimates put it at $1.2 billion, a figure that does not include sales, marketing and related corporate costs.

Spread out over the 21,500 Volts that GM has sold since the car’s introduction in December 2010, the development and tooling costs average just under $56,000 per car. That figure will, of course, come down as more Volts are sold.

The actual cost to build the Volt is estimated to be an additional $20,000 to $32,000 per vehicle, according to Munro and the other industry consultants.

The production cost estimates are considerably higher than those for the Chevrolet Cruze, the Volt’s conventional gasoline-engine sister car, which Munro estimates at $12,000 to $15,000 per vehicle.

Other such vehicles haven’t done nearly as well. Nissan’s pure-electric Leaf, which debuted at the same time as the Volt and retails for $36,050, has sold just 4,228 this year, while the Honda Insight, which has the lowest starting price of any hybrid in the U.S. at $19,290, has sales this year of only 4,801. The Mitsubishi i, an even smaller electric car priced from $29,975, is in even worse shape, with only 403 sales.

The real question is why carmakers seem to feel the need to make electric cars. If it is a question of the environment, then other issues come into play.

These ideas have to do specifically with whether these cars really ARE environmentally friendly. The wind industry has been hit by this already. Wind power was supposed to be a cheap, non-polluting type of energy. Instead, wind power producers have been hit with litigation about everything from killing birds to noise pollution.

The Volt was pitched as an answer to environmental problems. But the Volt is powered by coal-using power plants. And even its batteries are hard to dispose of. Issues having to do with popularity and acceptance are part and parcel of what investors will have to examine when determining the viability of this new auto-industry offshoot.

Right now there seem to be more questions than answers.

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