If you were told to set the price for the Chevrolet Volt, what number would you choose? We were recently discussing this question with our friend Jim Motavalli and realized that we're really glad we don't have this job. It's kind of a no-win situation. Here's why:
You might set the price too high. Everyone is worried that the Volt will be too expensive. Those of us who've followed the development of this car understand why – the very pricey battery pack has just a little bit to do with it – but most of the U.S. doesn't have much of a background knowledge about General Motors's halo car. They'll be learning about the car later this year when it actually goes on sale in select markets. A sticker price of, "OMG that's expensive!" will quickly turn people away. This, of course, must be avoided. Which brings in the obvious temptation to drop the price down to something very attractive. Which brings us to point number two.
You might set the price too low. GM has admitted that it will lose money on at least the first-generation Volt. So, no matter what (reasonable) price you choose, it'll be less than what it costs GM to make. Since this is a given, wouldn't it be tempting to go a little further and set the price at $29,999 after incentives. For one, you would break the $30k price barrier and GM could emblazon "Starting at $29,999" all over the advertising and really make the case that this is a plug-in car for everyone. But, if you do, how much extra will GM lose per car? Will the increased sales make up for the increased loss?
You might need to change the price not long after launch. No matter what you chose, changes in battery costs, economies of scale, customer demand (or a severe lack thereof) or any of a slew of other issue might force you to raise or lower the price not long after the Volt hits the market this November. If if does, then won't you look the fool.
It seems like the lesson here is that there's no obvious "right" price for the Volt. Low $30s after the tax credit is the most likely option, but different prices work for different groups, and what's best for the consumer might not be best for GM. With these constraints, just a few of the many considerations that need to go into setting the MSRP, where would you price the Volt?