General Motors is losing as much $49,000 each time it sells a Chevrolet Volt extended range electric vehicle, according to analysis done by Reuters news service. The chief reason is the high start-up costs of the car and the so-far disappointing response from consumers.
The report comes after Chevy had a record month of sales for the innovative Volt, which travels up to 35 miles on a single electric charge before a gas-powered motor kicks in to power the car until the car can be recharged.
There is no question that General Motors has had difficulty selling the economic benefits of the Volt to the public. And the car has been a political punching bag for Republicans who are against the 2008-09 tax-payer financed rescue of GM, as well as tax credits to subsidize consumer purchase of alternate energy vehicles like the Volt.
GM in August ran an incentive program for Chevy dealers resulting in lease deals on the Volt of less than $200 per month with about $1,000 down. Dealers report they quickly flushed out their dealer inventory at that price. The prevailing lease deal now, though, has popped back up to $299 per month.
GM spent $1.2 billion to develop the Volt. The automaker sold 13,500 through August, putting it on a sales track that would be well below its stated goal of 40,000 Volts a year. GM also plans to roll out additional vehicles with the same technology, including a Cadillac. The key to making the investment break even for GM is to spread the costs of the technology inside the Volt over greater sales volume.
GM disputes Reuters' calculations about losses on the Volt. "Reuters' estimate of the current loss per unit for each Volt sold is grossly wrong, in part because the reporters allocated product development costs across the number of Volts sold instead of allocating across the lifetime volume of the program, which is how business operates," said a GM spokesperson. "The Reuters' numbers become more wrong with each Volt sold," the spokesperson added. Though GM won't specify how much it loses on each Volt, it does not dispute that it is losing money on each one for now.
"It's true, we're not making money yet" on the Volt, said Doug Parks, GM's vice president of global product programs and the former Volt development chief, in an interview with Reuters. The car "eventually will make money. As the volume comes up and we get into the Gen 2 car, we're going to turn (the losses) around," Parks said.
What is the Volt exactly?
It is an extended-range electric vehicle. That means it is powered by a lithium-polymer battery. The car will go approximately 35 miles on a charge of the battery. After that, a gasoline motor kicks in to power the battery and propel the car until the battery can be recharged. There is no possibility of being stranded if the battery runs out of juice as long as their is gasoline in the car. And unlike some of the punky electric vehicles of the past, the Volt has exceptional acceleration and performance.
What's working against the success of the Volt?
-The car has a steep starting MSRP of $39,995, though that is before a $7,500 federal tax credit, and additional state tax credits such as one in Colorado worth up to $6,000.
-Consumers are wary of new technology. The Volt has attracted "early adopter" green car buyers. But any car that needs to be plugged in faces a steep learning curve with U.S. consumers.
-Chevy has spent millions of dollars to advertise the Volt, but it went more than a year of sending out pretty vague and muddled messages about how the car works, and what its benefits are. Lately, it has been advertising using real Volt Owners, which has been a clearer message. But it takes time for the clearer story to seep into the car buying public.
-The Volt has been politicized by Republicans. That has helped its awareness, but hurt the car's story.
-There has been almost a cottage industry of bashing the Chevy Volt and government investment in getting consumers to consider driving electric vehicles and extended range electric vehicles. It's a tough marketing hurdle to overcome.
Is there hope for the Volt's success?
-It's hard to say. AOL Autos has a very favorable view of the Volt. The technology in the car, and performance easily makes it a competitor to $30,000+ vehicles such as the Audi A4, Nissan Maxima and Lincoln MKZ.
-While the Obama White House recently finalized a fuel economy rule that will require all new cars sold by 2025 to achieve an average of 54.5 mpg (read here for details), we also believe that there needs to be an auto-industry and government partnership effort to promote and educate the public about electric and extended-range electric vehicles.
-As GM restyles the Volt and adds models and body-styles utilizing the plug-in technology to its other brands, and rivals like Ford and Toyota launch extended-range electric vehicles, familiarity and acceptance of these cars could take better hold with consumers.
Reuters contributing
Do you want a chance to win an OnStar FMV kit for your car, plus two free years of service? Click here to enter by liking AOL Autos on Facebook, and answering a few questions. AOL Autos gave away a MINI Countryman in July. The OnStar FMV is this month's gift to a reader. Stay with us for monthly giveaways including radar detectors, GPS units and even more cars in the coming months.
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The report comes after Chevy had a record month of sales for the innovative Volt, which travels up to 35 miles on a single electric charge before a gas-powered motor kicks in to power the car until the car can be recharged.
There is no question that General Motors has had difficulty selling the economic benefits of the Volt to the public. And the car has been a political punching bag for Republicans who are against the 2008-09 tax-payer financed rescue of GM, as well as tax credits to subsidize consumer purchase of alternate energy vehicles like the Volt.
GM in August ran an incentive program for Chevy dealers resulting in lease deals on the Volt of less than $200 per month with about $1,000 down. Dealers report they quickly flushed out their dealer inventory at that price. The prevailing lease deal now, though, has popped back up to $299 per month.
GM spent $1.2 billion to develop the Volt. The automaker sold 13,500 through August, putting it on a sales track that would be well below its stated goal of 40,000 Volts a year. GM also plans to roll out additional vehicles with the same technology, including a Cadillac. The key to making the investment break even for GM is to spread the costs of the technology inside the Volt over greater sales volume.
GM disputes Reuters' calculations about losses on the Volt. "Reuters' estimate of the current loss per unit for each Volt sold is grossly wrong, in part because the reporters allocated product development costs across the number of Volts sold instead of allocating across the lifetime volume of the program, which is how business operates," said a GM spokesperson. "The Reuters' numbers become more wrong with each Volt sold," the spokesperson added. Though GM won't specify how much it loses on each Volt, it does not dispute that it is losing money on each one for now.
"It's true, we're not making money yet" on the Volt, said Doug Parks, GM's vice president of global product programs and the former Volt development chief, in an interview with Reuters. The car "eventually will make money. As the volume comes up and we get into the Gen 2 car, we're going to turn (the losses) around," Parks said.
What is the Volt exactly?
It is an extended-range electric vehicle. That means it is powered by a lithium-polymer battery. The car will go approximately 35 miles on a charge of the battery. After that, a gasoline motor kicks in to power the battery and propel the car until the battery can be recharged. There is no possibility of being stranded if the battery runs out of juice as long as their is gasoline in the car. And unlike some of the punky electric vehicles of the past, the Volt has exceptional acceleration and performance.
What's working against the success of the Volt?
-The car has a steep starting MSRP of $39,995, though that is before a $7,500 federal tax credit, and additional state tax credits such as one in Colorado worth up to $6,000.
-Consumers are wary of new technology. The Volt has attracted "early adopter" green car buyers. But any car that needs to be plugged in faces a steep learning curve with U.S. consumers.
-Chevy has spent millions of dollars to advertise the Volt, but it went more than a year of sending out pretty vague and muddled messages about how the car works, and what its benefits are. Lately, it has been advertising using real Volt Owners, which has been a clearer message. But it takes time for the clearer story to seep into the car buying public.
-The Volt has been politicized by Republicans. That has helped its awareness, but hurt the car's story.
-There has been almost a cottage industry of bashing the Chevy Volt and government investment in getting consumers to consider driving electric vehicles and extended range electric vehicles. It's a tough marketing hurdle to overcome.
Is there hope for the Volt's success?
-It's hard to say. AOL Autos has a very favorable view of the Volt. The technology in the car, and performance easily makes it a competitor to $30,000+ vehicles such as the Audi A4, Nissan Maxima and Lincoln MKZ.
-While the Obama White House recently finalized a fuel economy rule that will require all new cars sold by 2025 to achieve an average of 54.5 mpg (read here for details), we also believe that there needs to be an auto-industry and government partnership effort to promote and educate the public about electric and extended-range electric vehicles.
-As GM restyles the Volt and adds models and body-styles utilizing the plug-in technology to its other brands, and rivals like Ford and Toyota launch extended-range electric vehicles, familiarity and acceptance of these cars could take better hold with consumers.
Reuters contributing
Do you want a chance to win an OnStar FMV kit for your car, plus two free years of service? Click here to enter by liking AOL Autos on Facebook, and answering a few questions. AOL Autos gave away a MINI Countryman in July. The OnStar FMV is this month's gift to a reader. Stay with us for monthly giveaways including radar detectors, GPS units and even more cars in the coming months.
Related:
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