Should GM Kill the Chevy Volt?

Chevrolet Volt. Photo credit: General Motors Co.

Few cars have taken more flak from media critics in recent years than General Motors' innovative green car, the Chevrolet Volt.


Of course, few of those critics are auto reviewers. Those reviewers, like most folks who try a Chevy Volt, tend to like the car. It's a great product, one of GM's best -- and believe it or not, GM's best are now as good as anybody's. It's comfortable, well made, and does what GM says it will.

I've talked to plenty of Volt owners, and every single one sings the car's praises. That's apparently typical: The Volt is tops among compact cars in J.D. Power's APEAL customer-satisfaction survey.

In fact, the Volt has delivered on every one of GM's major goals for it. Every goal, that is, except one: the sales goal.

And that's where the problems start.

Is the Volt really a big money-loser for GM?
Nobody disputes that the Volt hasn't met the ambitious sales goals announced for it in more optimistic days. It didn't come close to the company's target of 45,000 U.S. sales last year, and it isn't doing much better in 2013.

In fact, Tesla Motors' expensive electric sedan, the Model S, appears to have outsold the Volt in the first quarter, at least in North America.

That's more ammo for partisan critics who contend that the Volt is a money-losing boondoggle that is somehow subsidized by taxpayers (never mind that -- officially speaking, at least -- GM paid off its bailout ages ago) and should be killed off.

What's holding up sales isn't the car, it's the price: With a list price of nearly $40,000, the Volt is expensive for a compact Chevy, even a high-tech one. The sticker shock turns off a lot of potential buyers before they can hear the case for the car.

But is it really a money-loser for GM?

Why the "GM loses X dollars for every Volt sold" argument is flawed
No automaker, including GM, will tell you how much it's making (or not making) on any specific vehicle line. Critics doing flawed back-of-the-envelope calculations have contended that GM must be losing tens of thousands of dollars on every Volt sold.

But retired GM product chief Bob Lutz, who drove the Volt's development, has argued persuasively that the Volt is probably priced appropriately to cover its incremental costs.

In other words, each Volt sold probably pays for itself in terms of the parts and labor that went into that particular car. It probably also contributes a little toward paying down the big investment ($750 million, give or take) that GM made upfront to develop the model.

That's how the car business works.

So the real question isn't "How much is GM losing on every Volt?" The real question is whether GM will sell enough Volts over time to pay back GM's upfront investment in the Volt's technology with a profit. (It almost certainly hasn't so far.)

That makes the suggestion that GM should kill the Volt right now kind of a dumb one. GM absolutely shouldn't kill the Volt.

At least not yet.

Every Volt sold probably reduces GM's loss
Even if Volt sales don't pick up, the program's numbers will look better and better as more GM models incorporate the technology that was developed for the Volt. GM already sells a Volt sibling in Europe, the Opel Ampera. And the Cadillac ELR, a luxury coupe that uses the Volt's technology, is set to make its debut early next year.

Any sales of those models represent additional payback on GM's initial investment in developing the Volt's technology. And as Lutz argues, the knowledge (and green cred) GM gains from the Volt program has a value in and of itself.

So whether the Volt program ultimately turns a profit or not, it's really not a financial boondoggle for GM (or for taxpayers). There's no good argument for killing the program now: Most of the money has been spent, and every additional sale narrows the loss.

But should there be another Volt?
Here's the thing: The Volt's technology is unique. To oversimplify a bit, it's an electric car with an onboard gas-powered generator -- an arrangement no other automaker uses. It's innovative and works well in practice, but it was expensive to develop.

But functionally, the Volt is a plug-in hybrid: You charge it up at home, and then you can drive a moderate distance (38 miles on the latest Volt, says GM) on the battery before the gas engine kicks in.

If you have a short commute, you might only buy gas a few times a year. But for longer drives, you'll need to fill up more often -- just as you would with the plug-in versions of Toyota's Prius or Ford's Fusion hybrids.

And that raises this question: Should GM push forward with this unconventional technology?

The truth is, GM is already pushing forward. GM CEO Dan Akerson said this week that he expects the next Volt to be significantly less expensive (and to be profitable), which suggests that its development is already well under way.

But in terms of technology, is this really the right direction for GM to be going in? Does it really offer advantages over conventional plug-in hybrids that are worth its cost?

I don't know the answer to that question, at least not yet. But I'd like to hear GM address it.

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The article Should GM Kill the Chevy Volt? originally appeared on Fool.com.

Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool recommends Ford, General Motors, and Tesla Motors and owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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22 Comments

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mewchat

How many people commenting here have even driven a Volt. Both my husband and myself bought one and we love them and wouldn't think of getting rid of them.
As for the cost of electric we had a second meter put in and we get ulimited charges for $1.41 per day through DTEnergy. We bought both 2013 cars on a 24mo lease at a cost of $5100 each on a pay ahead lease.

We also have electric hookups at work so its a rarity that we need to go to gas. We are at about 50 miles on a charge so that pretty much covers my daily driving. So far I have only used 1.3 gallons of gas in my car.

Not only is it for the fact that we spend less in the gas stations, its that we are less dependent on foreign oil.

If you have never driven this car you really should. Its comfortable, stylish, great electronics and its really quite quick and does not starve for power.

What is wrong with the writer of this article. Why would you not be behind a US company that is trying to make cars in the US to get more Americans working, and developing cutting edge technology. Shut up and get your butt in a Volt and see what this car is all about.

August 13 2012 at 1:38 AM Report abuse rate up rate down Reply
Realistic

The reasons why smart people do not buy Electric or Hybrid cars are: Batteries are expensive, short lived, efficiency isn’t 100 % and the electricity is not free. Going electric you won’t decrease Air Pollution because 50 % of the electricity is produced by burning COAL. By the way a Jetta Diesel, TDI for $23000 makes 40MPG. With a full tank of Chevy Volt, driving non-stop, you make 37MPG, plus $3, the price of electricity you charged the hefty 750-pound battery pack.

February 11 2012 at 8:55 AM Report abuse rate up rate down Reply
thephenx

Dear writer. Please present the facts as they stand. Tesla is not "going to pass by" Chevy. Everyone is trying sadly to catch Tesla, and have been for years. Their tech is leaps and bounds above anyone else. Even the new Ford everyone is raving about is still just a plug in hybrid. Ever notice no one else can even come close to Tesla's 150 mile range on their lowest end car?

The reason Chevy should kill the volt is, well lets see its Fugly, It has terrible all electric range, its pricy, its battery and motor tech are way outdated, did I mention its Fugly?

And to the whiny worry worts who are scared of a vehicle fire, go look up the NTSB statistics on how many Gas related car fires there are every day, let alone every year.

Gas cars need to go away. Be it now or in 60 years when the worlds oil supply is exhausted.

January 26 2012 at 12:17 AM Report abuse -1 rate up rate down Reply
1 reply to thephenx's comment
mewchat

Yes the Tesla is ahead in technology but the Base S Sedan is 57,400 and that is before adding any options. Their advertised price is less $7500 tax credit, that is not $7500 it is an income credit, so its only a savings of taxes paid.
The Volt is not as you put it fugly...and what makes the Volt my choice over the Tesla is it does have a gas gen system so if I so choose to take trip in my car I am not dependent on electric only, seeing that is can be hard to find every 160 miles and it would take days to make the treck if you had to keep charging. With the Volt you can take a 2000 mile trip and still be getting 37mph while on gas.

August 13 2012 at 1:57 AM Report abuse rate up rate down Reply
Gumby

seriously.... my idea is workable and far out!

January 23 2012 at 1:29 PM Report abuse rate up rate down Reply
Gumby

I have a better design for Chevy Volt with modifications to its powertrain. I want a cool millon for my idea.

January 23 2012 at 1:29 PM Report abuse rate up rate down Reply
Gumby

GM was trying to committ suicide but UAW wont allow GM to do so...

January 23 2012 at 1:28 PM Report abuse rate up rate down Reply
JC3GBPFan

I would have to ask this author "Who is your employer?" I would say it is Motley Fool. And MFool has been pushing Ford quite a bit since they happen to own quite a bit of Ford stock. After the US government kicked in the dollars to save GM & Chrysler people have looked down at these 2 corporations. I would rather by an American made vehicle and have some chance that the money for this will stay here in our country and keep Americans working. I have 2 GM products and I am very happy with them. Face the facts that some of these articles are written with an agenda Saying such things as holding back information? After this came to the surface General Motors sent out memo's to the owners of Volts saying bring in your car get the updates and they gave them free vehicle to drive while the battery coolant systems was being corrected. Also they made offer that if you were NOT Satisfied you could get your money back. Actually I wanted to purchase a "Volt" but as any new type of technology I have found it safer to wait a while and don't purchase something when it is first coming out. I still am planning on purchasing one of these because for my driving needs I would not use any gas.

January 23 2012 at 2:48 AM Report abuse rate up rate down Reply
Denny

I don't get the whole electric car. Wasn't about 6 or 7 years ago California had brown outs? Can our electrical infrastructure handle this concept? I don't think so, especially when the current administration is wants to kill the coal power plants. It will be a trade off from buying fuel at a high price to recharging a electric car at the same high price or even higher. Going to need a massive solar and wind energy to supplement the charging of a battery, but then you are still talking about $30K minimum for each household for their own solar or wind energy (off the grid). I don't think it is economical that it is made out to be

January 22 2012 at 3:49 AM Report abuse +1 rate up rate down Reply
1 reply to Denny's comment
Bagginz

The charging happens mostly during the night, when the load on the grid is the least. Our electrical infrastructure can handle that concept. Secondly, because steam turbines and electric motors are inherently much more efficient than internal combustion engines, there are significant 'well-to-wheel' energy savings, even with coal (which provides only 15% of electricity in California, and 45% nationwide).

January 22 2012 at 11:27 AM Report abuse rate up rate down Reply
Bagginz

What boondoggle? The car's in production, and hasn't even reached overseas markets yet. It's been lauded by the automotive press. Consumer Reports likes it. It's not a Pinto. It's not an Edsel. It's not even an Aztek. There's been more FUD than fact, flamed by think-tanks and bloggers with an anti-Obama agenda.

You could take almost all your arguments against the Volt, and apply it to the early Prius.

Toyota spent a bundle on development of the Prius. It took years before sales took off and economies of scaled kicked in. When brought to America in 2000, it cost about 40% more than a comparable Corolla. Gas was $2/gallon, and fewer Priuses were sold in its first year of introduction than the Volt, when money was not nearly as tight as it is now. Adoption of the Prius (along with other hybrids) was greatly accelerated by tax credits.

Today, more than 1M Priuses have been sold in the U. S. alone. They have demonstrably reduced oil consumption and smog. Hybrid technology has found a place for itself in almost every major car manufacturer. And that is A Good Thing. Toyota has been been lionized for its forward thinking and risk-taking.

Oil security is not a sure thing, and hasn't been for a long time. The western world needs alternatives. Way before the bailout, GM stuck its neck out with the Volt, and came up with a remarkably good car that is unique in the marketplace and technologically leap-frogs the Europeans and Japanese competition. The benefits of this is not just something to have in its portfolio if gas prices shoot up (whcih is what helped the Prius). They gained the knowhow and a briefcase full of patents on Li-ion battery technology. Because Li-ion packs more power in a smaller size than the Prius' NiMH battery, it can make conventional hybrids lighter.

The comparison of the Volt to the plug-in Prius is a little off. The plug-in Prius (which, contrary to the above article is not available yet) only has a 13 mile range on its battery, compared to 40 for the Volt. The starting price, after the tax credit, is about $30K -- not that much less than the $32K Volt after its credit.

January 21 2012 at 5:14 PM Report abuse -1 rate up rate down Reply
Bagginz

What boondoggle? The car's in production, and hasn't even reached overseas markets yet. It's been lauded by the automotive press. Consumer Reports likes it. It's not a Pinto. It's not an Edsel. It's not even an Aztek. There's been more FUD than fact, flamed by think-tanks and bloggers with an anti-Obama agenda.

You could take almost all your arguments against the Volt, and apply it to the early Prius.

Toyota spent a bundle on development of the Prius. It took years before sales took off and economies of scaled kicked in. When brought to America in 2000, it cost about 40% more than a comparable Corolla. Gas was $2/gallon, and fewer Priuses were sold in its first year of introduction than the Volt, when money was not nearly as tight as it is now. Adoption of the Prius (along with other hybrids) was greatly accelerated by tax credits.

Today, more than 1M Priuses have been sold in the U. S. alone. They have demonstrably reduced oil consumption and smog. Hybrid technology has found a place for itself in almost every major car manufacturer. And that is A Good Thing. Toyota has been been lionized for its forward thinking and risk-taking.

Oil security is not a sure thing, and hasn't been for a long time. The western world needs alternatives. Way before the bailout, GM stuck its neck out with the Volt, and came up with a remarkably good car that is unique in the marketplace and technologically leap-frogs the Europeans and Japanese competition. The benefits of this is not just something to have in its portfolio if gas prices shoot up (whcih is what helped the Prius). They gained the knowhow and a briefcase full of patents on Li-ion battery technology. Because Li-ion packs more power in a smaller size than the Prius' NiMH battery, it can make conventional hybrids lighter.

The comparison of the Volt to the plug-in Prius is a little off. The plug-in Prius (which, contrary to the above article is not available yet) only has a 13 mile range on its battery, compared to 40 for the Volt. The starting price, after the tax credit, is about $30K -- not that much less than the $32K Volt after its credit.

January 21 2012 at 5:13 PM Report abuse rate up rate down Reply