Is GM Losing $50,000 per Volt?
Reuters and GM are in a something of a pissing match over how much the company is losing on the Volt.
Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as
much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.
Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher. There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce.
And while the loss per vehicle will shrink as more are built and sold, GM is still years away from making money on the Volt, which will soon face new competitors from Ford, Honda and others.
GM's basic problem is that "the Volt is over-engineered and over-priced," said Dennis Virag, president of the Michigan-based Automotive Consulting Group…
GM's quandary is how to increase sales volume so that it can spread its estimated $1.2-billion investment in the Volt over more vehicles while reducing manufacturing and component costs—which will be difficult to bring down until sales increase.
But the Volt's steep $39,995 base price and its complex technology—the car uses expensive lithium-polymer batteries, sophisticated electronics and an electric motor combined with a gasoline engine—have kept many prospective buyers away from Chevy showrooms.
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. The Reuters' numbers become more wrong with each Volt sold.
In addition, our core research into battery cells, battery packs, controls, electric motors, regenerative braking and other technologies has applications across multiple current and future products, which will help spread costs over a much higher volume, thereby reducing manufacturing and purchasing costs. This will eventually lead to profitability for the Volt and future electrified vehicles.
GM has a point—but its beside the point. The bottom-line is that the Volt is a massive money loser for the company and will likely remain so for the foreseeable future.
What's more, were it not for chronic green regulatory pressure and electric tax subsidies, few auto makers in their right mind would be investing in them except as futuristic, concept cars and even fewer would be trying to market them.