A recent report of controversy comes from Reuters, which claims that it costs as much as $89,000 to produce Chevy’s halo car, the Volt, which starts at $39,145. Obviously, that would mean the car is operating at a huge loss — way more than estimated. The lofty number was achieved via quotes from analysts and sources, along with a simplified arithmetic that tallied per-vehicle development costs based on the number of Volts sold through the end of August. But as Bob Lutz pointed out in his latest Forbes editorial, Reuters is doing it wrong.
Lutz opened his write-up with the following:
The statement that GM “loses” over $40K per Volt is preposterous. What the “analyst” in whom poor Ben Klayman placed his faith has done is to divide the total development cost and plant investment by the number of Volts produced thus far. That’s like saying that a real estate company that puts up a $10 million building and has rental income of one million the first year is “losing” 9 million dollars, or several hundred thousand per renter.
Indeed, development costs associated with the Volt’s program will thin out as more and more Volts find homes — which continues to be at an increasing rate. However, not sugar coating anything, Lutz also mentioned that the Volt may never make a decent profit, being the loss leader that it is. But from the Volt’s initial investment will at least stem the Cadillac ELR, which is expected to launch late next year in the mid to high $50,000’s — which has a much better bet at making the accounting team smile.