You may already know the Chevrolet Volt: the multiple car of the year award winner and a revolutionary and ingenious piece of automotive technology that is capable of bridging the gap between the era of gasoline-powered vehicles and the time when all automobiles run entirely on electricity. Unfortunately, the Volt’s brilliant qualities, of which there are many, are enjoyed by a seldom few today. And while the car had seemingly become a pawn in the recently-concluded U.S. Presidential election, it’s time to put politics aside and focus on the future. But to look at the Volt’s time ahead, we must look back to where the Volt has been and where it is now.
A Car Everyone Would Buy
Everyone would buy a Volt, if they could. The car is simply excellent: it feels, drives, and looks like a premium product, rather than a car for the masses. Besides the impressive powertrain technology, the Volt has an immense amount of complementary tech — including all the gizmos you’d expect to find in a modern vehicle such as the Chevy MyLink infotainment system, an awesome OnStar app that lets the owner perform remote commands like remote start, lock/unlock doors, and check electric range, among other things, as well as a back-up camera and keyless entry. And if it’s a refined ride you’re looking for, then the Volt fits the bill, as well.
So why doesn’t everyone own a Volt? For starters, it only seats four — making it a non-option for those who purchase seven-seater SUVs or crossovers for their seating capacity. But the biggest reason still, in our opinion, is the Volt’s $40,000+ asking price.
The Volt’s high price, however, doesn’t make it unwanted; in fact, the car has been setting sales records left and right. Globally, sales of the vehicle (in its various variations such as the Opel/Vauxhall Ampera and Holden Volt) are on the rise. And in the United States, the extended-range EV sold 2,961 units in October, 2,851 units in September and 2,831 units in August. Sure, those numbers may seem paltry compared to the consistent almost-20,000 monthly unit sales of the Cruze. But as we mentioned earlier this year, it’s much more apropos to consider year-over-year growth for vehicles that create a category — like the Volt — than to focus on unit sales.
Looking at rate of change data, it’s clear that the Volt is catching on — and catching on fast. October’s 2,961 sales are a 167.2 percent year-over-year increase; September’s growth is equally impressive — at 294.3 percent. August is even more so — at a whopping 837.4 percent year-over-year growth.
In fact, the Volt is now the top-selling electric vehicle in the United States — more than 8,000 units ahead of Toyota’s (beloved by the public) Prius Plug-in, while the Nissan Leaf is a distant third behind both vehicles. And having sold 19,309 units through October of 2012 (YTD), the Volt is on track to break the 20,000 annual sales mark this year.
Discounts & Incentives
To address the issue of pricing, General Motors is adding incentives for the Volt. Currently, the discounts seem to be in the $2,000-$4,000 range, which are on top of the $7,500 federal tax credit offered to buyers of qualifying electric vehicles such as the Volt — even though some buyers may not earn enough to take advantage of the tax credit. Other Volt-specific offers from GM may include low-interest financing, subsidized leases, customer cash, and sales bonuses to dealers.
According to an October report, GM spokesman Jim Cain said that most Volt discounts come in the form of lease deals. Leases represent roughly two-thirds of Volt sales, and customers are to lease a Volt for $249 per month after a $2,400 downpayment in most markets.
A Loss Leader With Benefits
But even with the astronomic year-over-year sales growth, General Motors is losing thousands of dollars on each Volt sale. While exact figures aren’t made public, estimates from Munro & Associates — a company in Troy, Michigan that analyzes vehicle production expenses for automakers — report a cost of $60,000 to $75,000 to build a Volt. That includes initial research & development, manufacturing, and raw materials expenses.
Much of the reason for the high cost is the result of the Volt’s use of two powertrains — the electric system and the gasoline engine-generator. Assuming a $40,000 sticker price and allotting $5,000 for discounts and/or incentives, GM gets roughly $35,000 for every Volt, so it could be losing $25,000 (at the least) to $40,000 (at the most) per car.
But according to GM, Munro’s figures are high — since they don’t spread the Volt’s costs far enough into the future — when the automaker plans to sell more units of the vehicle. In a way, then, the real cost of the Volt to GM is a numbers game, one that depends on how far into the future the Volt’s R&D cost is extrapolated.
Usually, automakers spend around $1 billion to develop a car and don’t turn a profit until a model is several years into its lifecycle. Sharing vehicle architectures/platforms helps bring that initial development cost down, but even for vehicles such as the Volt — which shares the Delta architecture with the compact Chevy Cruze — platform sharing isn’t enough.
However, it’s safe to assume that Volt technology will be used in future GM vehicles — so vehicles carrying the Voltec powertrain will eventually lead to profits. But the question GM is likely asking itself is how long it can keep eating losses on the Volt, especially without aggressively rolling out variants of the car. The automaker showed off a concept Volt van, called the Volt MPV 5, at the Beijing Auto Show in 2010 — but the vehicle has yet to enter production. Meanwhile, Ford has the next-best thing with its C-MAX Energi.
Creating A Market For A Brand New Technology
Let’s forget, for a moment, about profits, losses, and other financial aspects and consider that the Volt isn’t just a car with a new nameplate — it’s a product that has created an entirely new class of a vehicle. “We’re trying to create a market for a brand-new technology,” Cain says. Fisker, Ford, and Toyota have all followed the Volt with competing products, which in itself is a confirmation GM isn’t alone in seeing a need to bridge the gap between the current gasoline-dominated transportation and the pure electric future.
Unfortunately, the rollout of the Volt couldn’t have come at a more inopportune time. In 2010, a bad economy and tight credit made a $40,000 mainstream compact car difficult to stomach; that’s still the case today.
“Let’s face it, over $40,000 is asking a lot for a compact car,” says Bob Lutz, a retired GM vice chairman who led the development of the Volt.
Slow initial sales were expected by many — and discounts starting coming into the picture. In June of 2011, GM reduced the Volt’s starting price by $1,000 while furnishing the 2013 model with an improved battery that increased electric-only range by three miles, from 35 to 38.
But even with the improvements and price cuts, we’re dubious that most consumers today understand the basics about the Volt — or its benefits. And that’s a problem in and of itself that someone (either GM or its competitors) will need to address.
The Fire Hoopla
Remember this one? The National Highway Traffic Safety Administration (NHTSA) was crash testing a Volt (or two), and then made a big stink that one of the vehicles it had already crash tested and left in a garage after the crash had caught fire. Mind you, this was weeks after the crash test took place. Even Congress got involved.
No real-world fires were ever reported, but engineers figured out that the fire experienced by the NHTSA was the result of a coolant leak that caused electrical shorts after side-impact crashes. GM subsequently offered to buy back all Volts in existence (an offer that 24 owners took advantage of) and retrofitted all Volts with more steel to protect the battery. And the NHTSA cleared
The California Emissions Game
Then there was the issue of the Volt not being eligible to use California’s carpool lanes. The Golden State has 1,500 miles of freeway lanes that can only be used by cars carrying two or more people. The State, however, makes exceptions that allow less-polluting vehicles to drive in the lanes with one person in the car.
Initially, the Volt didn’t qualify to utilize the HOV (High Occupancy Vehicle) lanes because, according to California’s Department of Transportation, the Volt’s gasoline engine-generator didn’t meet the pollution standards. So GM engineers decreased the emissions produced by the Volt’s engine generator, and the State added the car as an exception to the HOV rule in late February of 2011. The move boosted Volt sales almost instantly — with nearly a quarter of Volt sales today being to California residents.
GM’s Green Image
GM says that the Volt has helped the automaker’s green image — a statement that few in their right minds would argue. The car has attracted and conquested new customers, some of which migrated from rival brands, while assisting Chevy to chip away at least part of the environmental halo from Toyota and its Prius line of hybrids — with most Volt buyers being new to the Bow Tie brand.
Perhaps even more important is the fact that the Volt has and will help GM meet stringent Corporate Average Fuel Economy (CAFE) standards.
Profitability Is Still The Name Of The Game
While the Volt may not be contributing to GM’s bottom line today, the vehicle isn’t in danger of being cancelled. Of course, it will need to be profitable — but the timetable for such a requirement isn’t set in stone just yet.
If anything, climbing sales — to the tune of triple-digit year-over-year increases — mean that car buyers aren’t opposed to accepting electric cars like the Volt — but that the the vehicles need to be offered at the right price. So far in 2012, electric and gas-electric vehicles have accounted for roughly 3.5 percent of total auto sales in the United States.
The Volt’s “prime purpose was to introduce a new generation of technology,’’ says Lutz. “And at the same time, demonstrate to the world that GM is way more technologically capable than the people give it credit for.”
Of course, any company wants its products to be profitable… but some may take a bit longer than others to reach that point. To that end, customers could be weary of buying vehicles that don’t bring in a profit for an automaker, since such products could end up on the chopping block and result in a shortage of parts in the future. But which regular consumer pays attention to this kind of data?
Ultimately, the Volt is a long-term play for GM. If we are to assume that the final destination for gasoline-free transportation lies in electric-powered vehicles, then the Volt is an excellent “intermediary” step. Of course, this “intermediary” nature of the Volt means that the gasoline range-extender will no longer be necessary in the future — but that point might only be reachable in several decades.
As such, GM has just that long (however long that will be) to lower the cost of the Voltec powertrain and make it even more efficient. Lowering the cost of any technology usually involves lowering the cost of parts, production, or manufacturing by selling more of the technology, usually by making the product that contains it more attractive to the mass market. GM can do just that by continuing to look for efficiencies (in parts and material sourcing, for instance) while offering the Voltec powertrain in as many vehicles as it can.
All evidence points to The General doing just that in the future. As of this writing, at least one Voltec-powered vehicle — the Cadillac ELR — is in the works. The ELR will be powered by the next-gen Voltec powertrain, but it alone won’t increase economies of scale that will make any kind of sizable difference — since the Caddy will be a low-volume product; in fact, the ELR may just assist GM in breaking even on the Voltec program. But GM needs to offer Voltec-powered crossovers, MPVs, and sedans/hatchbacks in all sizes and categories to truly make the Voltec powertrain profitable.
And once we reach the point of widespread electric-only propulsion, GM won’t be caught cold, either: the automaker is already testing a fleet of electric-only Chevy Cruze sedans in South Korea and will launch an electric-only Spark city car in 2013.
In the short term, marketing to consumers who may not be familiar with the Volt or its benefits may be the next thing The General tackles. Combating myths with facts, something GM’s Just the Facts campaign set out to accomplish, is also a good idea, because there is plenty of FUD out there. And then there’s the issue of purely uninformed spinmeisters. However would GM deal with those?