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GM Reportedly Losing $49,000 on Every Chevy Volt It Sells

Dismal sales, screaming lease deals lead to losses, but will that always be the case?

By Claire_Martin Sep 10, 2012 12:44PM
Chevrolet Volt photo by Chevrolet.Summer was ostensibly a good season for the Chevrolet Volt: Dealerships pushed more than 2,500 cars off their lots in August, making it a record sales month for the electric vehicle. The success was in part due to screaming lease deals. Reuters reports that the car is putting just a $5,050 dent in the wallets of some lessors over two years. But it costs General Motors up to $89,000 to produce a single Volt, and with every one it sells, Reuters calculates the automaker reportedly loses up to $49,000. Here's why:

Sales are dismal. Even though the Volt sold in record-breaking numbers in August, the record it bested wasn't particularly impressive. Drivers bought 2,831 cars last month; overall GM has sold 13,500 Volts so far this year. This is nowhere near its 40,000-vehicle, end-of-year projection. According to Reuters, this affects GM's bottom line in more than one way: "Some of GM's suppliers ... impose cost penalties on the automaker because the Volt's production volume remains well below projections."

Another hurdle for the Volt: It uses expensive lithium-polymer batteries, along with an electric motor and a gasoline engine, and it relies on high-end electronics. "[T]he Volt is overengineered and overpriced," says Dennis Virag of the Automotive Consulting Group. 

Yet with an estimated $1.2 billion in development costs for the Volt, GM has invested a fraction of what Toyota has put into the Prius ($10 billion) and Nissan has poured into the Leaf ($5 billion). This means it has less money to recoup -- but if sales don't improve, that won't matter. "GM will need to sell 120,000 Volts before the per-vehicle cost reaches $10,000," Reuters reports. 

But GM refuted Reuters' number-crunching in a press release: "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." It went on to say that much of its initial investment in Volt-related technology will be used in other vehicles, further helping to mitigate manufacturing costs.

Regardless of whose accounting is more accurate, moving forward the automaker will be pinning its hopes on the second-generation Volt, which will come out in about three years. "As the volume comes up and we get into the Gen 2 car, we're going to turn (the losses) around," GM's Doug Parks, the former development chief of the Volt, told Reuters. 

If past is prologue, it could take longer than that. After launching the Prius in 2000, Toyota is now finally turning a profit with its third-generation model. Prius sales have nearly doubled this year. 

Given that the Prius is significantly less expensive than the Volt ($19,745 versus $39,995), the key factor to a Volt turnaround could be this detail, revealed by Parks: "Virtually every component in the next-gen car is going to be cheaper."

[Sources: Reuters, CNN]
49Comments
Sep 10, 2012 6:14PM
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I remember when the Prius and Insight were introduced.

They didn't sell.

The technology was fairly simple compared to the Volt but almost as revolutionary for production vehicles. Now, every major manufacturer offers a hybrid version but only Honda offers a dedicated production hybrid outside of Toyota.

The revolution promulgated by the Volt is to truly find a way to stop using gas. My car has a 12 gallon gas tank and I fill it every 300 miles or so. Volt owners fill their little  10 gallon tanks, on average,  every 1,000 miles. Remarkable. Nothing compares to it. Nothing.

Sales?

The Volt beats the Ford Fusion and Lincoln MKZ hybrids, combined.

The Volt beats every Honda hybrid, combined.

Total up Mercedes, Nissan, Porsche, BMW, Volkswagen, Hyundai, Kia, Acura, Infinity, and so on, and the Volt beat them in hybrid sales.

 

Only two companies, in their entirety of hybrid sales, beat the Volt in sales: Toyota/Lexus and, well, believe it or not, GM.

 

Trashing the Volt is shortsighted.

The trail being blazed belongs entirely to GM for the patents, the quality, and more important than anything else, the future of personal transportation for Americans.

 

The author of this article belongs cooking fast food.

 

 

 

 

 

 

Sep 11, 2012 5:31AM
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"Here's an idea, stop spending/giving billions oversees and give a HUGE tax credit for the VOLT and any other hybrid car built in the US getting better than 60 mpg."

Here is an idea: ditch expensive hybrids and start building more clean diesels, and do not jack up the prices just because they have a diesel engine -- it does not cost more to produce a diesel, since a diesel actually has LESS parts than a gasoline equivalent, since the engine is simpler.

Here is another idea: boycott any and all goods which are made in China.

Here is yet another idea: a few more jobs in the auto industry are not going to save the economy; bringing back manufacturing, all of manufacturing back to the United States will.
Sep 11, 2012 9:28AM
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"The ONLY way that manufacturing jobs are going to come back to the US is if the government makes a deal with US manufacturers making it worth it to them to have the jobs here."

This has absolutely nothing whatsoever to do with any government of any country! It has to do with the following two things:

a) for decades, economics professors taught their students to always go to the lowest bidder "cutting cost is a good thing";

b) those students, which became managers, did exactly what they were taught to do with selfish self-promotion as the main motivator, and without considering the long term impact of outsourcing one's entire economy system to other countries.

Counter example: the Swiss did exactly the opposite: kept virtually all manufacturing in Switzerland, and what they do not produce, they import from the European Union, but only when they absolutely have to, and levy heavy customs duties on that which they import; as a consequence, funds constantly circulate inside of the country, instead of constantly pouring out of it. The Swiss' wages are almost double what they are in the United States, yet Switzerland is slightly less than twice the size of New Jersey, and has about 42 times less population. The Swiss franc was until recently worth more than the United States dollar, until the Swiss national bank intervened and forcefully devalued it. How do the Swiss do that?

The answer is very simple: they do not outsource, even if it is cheaper to do so. They will not sell their own out, because they understand that in the long term, that would affect them too.

"You can't blame the manufacturers for moving production to other countries"

Ooohhh yes I can, not only can I blame them, I know how it all works because I experienced first hand the corruption and the questionable deals and selfish politics that go on! It is the "management mafia". And they literally are like the mafia, only taken to the next level of sophistication.

I know how it works; I was there, in the very heart of it. Those people are selfish, corrupt, and greedy, and have no consideration for long term future, or for the well being of their fellows, or even the companies whose interest they are supposed to be serving and protecting. They are not even bright enough to consider the long term consequences of their actions, which is why we have no industry any more. Too self absorbed, you see, to consider well being of anybody but themselves. Managers are the plague of our society and the number one danger to our country. They are like metastised cancer. Parasites.

How much more outsourcing do you have to live through to believe it? How much poorer must people around you become, for you to realize what is taking place?
Sep 10, 2012 5:54PM
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Here's an idea, stop spending/giving billions oversees and give a HUGE tax credit for the VOLT and any other hybrid car built in the US getting better than 60 mpg. It puts more AMERICANS back to work, reduces dependency on oil and we'll have to build more power plants...putting more AMERICANS back to work.  
Sep 12, 2012 9:38AM
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"Please explain to me again why the volt needs to amortize its development cost in a single season instead of over 20 years like every other car on the market?"

Good question!
I would like to know the answer to that question as well: WHY?
Sep 11, 2012 4:14AM
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Hey, what ever happened to the 250k per volt cost estimate these same characters spewed about back in march ?

 

  Oh that’s right GM sold a few more cars, so now its down to 49k. 

 

Please explain to me again why the volt needs to amortize its development cost in a single season instead of over 20 years like every other car on the market?

 

I understand that the Volt development is a risky strategy for Gm — gambling on relatively untested technology always is.  But hey they are in that business.  No risk no reward.

I guess now they also have to add in the risk that a few anti GM /Auto bailout nuts, angry at the GM Volts success, will spend money on a Nonsensical rambling press releases on Reuters.  

 

But why did you pick this up? Slow news day? Looking for internet hits? Repeating a paid political piece does not do you justice.

Sep 10, 2012 6:26PM
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A Reuters report Monday said GM's plug-in hybrid   GM, though, disputed the contention, saying Reuters' research "is grossly wrong" and accusing the news agency of bad math. The automaker said the news agency incorrectly "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.”

Sep 11, 2012 8:15AM
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The ONLY way that manufacturing jobs are going to come back to the US is if the government makes a deal with US manufacturers making it worth it to them to have the jobs here.
  Jobs left this country because it costs too much to make things here. Obviously us Americans are not going to take a pay cut to get the jobs back so the government needs to provide tax breaks or other incentives to these companies to make manufacturing come back to life.
  You can't blame the manufacturers for moving production to other countries, they are in business to make money and in some cases, such as with GM and Ford, union greed caused those companies to start manufacturing in foreign countries.
  Another way to get more jobs here is to stop voting for politicians that want to give amnesty to the millions of illegal immigrants in this country, thus keeping millions of jobs from US citizens. I don't blame these people for coming here, any of us would do the same thing if we were in their shoes, I blame politicians like Obama that cater to them just to get votes and without regard to the AMERICAN jobless situation. If you voted for him, or are about to again, YOU are what's wrong with this economy, not people that are buying imported cars, that's a drop in the bucket when it comes to our economic problems.

Sep 11, 2012 8:22AM
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I am all for new technology and of course the best fuel mileage. Hopefully we wont have to bail out GM again because of this. Auto industry needs to all work together on this...
Sep 11, 2012 5:34AM
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"The problem is that for that money I could buy a BMW 320d still get impressive economy and drive in image and luxury.  And that's why the Volt is slow to sell."

You hit the nail on the head.
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