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Does The Chevy Volt Make Economic Sense?

July 28, 2010

What a Re-Volting Development!

First off, let me make a a disclaimer. I was one of the first people to reserve a place to buy a Nissan LEAF. I think the car is solid, well designed and a good value, when the Fed/State rebates are included on the car and home charging station. See a number of posts, including a video, we’ve done here at Innovational Musings on the LEAF.

I grew-up a GM car fan in the 50s & 60s, one of my first cars was a used 1961 powder blue Impala convertible, very sweet. Much later I got to work with a number of the U.S. automakers in the 1980s as a robotics consultant. I was dismayed by the arrogance displayed by their people on walnut row and the factory floor. This was a period when they were having their clocks cleaned by aggressive Japanese competitors.

New Era or New Error?

My first Japanese car was the Nissan Maxima, bought in 1981 when it was first introduced. We loved it and kept the car for a decade. I have always been a pro buy American guy, and still am. However our products must be competitive and of good value. My pro-American bias starts to dissolve at above a 10% premium. And the globalization of the automotive industry makes it difficult to tell who makes what. The LEAF will be made in Nashville next year.

The Chevy Volt was introduced to favorable industry buzz and reviews. But that was then. Yesterday GM announced the Volt’s MSRP  at $41,000! The market is not pleased. Below is a sample of backfires from the street.

Martin LaMonica a senior writer for CNET’s Green Tech blog has a good post discussing the cost of the Volt and a couple of other EVs in his article. How much does cost matter in first wave of EVs? Here are a few key points:

Although there are many factors at play, in general, electric cars cost more upfront but have lower operating costs.

With the average gasoline price in the U.S. now at $2.75 and average fuel efficiency for new passenger cars at 32 miles per gallon, it costs 8.4 cents per mile to drive on gasoline.

Battery-electric vehicles, such as the Leaf, cost less to operate. The 24 kilowatt-hour battery of the Leaf can take it about 100 miles. Using that as a crude approximation of economy, that’s 2.8 cents per mile if you use the average U.S. retail electricity rate of 11.7 cents per kilowatt-hour.

GM figures that if you drive within the Volt’s 40-mile battery range, it will cost $1.50 a day to drive, compared to about $3.50 per day for a 30 mpg sedan. Read the full post…

Future Car Wars…

GM takes on Nissan in electric car battle

“The next phase in the rebirth of the electric car is turning into a battle between General Motors and Nissan Motor Co. GM executives, speaking Tuesday at a plug-in car conference in San Jose.” Read the full SF Chronicle article

Make sure to read the very passionate reader comments about the Volt vs the LEAF on the above two posts.

The Wall Street Journal said. “Toyota Motor Corp. lost money on the best-selling Prius for years, and those losses have more than paid off. But GM Chairman and Chief Executive Edward E. Whitacre Jr. has vowed that any car made by GM, including the Volt, will be a moneymaker for the company. Meantime, spending at GM, which is majority-owned by the U.S. government, receives close scrutiny from politicians and the public.”

Don’t forget that Whitacre is the the guy who made the disingenuous claim that GM had fully paid back taxpayers early, failing to mention that it was paid with government money.

A Revoltin’ Development?


Chester A. Riley, a wing riveter at the fictional Cunningham Aircraft plant in California. His frequent exclamation of indignation became one of the most famous catch phrases of the 1940s: “What a revoltin’ development this is!”  Wikipedia

GM has made a many miserable missteps in the last couple of decades, much of it the disastrous legacy of Roger Smith.  GM used to make the sexiest cars in the world. Now they’re known for poor designs like the Cadillac Cimarron, the Saturn and the Pontiac Aztek. The Aztek was a hatchet job of committee redesigns and cost cutting.

And it was designed before the government bailout and now with political hacks and union bosses holding influential management positions at GM, what kinds of inspired designs and decisions can we expect out of the new Government Motors?

Did you hear that GM wants to end the use of Chevy and insist on only using the Chevrolet name?  Also there is still a nasty industry residue from the recent brutal shutdown of 1,100 U.S. GM dealers. Dealers who will be open to EVs and other cars from China when they’re available. And Let’s not forget GM’s original EV stumble the EV1.

The Volt has a significant 240 mile range advantage over the LEAF and could be used for a single car family. But the Volt is a hybrid and more complex than the LEAF and has a smaller interior. I also suspect that all the chaos at GM is going to make it tough for them to deliver this car on time without inherent new tech problems. I like Nissan’s reasonable approach to the development and deployment of the LEAF and belive they have a good chance to deliver a reliable car that lives up to its promise.

I happen to like the Volt’s styling and think the Volt is cooler looking than the LEAF. However, the Tesla is the coolest, but too expensive for most of us. For this first generation of EVs to succeed they will have to prove that the technology is reliable and the economics pencil out. Yes I want to get off foreign oil and improve the environment. But like buying American there’s only so much of a premium I’m willing to pay for it.

Nissan Motor Co., Ltd. invited nearly 500 people to experience the world’s first mass-production, 100% electric, zero-emission car – Nissan LEAF – at the company’s Oppama test track in a world-exclusive preview from June 11-19, 2010.

One of the ways that GM hopes to overcome the high cost of the Volt is with “creative subprime leasing options” (Have we no memory?). CNN Money reports. “General Motors is paying $3.5 billion in cash to buy subprime auto lender AmeriCredit, a move that will once again give the automaker its own finance arm. It is the first major acquisition for GM since it emerged from bankruptcy a year ago with the help of a $50 billion bailout by U.S. taxpayers.”

Not only does the new Volt evoke sticker shock  at $41K. It looks like buyers of the new Chevrolet Volt will not get the coveted sticker that gives them access to the California’s fast-moving commuter lanes, nor will they qualify for a potential $5,000 state-funded rebate. The Nissan LEAF qualifies for both perks and has a starting price of $32,780. In California the LEAF may only cost $20,000 dollars when the state tax credit is included.

In the meantime, insists Volt’s program chief Tony Posawatz, “The car won’t have trouble selling,” especially during the first year, he tells TheDetroitBureau.com

I bet the Detroit guys I used to work with would have said. “Yeah. I wouldn’t worry about it though, California’s not a big EV market.” Just like “Boston’s not a big college town...”

Related articles:

2011 Automobile of the Year: Chevrolet Volt

From the January, 2011 issue of Automobile Magazine

It wasn’t a shoo-in. Quite the opposite, in fact. On its way to becoming Automobile Magazine‘s 2011 Automobile of the Year, the Chevrolet Volt endured more scrutiny and skepticism than any of the nine other semifinalists.

Consumer Reports: GM’s Volt ‘doesn’t really make a lot of sense’

David Shepardson / Detroit News Washington Bureau, Last Updated: February 28. 2011

Washington — Consumer Reports offered a harsh initial review of the Chevrolet Volt, questioning whether General Motors Co.’s flagship vehicle makes economic “sense.”The extended-range plug-in electric vehicle is on the cover of the April issue — the influential magazine’s annual survey of vehicles — but the GM vehicle comes in for criticism.

“When you are looking at purely dollars and cents, it doesn’t really make a lot of sense. The Volt isn’t particularly efficient as an electric vehicle and it’s not particularly good as a gas vehicle either in terms of fuel economy,” said David Champion, the senior director of Consumer Reports auto testing center at a meeting with reporters here. “This is going to be a tough sell to the average consumer.”

2011 Chevrolet Volt: What’s the Right Price?

By Philip Reed | March 1, 2011, © Edmunds Inc.

I would consider putting a Chevy Volt in my garage, but not at the current price of $43,000. Even after the federal tax credit we’re looking at $35,500, and that’s too steep. Just think of the cars in that price range.

U.S. boosts estimate of auto bailout losses to $23.6B

Nov. 14, 2011, The Detroit News

The Treasury Department dramatically boosted its estimate of losses from its $85 billion auto industry bailout by more than $9 billion in the face of General Motors Co.’s steep stock decline.

In its monthly report to Congress, the Treasury Department now says it expects to lose $23.6 billion, up from its previous estimate of $14.33 billion.

 

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7 Comments leave one →
  1. September 16, 2010 3:56 am

    Electric, software controlled steering, etc scares the shit out of me. What happens when, inevitably, the computer crashes or the electrical system dies because a fuse blew? Not a good idea to me. The door on the plug seems wrong. It should not have to sit wide open why it’s plugged in. Thats just asking for it to get broken off by some genius for kicks and giggles.

  2. September 16, 2010 7:54 am

    Understandable concerns, but fly-by-wire aircraft have been used for over a decade and redundancy and fail-safe designs have proven safe – but nothing is certain, ‘cept Murphy.

    Not sure how the fuel door is any more vulnerable to vandalism than current cars. Although if electricity rates get too high we might see locks needed on fuel doors to prevent power thieves from siphoning EV juice.

  3. April 6, 2011 9:29 pm

    I believe the Volt will be a white elephant if you campare the car to other excellent mileage cars like the new Hyundai Elantra. Just do the math:
    Volt cost $44,680
    Hyundai Elantra about $18,000
    Savings $26,680.
    The Elantra averages about 35 MPG and if you put 12,000 per year on he car, it will consume 343 Gal of gas at a cost of $3.50/Gal. That totals to $1200 per year. Divide the savings generated in the car purchase ($26,680) by your fuel cost per year with the Elantra($1200) and you will be able to drive the Elantra (or any other car in this mileage range) for 22 years!
    The Volt also consumes $1.30/day for recharging.

    • April 7, 2011 12:54 pm

      Thanks for you comment Haiko. I agree with your sensible ROI approach.

      As much as I like the fact that there’s lots of new tech in transportation being developed and brought to market. The Volt and LEAF don’t currently pencil out (even with the tax credits) as your examples point out.

      The market should pick the winners in the long run. I think the government should limit its investments to basic research not applied research or assisting specific companies or technologies. Also investments should be made with saved or earned funds, not borrowed.

      • Ray permalink
        November 10, 2011 7:46 pm

        Tke 11K off the volt price for the goverment subsidy and you still have 16K to spend on your elantra for gas/maintenance. Thats still 13 years before you see any savings over the volt. The volt costs too much.

        You can say the elentra wil have more mainenance costs so take 4K off the 16K and you still drive for 10 years.

        I would like to see an independent review of the Life Cycle cost of a Volt vs 3 or 4 equivalent gas or deisel car. this must include mentance, finance and residual or disposal value after 5, 7 and 10 years.

        Thanks Ray

      • November 18, 2011 3:25 pm

        Not only that, but after the warranty runs out with the “VOLT”, most likely the battery must be replaced to the tune of seven or eight thousand dollars. Who would want to purchase the “VOLT” as a used car with such a battery replacement cost.

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