Chevrolet Volt: What Might Kill GM's Next Electric Car?By Karl Brauer November 29, 2010
It's all over but the selling.
General Motors has fully and effectively introduced the all-new 2011 Chevrolet Volt to an eager American public (and media). The journalists have all driven it, the Twitter and Facebook pages are in place, and there's even a host of celebrity and high-profile endorsements for the car, ranging from electric vehicle enthusiast Alexandra Paul to President Barack Obama.
There's no denying the awareness and image boost the Volt has provided to GM over the past few weeks, and given the automaker's recent history that alone may justify the car's $1 billion investment.
But the bigger question remains: Will it sell?
Managing the $40,000+ Price Tag
The Volt's starting price is $41,000, though adding leather and polished wheels bumps the price to $43,000. GM is quick to point out the $7,500 federal tax credit available on the Volt because of its 16-kWh lithium-ion battery pack (The $33,000 Nissan Leaf, with a 25-kWh battery pack, will also qualify for the $7,500 credit.)
But too often the details of this tax credit are glossed over. Details like not getting that price chopped right off the car at purchase, but having to chase it down as part of your next tax return.
In other words, Volt buyers will still pay over $41,000 for the car (not including taxes, registration, fees, etc.), which means either having that much cash available up front or qualifying for a loan - and making loan payments - based on a $41,000 purchase. Reducing an annual tax bill is all well and good, but it's not the same as reducing the purchase price of a vehicle by $7,500, even if that's how a Volt buyer (or GM) wants to look at it.
So the $41,000 question is - does the Volt cost too much? For buyers with a Lexus LS 600h, Porsche Cayenne S Hybrid or Tesla Roadster already in their garages, probably not. For the other 98 percent of the U.S. population, maybe.
GM plans to produce and sell 10,000 Volts in 2011, a number that shouldn't be too tough to hit given the environmental "first-on-the-blockers" who won't even be looking at the sticker price (which is good, because many of those first 10,000 will likely go for more than the
$41,000 sticker price after dealer gouging).
But for the 2012 model year GM is prepared to ramp production of the Volt up to 45,000 units. This is when we'll finally know if the Volt can establish a significant sales rate.
Toyota sold 140,000 Prius hybrids in 2009 and is on track to sell roughly the same number in 2010, but the Prius starts in the low $20,000 range, or roughly half the cost of a Volt. If one were to argue that twice the price of a Prius translates to half as many sales, Chevrolet could still move 70,000 Volts a year. By that logic 45,000 Volt sales almost sounds conservative.
There's also a Volt lease program that asks for $2,500 down and $350 a month for 36 months. Those numbers sound reasonable at first glance and may prove the most popular path for potential Volt drivers.
Fuel prices are another factor to consider. If they remain stable, and in the $3-a-gallon range, the Volt could struggle to meet that 45,000 sales goal for 2012. Higher gas prices would inevitably lead to higher sales, but how much does gas have to cost to substantially shift consumer buying habits toward fuel-efficient vehicles? You can find plenty of predictions on that topic scattered across the Web, though no one really knows for sure.
Educating the Public
If the Chevrolet Volt's pricing issue remains a potential hurdle to long-term success, at least it's an easily identifiable one. There's a second issue that could prove both more challenging to widespread buyer approval and more difficult to solve: ensuring people understand exactly what the Volt is and how it works.
Controversy surrounding precisely how the Volt's drivetrain is defined and operates has already sprung up, but it ultimately had more to do with engineering terminology than end-user functionality. Regardless of how its defined, the Volt is a vehicle capable of going approximately 40 miles on pure electricity before continuing on for an additional 300-plus miles on gasoline. Simple, right?
Wrong! This is a vehicle unlike any ever previously sold to the American consumer. It has the ability to be powered by electricity from a wall outlet, electricity from an on-board battery, electricity from an on-board generator, or a varying combination of all three depending on driving distance and conditions. This makes it both a technological marvel and a marketing nightmare.
Keep in mind that the average U.S. driver has never even touched, let alone read, his vehicle owner's manual. Now this same group of buyers is expected to both understand how the Volt works while actively maximizing the car's potential energy efficiency by plugging it in, carefully considering daily driving needs and even engaging specific driving modes for specific circumstances (i.e. "Mountain Mode" when scaling a steep pass).
For technically savvy drivers, these activities will be part of the appeal in owning a Volt. Yet for every driver who revels in the car's complexities there will likely be thousands who are simply overwhelmed by them. While it's easy for most people within the automotive industry to grasp how the Volt works, it won't be the same story for the majority of consumers. Think of the questions potential buyers will likely ask.
"It's electric, so I have to keep it plugged in or I'll get stranded when the battery is drained, right?"
"Does the engine or electric motor power the wheels?"
"It runs on gas, so why do I have to plug it in?"
"Can I get those carpool lane stickers for it?"
"Does it get better fuel mileage than a Prius?"
"Does it really need premium fuel?"
Of course none of those questions has a simple answer, and some of them involve explanations that could challenge an engineering student.
One could argue the Toyota Prius was as advanced when it debuted in 2001 as the Volt is for 2011. The Prius also has a history of costing more than similar mid-size sedans. However, the Toyota has never required driver modification. Sure, an awareness of how the Prius' battery, motor, engine and brakes work can lead to altered driving patterns and higher fuel efficiency. But even the most oblivious owner can simply fill the car when the gas gauge nears "E" and still benefit from excellent fuel mileage.
Understanding and optimizing the Volt's technology will require a much higher degree of driver commitment.
EV1, Part 2?
It doesn't take a feature film to understand why GM's EV1 failed. It can be explained in three words: Nobody wanted one.
Yes, GM built just over 1,000 EV1s. And a couple hundred former owners have made plenty of noise about how great the car was and how GM shouldn't have abandoned it. But 1,100 cars and 200 passionate owners do not define success in the modern automotive marketplace, even for a specialized car like the EV1. It simply cost too much while putting too many lifestyle demands on its owners.
There's no denying the Chevrolet Volt provides a far more capable and practical automotive package than the EV1. But those same two issues, what it costs and what it demands of its owner, put it at a disadvantage against cars like the Ford Fusion Hybrid, Toyota Prius or Volkswagen Jetta TDI.
Exactly how this plays out in Volt sales over the next two years remains to be seen.
But it should prove interesting.