Despite a rather high US$39,995 sticker price for the base edition of the Volt, Chevrolet’s range-extended hybrid has sold a record 2,831 units in August. So all is well for GM?
In the case of the Volt, the answer is a bit complicated since it’s not your run-of-the-mill gasoline- or diesel-powered car. It’s a problem shared by every hybrid and all-electric vehicle manufacturer: the development costs, the tooling, the battery packs and the powertrain, when added up, simply make for a very high price.
On Monday, Reuters reported that, “according to estimates provided by industry analysts and manufacturing experts” each Volt costs as much as US$89,000 to build. In other words, General Motors is losing US$49,000 on each Volt it sells.
President of Michigan-based Automotive Consulting Group Dennis Virag commented “the Volt is over-engineered and over-priced”.
Moreover, the news site claimed GM has lowered its lease prices, with some Volt owners paying as little as US$5,050 annually for a two-year period - a practice that may increase sales, but also increases the company's loss per vehicle.
The report said that the initial development budget was US$1.0-1.2 billion excluding sales, marketing and other corporate costs. It then divided that number by the 21,500 cars Chevrolet had shifted until the end of August and came up with the $89,000.
GM responded that the Reuters’ estimate is “grossly wrong” because it allocated all development and manufacturing costs to the units sold to date instead of the model’s lifecycle as it should.
The press release refuting the story added that the numbers quoted are incorrect for one more reason: “Our core research into battery cells, battery packs, controls, electric motors, regenerative braking and other technologies has applications across multiple current and future products, which will help spread over a much higher volume, thereby reducing manufacturing and purchasing costs.”
Therefore, GM may have indeed initially shelled out a lot of cash, but the technologies developed will also be used in other models that will sell in higher numbers, thus justifying the investment.
It did concede, though, that each Volt is sold for less than it actually costs to manufacture.
"It's true, we're not making money yet”, said Doug Parks, GM's vice president of global product programs and the former Volt development chief in an interview. He was adamant though that the Volt will "eventually make money. As the volume comes up and we get into the Gen 2 car, we're going to turn (the losses) around."
GM added that in the long term, its strategy “will eventually lead to profitability for the Volt and future electrified vehicles.”
Still no official word on how much it really costs to build a Volt, though.
By Andrew Tsaousis