GM Refutes Reuters’ Claim That Each Volt Costs $89,000 to Build, Though it’s Still Losing Money


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


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Dar1f said... »September 11, 2012

It's ludicrous to think that these cars will be profitable in the first two years. Heck, you can bet that even the most mainstream cars lose money during their first year. 

interstatex said... »September 11, 2012

It's actually not Reuters that estimated this, they just reported that 
Automotive Consulting Group had made this calculation. It also reported that 4 other automotive companies associated with the supply chain had concurred roughly to the cost of each car including development at...$76- $88,000. 
The actual cost per car is estimated between $20-32,000.
A Prius costs $24k.
 Expect another GM bailout within 5 years

Sykirk said... »September 11, 2012

 Do you really think GM is to ask for another bailout in 5 years? They're making billions each year since coming out of bankruptcy. Are you just a "GM Hater" or just an idiot?

Spamism said... »September 11, 2012

The Prius, as you mentioned, can't do what the Volt does. Even the plug-in Prius can't go as far as the Volt can on EV alone.

At $40K, the Volt is twice the car in range and engineering over that of the Prius in any flavour. I'm sure you're aware that it was stated long ago that the first gen Volt was going to loose money on each unit sold.

interstatex said... »September 11, 2012

I'm neither a hater or an idiot, GM actually made approx 1.5 b last year, little more than BMW.

I agree it is a substantial amount however GM face increasing competition from the Asian brands and if the demand for Electric vehicles increases so will the cost of many rare earth materials required for these cars. China owns over 80% of the rare earth mines.
These things considered and the increasingly poor world economic outlook lead me to believe that a company of GM's size is very susceptible to a further economic downturn, especially if their profits are still partially government reliant. 

The Volt is being sold at a massive loss and the demand is still 25% of GM's own projections, basic business sense would say the have a problem.

If you think 1.5 billion a year profit is enough to guarantee success who obviously hadn't noticed the banks collapsed around 5 years ago after decades of massive profits.

Try thinking before insulting people you disagree with.

Jace Loggins said... »September 12, 2012

Well sure. But that's different!

(I have no idea how, I'm anticipating completely clueless arguments like that)

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