GM offers big discounts to boost Volt sales (Update)

Sep 23, 2012 by Tom Krisher
This Feb. 19, 2012 file photo, shows a 2012 Chevrolet Volt at a Chevrolet dealership in the south Denver suburb of Englewood, Colo. Sales of the Volt set a monthly record of 2,800 in August, mostly because of steep discounts. (AP Photo/David Zalubowski)

General Motors rolled out the Chevrolet Volt two years ago with lofty sales goals and the promise of a new technology that someday would help end America's dependence on oil.

So it seemed like a good thing in August when of the $40,000 car set a monthly record of 2,800. But a closer look shows that things aren't what they seem for the cutting-edge car.

Sales rose mostly because of discounts of almost $10,000, or 25 percent of the Volt's sticker price, according to figures from TrueCar.com, an auto pricing website. Other pricing services gave similar numbers, and dealers confirmed that steeply discounted Volts are selling better than a few months ago.

GM's discounts on the Volt are more than four times the industry's per-vehicle average, according to TrueCar estimates. Edmunds.com and J.D. Power and Associates say they're about three times the average. Discounts include low-interest financing, cash discounts to buyers, sales bonuses to dealers, and subsidized leases.

Americans have been slow to embrace electric cars. But the Volt's August sales show they're willing to buy if prices are low enough. Even so, electrics have a long way to go before they enter the mainstream and make money for car companies. Electrics and gas-electric hybrids account for just 3.5 percent of U.S. this year. GM is losing thousands of dollars on every Volt, raising the question of how long it can keep eating the steep losses.

For the foreseeable future, carmakers will have to cut prices to move electric vehicles off dealer lots. The nonpartisan Congressional Budget Office says the cost of electric cars must drop to be competitive with gasoline-powered ones.

GM executives have conceded from the start that they were losing money on the Volt, and that was before the big discounts.

Now the losses could be even higher. It costs $60,000 to $75,000 to build a Volt, including development, manufacturing and raw materials, estimates Sandy Munro, president of Munro & Associates, a Troy, Michigan, company that analyzes vehicle production expenses for automakers. Much of the cost comes from an expensive combination of two power systems—electric and gasoline. With a sticker price of $40,000, minus the $10,000 the company pays in incentives, GM gets roughly $30,000 for every Volt. So it could be losing at least $30,000 per car.

"It certainly wasn't a rousing success," Carter Driscoll, senior analyst for CapStone Investments who follows , says of the Volt.

GM confirmed there are incentives on the Volt and that the company loses money on the car. But the automaker declined to give figures for the discounts or the losses. The figures exclude a federal tax credit that goes to buyers.

The automaker says Munro's estimate is high because it doesn't spread the Volt's costs far enough into the future, when more Volts will be sold. Automakers typically spend $1 billion or more to develop a car, and sometimes don't recoup the investment and start making money until late in its life. Also, Volt technology will be used in future cars and trucks, eventually leading to profits, the company says.

GM spokesman Jim Cain says most of the Volt discounts come in the form of lease deals, which account for about two-thirds of sales. In some markets, Volts can be leased for $249 per month with $2,400 down.

"We're trying to create a market for a brand-new technology," Cain says.

NO SPARK AT THE START

The Volt, a four-seat compact, was rolled out in a few states in December 2010 with a starting price of $41,000.

GM had high hopes. The car's features stacked up well against the Nissan Leaf, a pure electric car that debuted about the same time and is the Volt's closest competitor. The Volt goes about 35 miles (56 kilometers) on battery power, then a gasoline-powered generator can take over, giving it the same range as a car with a gasoline engine. And the battery can be recharged in 10 hours from a standard home electrical outlet for about $1.50.

But the timing of the launch was poor. The pricey car hit showrooms when many buyers were reeling from the bad economy and turned off by the government's $50 billion bailout of GM.

"Let's face it, over $40,000 is asking a lot for a compact car," says Bob Lutz, a retired GM vice chairman who led the development of the Volt.

Even a $7,500 federal tax credit, which dropped the Volt's sticker price to $33,500, did little to promote sales. The car cost $7,000 more than the Leaf, and $13,000 above a well-equipped compact with a gas engine.

As it reached more dealers in 2011, the Volt had to overcome more than a high price and recession-weary Americans. The government found that the battery could catch fire after crash tests. In California, a key market because of its tech-savvy population, another roadblock emerged. Volt drivers traveling alone weren't allowed to use carpool lanes because the car didn't qualify for a state exemption. Drivers of the Toyota Prius hybrid, meanwhile, could use those lanes, thanks to the exemption for lower-polluting vehicles.

U.S. Volt sales totaled just 7,700 in 2011, short of GM's goal of 10,000 and a fraction of the 136,000 for the Prius hybrid, the world's best-selling alternative fuel vehicle. Volt sales have climbed to more than 13,000 this year. But at their current pace, sales will still miss the company's 2012 target of 60,000 worldwide.

MOVING THE NEEDLE

Faced with disappointing sales, GM began toying with discounts. In June of 2011, the company knocked $1,000 off the Volt's starting price, but it didn't help. So early this year, GM started offering many more discounts, which soared to $10,000 per car in August.

The Volt is now the top-selling electric car in the U.S. —7,400 ahead of the Prius Plug-in. Nissan's Leaf is a distant third, and analysts say Volt sales could reach 20,000 this year.

Spikes in gas prices also have helped sales, especially when incentives rise at the same time. The national average price of gasoline rose at least 24 cents a gallon in March and August. Those were the Volt's two best sales months.

Other changes have helped boost the car's appeal. Engineers figured out that the Volt fires were the result of a coolant leak that caused electrical shorts after side-impact crash tests. GM retrofitted the car with more steel to protect the battery. No fires were ever reported on real-world roads.

The carpool problem, which had cost sales on the West Coast, also was resolved. California has 1,500 miles (2,400 kilometers) of freeway lanes that can be used only by cars carrying two or more people. But there are exceptions allowing lower-pollution vehicles with one person. Initially, the Volt didn't qualify because its gasoline-powered generator didn't meet the pollution standards.

But engineers eventually cut the generator's pollution, and the Volt won an exception in late February, immediately boosting sales in a state where one-quarter of all Volts, or about 3,400, were sold this year.

Before the cheap leases and the carpool exemption, Bunnin in Culver City, California, was selling three to five Volts per month. The dealership sold 36 last month, mostly leases, and it is struggling to keep Volts in stock, says sales manager Chad Kelman.

"It definitely helps to discount," Kelman says. "The market in L.A. is fiercely competitive."

Gas in Los Angeles, which now runs more than $4 per gallon, was the big reason that Donald Keller traded in his 2007 Lexus ES350 for a 2012 Volt in July. But he might not have bought it without $5,000 in discounts from Bunnin Chevy.

Keller, 82, who volunteers to take senior citizens to the grocery store and medical appointments, says he's driven more than 1,100 miles (1,770 kilometers) in his Volt, and hasn't bought any gasoline. Charging the car has boosted his electric bill by about $40 per month, but he used to spend $200 a month on gas for the Lexus.

"I don't go to the (gas) station and I don't have to worry about the price," he says.

AIMING FOR THE MAINSTREAM

While the Volt isn't helping GM's bottom line, it's not in danger of being canceled anytime soon.

GM can subsidize the Volt's cost from profits on other cars, says CapStone's Driscoll. But eventually GM will have to get closer to breakeven or make money, he says. GM earned almost $2.5 billion overall in the first half of this year.

Discounting the price should help Volt sales expand beyond early adopters, says Michael Lew, an energy efficiency analyst for the Needham & Co. investment firm. That's important because if sales increase, GM will have more negotiating power with parts suppliers to cut costs and stanch losses, he says.

GM says that the Volt has helped the company, even if it never makes a dime. The car has pulled in customers from rival brands, and helped Chevy wrestle at least part of the environmental halo from Toyota's Prius, executives say. It also will help GM meet tough government fuel economy standards.

GM's Cain says the company wants all cars and trucks to be profitable, but some take longer than others.

"Its prime purpose was to introduce a new generation of technology," says Lutz, the former vice chairman. "And at the same time ... demonstrate to the world that is way more technologically capable than the people give it credit for."

The 5 top-selling electric cars in the US

Americans have been slow to adopt electric cars. Here are the five top sellers in the U.S. this year, with sales listed through August.

Chevrolet Volt: 13,497

Toyota Prius Plug-in: 6,082

Nissan Leaf: 4,228

Mitsubishi i-MiEV: 403

Ford Focus Electric: 169

Source: Auto companies, Autodata Corp.

Fisker Automotive says it has sold more than 1,000 Karma sports sedans in the U.S. since December but would not say how many were sold this year. Ford Focus Electric fleet sales started in December, but it was not in dealers until May.

Explore further: Engineers recall five-year planning for nation's largest federally owned wind project

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User comments : 24

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Milou
2 / 5 (4) Sep 22, 2012
I guess GM will never learn it takes a lot of money to sell junk. I am not talking about electric cars but about their product/services. The only good thing about GM is their management. And they are the worst in the world.
Vendicar Dickarian
2 / 5 (4) Sep 22, 2012
I guess GM will never learn it takes a lot of money to sell junk. I am not talking about electric cars but about their product/services. The only good thing about GM is their management. And they are the worst in the world.


Yeah, those Corvettes just suck.
jerryd
2 / 5 (4) Sep 22, 2012
GM isn't losing money on the Volt as it was overpriced to begin with. One measures auto costs over the model run which is 3-4 yrs. Plus the gov paid most of the start up costs.

So lowing the price to more reasonable $30k will get it produced in the numbers needed.

What we really need are lightweight, aero EV's that need much smaller battery packs. A composite body/chassis stronger than steel could weight 50% less along with a 12kw generator and a 70% smaller battery pack would give 50 mile range on battery while having unlimited range on the generator.

We don't really need overweight, overpriced and overteched EV's. KIS is the way. EV's are simple machines, let's keep them that way.

I drive mylightweight composite body/chassis EV's at 25% of the cost of a similar ICE everything included. And I laugh all the way to the bank!!!
jerryd
3 / 5 (2) Sep 22, 2012
Look up the GM Ultralite and Toyota X-1 showcars shows the way but using medium tech composites instead of costly and barely better Carbon fiber.
Eikka
2.3 / 5 (3) Sep 23, 2012
What we really need are lightweight, aero EV's that need much smaller battery packs.


It's a tough sell though, because rigidity does not directly translate to safety. The smaller the car, and the more rigid it is, the higher the acceleration forces on the passengers in a crash. Of course if it's not rigid then they'll just get crushed.

We can go back to 1950 when European small cars weighed in at 500 kg instead of 1500 kg. For example, the Citroen 2CV went 70 miles on a gallon.

But not without a compromize in safety. Better materials can stand higher forces, but they also fail more catastrophically, and seatbelts and airbags don't completely compensate for missing crumple zones and the volume of material around you that can carry the stresses of a collision. You do survive a crash in a Smart Fortwo, but you won't walk out of it because you'll have no knees.

http://www.youtub...I#t=131s
Husky
1.5 / 5 (2) Sep 23, 2012
long term leasecontract/constructions are very appealing for electric cars because as a consumer you can use your montly savings on gasoline as a substantial amount of the monthly leasepayment, for the carmanufacturer it makes it possible to make a car that is really too expensive to buy off the shelf come into the hands of the masses.
Eikka
3.7 / 5 (3) Sep 23, 2012
long term leasecontract/constructions are very appealing for electric cars


Yes, on paper, but then you have to pay for the overhead, profit and bureaucracy of the party that lends you the car and you end up paying more.

There's a reason why people don't drive leased cars to better afford them right now. Taking a loan to buy a car makes more sense than leasing one.
JoeBlue
2.6 / 5 (5) Sep 23, 2012
What does this article have to do with the aspect of this site?
ScooterG
1 / 5 (3) Sep 23, 2012
If the Chevy volt is such a wonderful car, why doesn't the Obama administration purchase all of them and require their use by guv employees?
Newbeak
not rated yet Sep 23, 2012
You do survive a crash in a Smart Fortwo, but you won't walk out of it because you'll have no knees.

http://www.youtub...I#t=131s

Having no knees would be the least of your problems.Your heart,among other internal organs, would be torn loose by the huge g forces,and you would be dead,even though your corpse looked like it should have survived.
Newbeak
not rated yet Sep 23, 2012

There's a reason why people don't drive leased cars to better afford them right now. Taking a loan to buy a car makes more sense than leasing one.

Yeah,I could never see myself leasing a car,as I couldn't deduct running expenses from my income taxes-it would only make sense to lease if your business,or the company you worked for, could deduct these expenses.I also don't like the idea of spending thousands and then turning the car in at the end.
Newbeak
5 / 5 (2) Sep 23, 2012
If the Chevy volt is such a wonderful car, why doesn't the Obama administration purchase all of them and require their use by guv employees?

Where would he get the money? It is now mathematically impossible to repay the national debt: http://theeconomi...nal-debt
Physmet
2.3 / 5 (3) Sep 23, 2012
I understand that companies choose to float a bill to further a technology. However, figure the goal of 20,000 Volts to be sold this year at a loss of $30,000. That's $600m dollars for one year! That can't be sustainable. I guess there are always more taxpayer - I mean government - dollars to throw at it.
Newbeak
5 / 5 (1) Sep 23, 2012
It's a shame the Volt can't be price competitive with the Japanese hybrids.One reason could be the Volt is a series hybrid,whereas the Prius and Insight are parallel hybrids,so GM is breaking new ground here.I prefer the series hybrid concept,as you are always burning gas with the parallel hybrid concept,but none with the series hybrid concept,at least until you hit the 40 mile mark.Yes,I know,the Japanese cars run on battery power too,but they have less electric range before the gas engine starts up.I like reading about people like Donald Keller and their personal experience with the Volt-1100 miles without burning a drop of gas.
Eikka
4 / 5 (1) Sep 23, 2012
whereas the Prius and Insight are parallel hybrids,so GM is breaking new ground here


Both versions are actually as old as the car itself.

http://en.wikiped...e_Hybrid

It all comes down to the batteries, which still aren't good enough, and still aren't cheap enough.
Newbeak
not rated yet Sep 23, 2012

Both versions are actually as old as the car itself.

http://en.wikiped...e_Hybrid

It all comes down to the batteries, which still aren't good enough, and still aren't cheap enough.

Okay,but I was talking about modern attempts at a series hybrid.
Agreed,batteries are a bottleneck to electric car range.Until they find better cells,what about the ebuggy for long road trips? See: http://www.greenc...-trailer
freethinking
1 / 5 (4) Sep 23, 2012
I pay up to $4000 for a new volt. Any more and it would be a waste of money for me as I can get many used cars at around $4K which would be cheaper to operate in the longer run.

Actually right now I'm looking at purchasing a $40K vehicle a ford F150. For $40K I get a safe vehicle that will last me most likely 15 years.
ormondotvos
3 / 5 (4) Sep 23, 2012
Come on, people, let's stop rehashing the same old misinformation about cars, green tech, and politics.

Electricity is cheaper and less polluting than gas cars. Small cars and big cars both kill you if you insist on smashing into a concrete abutment. Government is efficient and necessary for those things not profitable under capitalism.
Eikka
1 / 5 (1) Sep 24, 2012
what about the ebuggy for long road trips?


You ever tried to drive around with a trailer? It's not too bad on the long stretches, if there's not much sidewind, but it gets really annoying in traffic and in the city, and generally just trying to park a car with an extra appendage going left when you go right and vice versa.

There's also inherent safety problems with trailers, because they tend to make a car spin or flip in an emergency stop because the trailer tries to overtake the car with its momentum, unless they're fitted with slave brakes, but then they cause the pulling car to understeer badly when braking.

And the trailer will probably cost a third of the car's price anyways.
Newbeak
not rated yet Sep 24, 2012

And the trailer will probably cost a third of the car's price anyways.

But you don't own the trailer,you rent it.You do have to buy a hitch and equipment to prepare your car to use the trailer,but after that,you only pay for what energy you use.Also,you drop off the trailer at a depot near your destination,so you don't have to deal with parking your car with the trailer in tow.You are probably right about the safety issue,but thousands manage to tow trailers now without problems.To my mind,it is an ingenious solution to range until it is replaced by higher capacity batteries.
freethinking
1 / 5 (2) Sep 25, 2012
trailer idea is an interesting idea. Now to logestics. Towing the trailer will use more energy, then you would need to drive to where they have these spare trailers hanging around. What happens if they are out of trailers, do you wait or go drive to another station where they might have them, when you drop off the trailer, what happens if they have too many.

Then there is the pollution of so much lead and acid everywhere. Who is responsible? You would then need to raise your car insurance to cover the cost.

Don't anyone get me wrong. I am against gas engines. I want them gone, I think they are old fashioned. However, until someone comes up with a better, safer, cheaper method, we are stuck with them.
Eikka
1 / 5 (1) Sep 25, 2012
But you don't own the trailer,you rent it.


So that means it's only useful if you live close enough to a trailer rental, and your destination is close enough as well. Might as well rent an entire vehicle instead so you don't have to pull a trailer behind you.

when you drop off the trailer, what happens if they have too many.


Just like with rental cars, they pay some dude to drive the extra trailers to dealers that don't have enough. That of course means extra miles driven, but that's the price you have to pay.

Same thing with battery swapping schemes. You need a delivery truck to shuffle batteries between the stations so they don't suddenly run out when people don't immediately return the same way.
Eikka
1 / 5 (1) Sep 25, 2012
You are probably right about the safety issue,but thousands manage to tow trailers now without problems.


In many countries you need a special lisence to drive with a trailer, or you can't drive faster than 50 mph, or you can't enter a freeway with a trailer, or all of the above.

Newbeak
1 / 5 (1) Sep 25, 2012

So that means it's only useful if you live close enough to a trailer rental, and your destination is close enough as well. Might as well rent an entire vehicle instead so you don't have to pull a trailer behind you.

Hey,I think it is a good idea,not perfect.It is new to me,and if it takes some ICE autos off the highway,I am all for it.