Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Larry Burns, General Motors vice president of Research and Development and Strategic Planning, demonstrates how to plug in a Chevy Volt on Capitol Hill in Washington December 4, 2008. (KEVIN LAMARQUE/REUTERS)
Larry Burns, General Motors vice president of Research and Development and Strategic Planning, demonstrates how to plug in a Chevy Volt on Capitol Hill in Washington December 4, 2008. (KEVIN LAMARQUE/REUTERS)

GM’s Volt: The ugly math of low sales, high costs Add to ...

General Motors Co. sold a record number of Chevrolet Volt sedans in August – but that probably isn’t a good thing for the automaker’s bottom line.

Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 (U.S.) on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.

More Related to this Story

Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher. There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce.

And while the loss per vehicle will shrink as more are built and sold, GM is still years away from making money on the Volt, which will soon face new competitors from Ford, Honda and others.

GM’s basic problem is that “the Volt is over-engineered and over-priced,” said Dennis Virag, president of the Michigan-based Automotive Consulting Group.

And in a sign that there may be a wider market problem, Nissan, Honda and Mitsubishi have been struggling to sell their electric and hybrid vehicles, though Toyota’s Prius models have been in increasing demand.

GM’s quandary is how to increase sales volume so that it can spread its estimated $1.2-billion investment in the Volt over more vehicles while reducing manufacturing and component costs – which will be difficult to bring down until sales increase.

But the Volt’s steep $39,995 base price and its complex technology – the car uses expensive lithium-polymer batteries, sophisticated electronics and an electric motor combined with a gasoline engine – have kept many prospective buyers away from Chevy showrooms.

Some are put off by the technical challenges of ownership, mainly related to charging the battery. Plug-in hybrids such as the Volt still take hours to fully charge the batteries – a process that can be speeded up a bit with the installation of a $2,000 commercial-grade charger in the garage.

The lack of interest in the car has prevented GM from coming close to its early, optimistic sales projections. Discounted leases as low as $199 a month helped propel Volt sales in August to 2,831, pushing year-to-date sales to 13,500, well below the 40,000 cars that GM originally had hoped to sell in 2012.

Out in the trenches, even the cheap leases haven’t always been effective.

A Chevrolet dealership that is part of an auto dealer group in Toms River, New Jersey, has sold only one Volt in the last year, said its president Adam Kraushaar. The dealership sells 90 to 100 Chevrolets a month.

The weak sales are forcing GM to idle the Detroit-Hamtramck assembly plant that makes the Chevrolet Volt for four weeks from September 17, according to plant suppliers and union sources. It is the second time GM has had to call a Volt production halt this year.

GM acknowledges the Volt continues to lose money, and suggests it might not reach break even until the next-generation model is launched in about three years.

“It’s true, we’re not making money yet” on the Volt, said Doug Parks, GM’s vice president of global product programs and the former Volt development chief, in an interview. The car “eventually will make money. As the volume comes up and we get into the Gen 2 car, we’re going to turn (the losses) around,” Mr. Parks said.

“I don’t see how General Motors will ever get its money back on that vehicle,” countered Sandy Munro, president of Michigan-based Munro & Associates, which performs detailed tear-down analyses of vehicles and components for global manufacturers and the U.S. government.

It currently costs GM “at least” $75,000 to build the Volt, including development costs, Munro said. That’s nearly twice the base price of the Volt before a $7,500 federal tax credit provided as part of President Barack Obama’s green energy policy.

Single page

Follow us on Twitter: @GlobeBusiness

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories