The new DS3, customise every feature to suit your style
General Motors sold a record number of Chevrolet Volt sedans in August - but that probably isn't a good thing for the carmaker'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 (R400 000) on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.
Cheap Volt lease offers that are meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher. There are some Americans paying just $5050 (R41 200) to drive around for two years in a vehicle that cost as much as $89 000 (R726 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 range has been in increasing demand.
GM's quandary is how to increase sales volume so that it can spread its estimated $1.2-billion (9.8-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 (R326 350) 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 been speeded up a bit with the installation of a 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 have helped propel Volt sales in August to 2831, pushing year-to-date sales to 13 500, well below the 40 000 cars that GM originally had hoped to sell in 2012.
WILL IT EVENTUALLY SUCCEED?
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,” 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 $7500 federal tax credit provided as part of President Barack Obama's green energy policy.
Other estimates range from $76 000 to $88 000, according to four industry consultants contacted by Reuters. The consultants' companies all have performed work for GM and are familiar with the Volt's development and production. They requested anonymity because of the sensitive nature of their auto industry ties. [Factbox on estimates - nL2E8K7HPC]
Parks declined to comment on specific costs related to the Volt.
The Volt costs more to build for several reasons, mostly related to the car's richer content, complex technology and still-low sales and production volumes.
The Volt also has a number of unique parts, including the battery pack, the electric motor and the power electronics.
Some of GM's suppliers also impose cost penalties on the automaker because the Volt's production volume remains well below projections.
Still, as the company wrestles with how to drive down costs and increase showroom traffic, Parks said the Volt is an important car for GM in other respects.
“It wasn't conceived as a way to make tons of money,” he said. “It was a big dip in the technology pool for GM. We've learned a boatload of stuff that we're deploying on other models,” Parks said. Those include the Cruze and such future cars as the 2014 Cadillac ELR hybrid.