Doug Mataconis’ post on the Volt (General Motors Loses Nearly $50,000 Every Time It Sells A Chevy Volt), as well as the news and reaction to the Reuters piece upon which the post is based, lead me to some thought and reading on the subject.
I will state that I am not a Volt booster and, indeed, do not trust GM products (a relevant point, as I am about to purchase a new car). I also remain somewhat ambivalent on aspects of the GM bailout process (although I cannot ignore the fact that the company remains open, which is a significant outcome).
However, I think that the title of this post, taken from an LAT piece (quoting Jeremy Anwyl of Edmunds.com) hits the nail on the head: it is very difficult to judge the Volt without it becoming a wholly political question.
Still, a few things are worth considering, I would think, in an assessment of the vehicle and whether the number reported by Reuters is the right number by which to judge the car. Bob Lutz, writing for Forbes thinks not:
The statement that GM “loses” over $40K per Volt is preposterous. What the “analyst” in whom poor Ben Klayman placed his faith has done is to divide the total development cost and plant investment by the number of Volts produced thus far. That’s like saying that a real estate company that puts up a $10 million building and has rental income of one million the first year is “losing” 9 million dollars, or several hundred thousand per renter.
CNBC provides the basic math:
General Motors has spent roughly $1.2 billion developing the Chevy Volt. And in the last two years it’s only sold 21,500 versions of the extended range electric car. That means GM has lost a little over $55,000 on every Volt it’s sold.
Beyond that, the LAT piece linked above notes the following:
Plenty of vehicles besides the Volt lose money when their development costs are included in the analysis, analysts said.
Anwyl said he suspects Nissan is losing money on every Leaf electric vehicle it sells because of the investment in battery technology.
Even Honda may lose money on its conventional gasoline engine-equipped Fit because the sub-compact has a small profit margin that is eaten up by the unfavorable exchange rate between the Japanese yen and the U.S. dollar, Anwyl said. All of the Fits sold in the U.S. are made in Japan.
“Toyota lost a lot of money in the beginning when it brought the Prius to the world,” Koslowski said. “This is particularly true for cars with new powertrain technology like the Volt.”
So, some comparative data help to set context.
Also, the assertion that the Nissan Leaf is more popular than the Volt doesn’t bear scrutiny, as least in terms of recent sales:
Nissan sold fewer than 700 of the vehicles in August and just a little more than 4,000 so far this year.
The Volt? According to the article, it has sold 13,000 this year. As such, the notion that the Leaf is a radical success versus the Volt does not stand up to the numbers, at least not this year. In fairness to critics, GM did expect to sell twice that many cars.
Now, it should be stated that a Leaf-Volt comparison is problematic, because the Leaf is a fully electric vehicle and the Volt is a hybrid. Still, that is the comparison that comes up (it did in the discussion thread of Doug’s post), so it seemed worth pointing out the numbers. The Toyota Prius is, of course, the King of the Hybrids.
Still, it seems to me that once we set politics aside we can say a few things: 1) including overall development costs of the vehicle into the per sale profits is misleading, 2) there is a development path here not dissimilar to other vehicles, and 3) we really don’t have enough data at this point to declare whether this has been a success or a failure.
I am not writing this to defend GM, the Volt, the bailout, or really much of anything. Rather, I am appealing for a consideration of how things really work, and how comparable situations have played out before rushing to judgment.
On the politics point raised here, it isn’t hard to see this in action. A quick search of the Volt in Google news gets stories from Town Hall, Fox News, and Heritage all pointing out the loss figure.
