The numbers for the Chevrolet plug-in hybrid electric Volt—running costs vs. the competition and the manufacturer’s margin—don’t add up. Never did. Right from its inception, GM was demurring on the timeline for the theoretical vehicle’s theoretical profitability. Early adopters, economy of scale, yada yada yada. Even after GM’s prearranged a $7500 tax credit with Uncle Sugar—an outrageous tilting of the playing field in the former bankrupt’s favor—the Volt remains a guaranteed, sure-fire money loser. Even if the price of gas soars, the Volt will not be an economic proposition. These facts have been largely lost on the mainstream media (MSM), whose myopia for all things green and beautiful has blinded them to the equations that will seal its fate. And even when they do crunch the numbers, they refuse to see the light. To wit CNNMoney. Make the jump to do the math. Otherwise, GM’s headlong rush down the obfuscation highway has a new champion: “So it’s not impossible that the Volt could become a sales success, even if the strict dollar analysis does not work out for it.”
Driving a typical 14,000 miles a year, or 38 miles a day, the Prius would use about 280 gallons of gasoline.
With gas at its current price of about $2.65 a gallon, that would come to about $742 a year in gas, or $421 more than the Volt owners would pay if they can stick with electricity.
Even if gas goes back to the record high of $4.11and stays there, gassing up a Prius would cost about $1,150 a year, giving the Volt an $830 a year cost savings.
But a Prius costs $25,428, on average, according to sales data from Edmunds.com, while GM will probably have to spend $40,000 or more to build each Volt.
While Volt buyers will get a $7,500 tax credit that reduces the still undisclosed purchase price by that amount, the fact is that GM will have to subsidize much of the remaining $7,000 difference in cost to make it competitive with the Prius.
At current gas prices, the $421 a year savings over a period of six years that a new car is typically owned, would mean that a Volt would only be cost competitive with a Prius if was about $34,500 before the tax credit.
That means GM would have to take about a $5,500 loss on each Volt if it is to be strictly competitive.
If you assume modest sales of 20,000 Volts the first year, that would mean about $110 million in additional losses for the cash-strapped automaker.
Luckily, or unluckily, for GM, they don’t plan to build such vast numbers of Volts as 20,000. It’s about 10,000 for the first year. According to Lutz, they’re beavering away on future versions of the vehicle and cost reductions are on their minds.
The big chunk of added cost, of course, is the battery and there’s nothing GM can do about that, it’s the battery industry’s problem. The battery industry is actively seeking to build better/denser/cheaper batteries, so we’ll see some price cuts and improvements as we go along. Volt fans like to talk about 50% reductions in battery cost but that will likely take years to achieve.
That $7500 tax credit is a two-edged sword. It’s stepped, with smaller amounts available for vehicles with smaller batteries. Toyota or any other manufacturer is not necessarily going to leave this marketing support cash from Uncle Sam on the table. They could build a less expensive car and still get help from the government to sell it.
I don’t drive very far every day, some sort of hybrid vehicle with less EV range would be attractive to me. I wouldn’t be surprised if people who are interested in EVs skew towards shorter commutes. Why would I buy a $40K Volt with 40 mile range, if all I need is a $30K Prius with 10 mile range? A shorter range xEV could really eat into GM’s market.
At production levels of 10K, GM will sell all they build an can declare victory. In 2012, if they ramp to 60K units, as they have indicated, that’s when we find out that this is a marketing disaster.
I never believed the Volt was going to work. If they release it, its probably going to be done as a test market like the Honda insight Hydrogen fueled car in California.
Well I guess I still think there is a chance of this thing being somewhat of a hit. OK, not cost justified. Who ever thought it would be (other than GM maybe at one time)?
I just look at other vehicles that sold in sufficient quantity to qualify as at least minor hits at one time. Cars that also could never be cost justified in any way.
How many hundred thousand ES’s have been sold for more bucks than an Avalon let alone an optioned out Camry? Maybe the Volt to some people might have a little status of some kind, just not the exact same status of an ES.
H2’s? Easy to forget now, but when these were first introduced they were a real success story for Hummer. Never made any sense as 99% never went off road and even a Suburban would be over kill for most owners. Status of a different type.
The dumb Smart Car? Had a brief moment in the sun, didn’t it? Sure a Yaris or Fit is probably a more logical choice, but facts rarely deter the passionate.
Think of any weird, over-priced anything. Why do people (some at least) buy a Saab?
I’m not predicting a major Volt success but I think banking on the common sense of the American car buyer to make it a failure is never a sure bet. Might happen.
I keep getting dinged for saying this, but people don’t spend $30k to $40k to save money on gas.
Car buyers spend that type of coin for luxury, status or performance.
The Volt appears to have none of these traits.
Status – it’s a Chevy.
Luxury – a Lexus/BMW/Merc, it ain’t.
Performance – This one is a toss-up – the Tesla performs very well – will the Volt perform like a Tesla? – a definite maybe or maybe not.
Ultimately, a Volt buyer wants economy and you can have that for much less buying a Prius.
Finally, Toyota is developing a Plug-in variant of the Prius. Honda is also thinking about developing a plug-in hybrid thanks to the very same policies that benefit the Volt.
If GM was profitable, I’d say this is a good research project/halo car – but GM is not profitable, and this is the wrong car at the wrong time.
-ted
“that would mean about $110 million in additional losses for the (U.S. taxpayer)”
There, Robert. I fixed that last sentence for you.
Please don’t take my tax money and give it to someone to buy one of these. C4C is bad enough.
Time and again we see the financial calculations telling us that you can’t save money on gas, so it’s not a wise choice to buy X over Y. Those are calculations that you perform when you are looking for an excuse NOT to buy something, i.e. cold hard business finance.
Don’t underestimate the gee-whiz factor that makes people buy one because they WANT one. Otherwise why would anyone pay $15,000 more for an Escalade when they could have a Suburban?
I hope the Volt does better than the deathwatchers here predict. I’m not placing any bets though.
Perhaps left out of this analysis: does the Prius really make a profit for Toyota, or does that car lose money?
Sorry if I’m out of the loop. That question has probably already been settled here on TTAC. Can anyone comment?
If Toyota’s losing money on each Prius, then perhaps the unprofitable nature of the Volt is less shocking (pardon the pun)?
What’s GM’s reaction going to be if the Volt cuts into Malibu hybrid sales. Also as stated by GM, competition isn’t stagnating on hybrid & ev cars. Two people I know that only have car knowledge from msm said $40,000?!, expensive. I said there would be $7500 off from Govt. first year and they still thought it was expensive. Given that the Prius, Fusion hybrid, etc. get 40 miles before using gas, don’t require you to plug it in, I think the consumer will not want to do more and having to remember to plug it in and unplug it before they leave (yanked out cord comes to mind). Also being near an outlet even at your own home isn’t as easy as GM thinks, running an extension cord another inconvenience.
Its a year and a half old, but my in-depth comparison of operating costs of the Volt and Prius is still pretty spot-on:
https://www.thetruthaboutcars.com/the-great-hybrid-showdown-chevrolet-volt-vs-toyota-prius/
dingram01, Yes, the Prius is not only profitable, but Toyota has said it now has the same profit margin as their other cars. It’s much, much cheaper to build than the Volt; about $3k more than a Corolla, which explains why it costs about $3k more than a Corolla.
The big chunk of added cost, of course, is the battery and there’s nothing GM can do about that, it’s the battery industry’s problem.
If became GM’s problem when they decided to make a car who’s succees is contingent on the availability of the battery.
If only GM had started working on the Volt in the 90s and released it around the same time as the first generation Prius. They could have used all that SUV/truck money they were swimming in at the time to get it refined and profitable. But since GM now can’t afford a pack of gum without asking for an advance in their allowance from Obama, they’re screwed. (What is this long term planning that you speak of?)
The Volt,or the Prius for that matter,is not for the budget minded.
If you want to truly save money. Buy a gently used 2 to 3 year vehicle. Buy the most fuel efficient vehicle,that you and your family are comfortable with,that also will meet your needs. Initial cost is a huge factor. But if you truly need a Tahoe buy one. If a Civic will work,buy one or an
Impala. They are practically giving away 2 year old G6s.A Volvo an Accura a pick up truck, whatever.
Keep your vehicle tuned,check your tire preasure
Maintain repair records,wash it vacum it.Cut your driving down.
Drive your vehicle to the point that YOU think your spending too much on repairs.Forget about depreacation it just muddles your thinking.
By following a few simple steps you can save thousands.
TRL: “banking on the common sense of the American car buyer to make it a failure is never a sure bet” – heh.
I understand that not all (hell, probably MOST) car purchases are not based on economics/common sense. And there are certainly plenty of status-seeking greenies willing to shell out, at least once, for a Volt.
But Mr. Average ain’t a status-seeking greenie, nor does he have money to burn. GM’s banking on this being:
1) a green halo
2) a way to meet CAFE
3) part of meeting its new Govrnment mandate.
Making money on it was never in the equation.
Wasn’t the Prius a loss initially, at least in the planning period?
At the time, if the bean counters had their say, it too would not be here today.
While NOT a Prius fan, because I love the driving of cars and not the saving of fuel, I am glad for its success.
I love R&D people getting their opportunities.
And I hope the Volt results in a future of powerful, fun to drive electric cars.
BUT…they had better be FUN!
So far, the Prius is simply a commuting machine, NOT a fun to drive car.
Is it that terribly hard to stuff batteries in a chevy aveo? The most expensive thing about it would be the batteries. Jeez. That car can’t logically be worth more than 3k as a body frame.
MSM creates the impression that switching from a gas powered car to an electric one will lower the cost of operation by a lot. The amount of energy to move a car is the same whether its gas powered or electric powered. There may be temporary advantages to an electric car but when everyone switches to electric – the advantages will probably go away.
I am always amused by folks who tout used cooking oil for fuel. While it works just fine, where does the new cooking oil come from? And will it be in quantities to run the entire auto fleet of the nation? And what about our cholesterol levels and waistlines creating the used cooking oil? Aren’t we supposed to be staying away from this?
re:photo
I cringe when I see a photo like this. Using a 110 volt outlet for anything more than casual charging of an auto battery will take hours and hours of charging time.
no one knows exactly what the manufacturing costs will be to GM – so let’s all go crazy with speculations – oh wait – CNN Money is never wrong so there we have it on good authority – GM will file for bankruptcy based on Volt sales or maybe it’ll be the Stingray concept that will pull the plug on the new GM – my money is on Buick being the death of GM. Maybe Tata Motors will purchase GM and save it from itself.
The “six years that a car is typically owned”? Who cares how much it saves over the period that a car is “typically owned”; what matters is how much it saved over the lifespan of the vehicle, which these days averages over 19 years. The cost savings after you own it will be factored into the resale value of the vehicles. Or, to put it another way, if you want to consider how much it’ll be worth after six years, you also need to consider its expected low depreciation rate, since depreciation rates are often tied to operating costs.
KarenRei: “The “six years that a car is typically owned”? Who cares how much it saves over the period that a car is “typically owned”; what matters is how much it saved over the lifespan of the vehicle, which these days averages over 19 years.”
While I understand what you are saying, the savings the car accumulates after the original owners sells it don’t end up in his pocket, so he really doesn’t care. The car has to make a case within the original ownership period.
Now, if you try to sell a car that uses little gas at a time when fuel prices are high, that will likely net you extra money on the sale, so that is a consideration.
But that’s where depreciation comes into play. When people buy a user car, they look at how much it’s going to cost to operate. The older the car, the more that typically comes into play, as all of the “newness” and “luxury” has worn off, and the only thing left to it is how cheaply it can convey you to your destination. Hence the reason why a Hummer H2 depreciates three times faster than a Prius.
You don’t get the savings directly, but you do get them indirectly.
Now, there is an argument to make that depreciation rates aren’t linear, and so those late on the depreciation curve make out like bandits while those early on the curve lose. But that’s more of an argument about not buying *any* car new.
me: “The big chunk of added cost, of course, is the battery and there’s nothing GM can do about that, it’s the battery industry’s problem.”
drifter: “If became GM’s problem when they decided to make a car who’s succees is contingent on the availability of the battery.”
drifty,
I expressed myself poorly and you’re fairly well right. GM’s at the mercy of the battery industry and the pace of battery development. Yes, the battery industry is motivated to improve price/performance/etc, but GM has no control over it.
Worse, when improved batteries are avaialable, GM doesn’t own the technology; it’s available to anyone. GM has no strategic advantage.
KarenRei: “But that’s where depreciation comes into play… (operating cost)…”
Yes, but it’s not as big an effect as you might think. Gas prices must spike really hard to make a significant difference in vehicle prices. Vehicle depreciation based on mileage and condition is probably almost always a bigger factor than operating cost to the seller.
I’m not sure the market for this thing has anything to do with cost-effectiveness. There are plenty of cost analysis articles out there comparing the Prius to the TDI VWs or even the Yaris, and – in the articles I’ve looked at – the conventional vehicles almost always come out as the most cost-effective solution (even with high-priced gas).
Simply: people who are impressed with mileage and technology and “being green” will buy this car. It is not made for enthusiasts, and isn’t going to be marketed to them. It will be marketed to celebs who want to make a “buy American” and “buy green” statement, however, and THAT will generate enough PR to justify the profit lost.
GM has probably written off the whole project as “promotional expense” already!
“in the articles I’ve looked at – the conventional vehicles almost always come out as the most cost-effective solution (even with high-priced gas).”
What articles are you reading? The Prius is #1 on Consumer Reports’ best value list.
To those who tend to credit American consumers with common sense and good taste, I off these 10 reminders that, as ol’ PT Barnum said, there’s one born every minute:
The pet rock
Fall-out shelters
Leisure suits
Barack Obama
Escalades (already mentioned)
Detroit Lion season tickets
KISS
Evel Knievel’s Snake River Canyon jump
Atlantic City
Bottled Water
What these 10 things all have in common is that many, many people who otherwise should have known better have ‘bought’ them, allowing the proprietors to pocket large sums of money.
Did the first Plasma TVs make financial sense at $20k per? Or the first Prius, which did sell at a loss to Toyota and was a pretty awful little runnabout. If they’re making a profit now, it’s only after ten years of government subsidies and corporate investment. Hybrid technology is only a stop-gap solution to what people consider a fuel crisis and environmental issues. Clearly building a Prius is not very environmentally friendly anyway. Forget the Prius, people spend a premium on hybrids, some of which aren’t even very fuel efficient. If the Volt works like it should, it will be revolutionary. Early adopters will buy them, and over time the cost will go down to benefit everyone else.
The only way for GM to sell this car in volume is to reduce the price down to $29.9k. Assuming the government (YOU) kicks in another $7500 in tax incentives, the Volt suddenly is price-competitive with the Prius.
At that point, people will begin to rationally evaluate other factors:
Range: Prius wins (600 miles vs 350 for Volt)
Fuel economy for 1 tank of gas, highway driving: Prius wins (51 vs 44 mpg)
Quality: Prius wins (historically speaking)
# Fuels: Prius wins (gasoline only)
Maintenance: Prius wins (e.g.: standard tires vs 21″ special tires for Volt)
Driveability: Prius wins (single performance curve)
I don’t think Toyota should lose much sleep over this one.
So how much does it cost to charge this car every night for years?
Don’t forgot to factor in the cap & tax bill that is coming to an electric bill near you!
To those who tend to credit American consumers with common sense and good taste, I off these 10 reminders that, as ol’ PT Barnum said, there’s one born every minute:
The pet rock
Fall-out shelters
Leisure suits
Barack Obama
Escalades (already mentioned)
Detroit Lion season tickets
KISS
Evel Knievel’s Snake River Canyon jump
Atlantic City
Bottled Water
What these 10 things all have in common is that many, many people who otherwise should have known better have ‘bought’ them, allowing the proprietors to pocket large sums of money.
You forgot the biggest American disgrace of all:Bush’s second term
@gslippy:
Electric powered cars are most efficient when the accelerate as fast as the battery allows, gasoline gas don’t work that way as fast acceleration isn’t the most efficient way. That is why the expected driveability of a Volt will be so much better than a Prius.
Since when does the Prius run on normal tires? You can put normal tires under it but than it wont be as fuel efficient. Also electric engines are highly reliable that even Chrysler would have trouble to F it up.
Also the Volt wins with fuel, you need to drive to a gas station to fill her up while with the Volt you can stay home.
It is cheaper to drive a Volt X miles so it wins that to.
Range depends on the model. Volt will come with different battery sizes
I’m with lw – what’s it going to cost to charge a Volt? Since I got my electric bill today, I am quite painfully aware that electricity is NOT free. In fact, here on the coast of Maine it is just about $.20/kwH. And that is AFTER a recent rate reduction! My electric bill runs $200-300/month, for an admittedly tech-packed and air-conditioned 1200sq/ft house. That’s before I charge up a car…
Electricity will be much cheaper than gas. 1/5
@Charly
Can I have some numbers please? 1/5 the price of gas based on what price for gas, and what price for electricity? For example, electricity is more than 10X more expensive in my area than in parts of Wyoming, and gas is more than $1/gal cheaper in parts of NJ than in parts of CA. So how many KwH is it going to take to charge a Volt? We already know that a full charge will take one “up to” 40 miles… Though somehow I expect that miles number to be a WHOLE lot lower in the dead of a Maine winter at night.
gas contains about 36.6 kWh/US gal but the gas engine is about 1/5 as efficient as a battery/electro motor combo.
Electricity also cost less if you use a lot and promise not to use it when there is great demand. Battery powered cars use a lot of electricity and you don’t mind that most of the charging is done between 3 and 5 am
@Golden2husky
You’ve hit on it. This country is literally full of suckers.
Are you dumb and want a Volt? Go buy one…
Are you smart and want a Volt, but realize that it costs too much to make / sell? No problem. Some dumbnuts is buying one.
Dumbnuts will make a couple payments, figure out that he can’t afford it (and he won’t even understand why it was a bad deal).
Then you can buy it lightly used for $20K and enjoy a great deal.
The first year of depreciation on the Volt will fix the price. The US government owned banks will eat the 20K (using your tax dollars and/or raising fees on your checking account) and all is well.
@FloorIt – IIRC GM announced that they are not selling Malibu hybrids any more – sales were very low, so the Volt cannot eat into those sales. And there is a failsafe on the Volt so that you cannot start the car when the cord is plugged into an outlet.
@paulie – I realize the emo I might generate dropping Lyle Dennis’ name, but he does have a video of his ride in the pre-prod Volt. From a co-worker I hear tell that the Volt will go like a bat out of hell because the ‘tricity is always on – it will accelerate faster than an ICE. It sounds like it will be fun to drive.
@tced2 – from GM’s Volt website, they say it will take 6 hours on a 110 outlet to charge 8kWh.
@gslippy – How can you compare the Volt to anything when it isn’t on the road yet? All is TBD in reality.
@lw and krhodes1 – cost to charge is whatever your kWh rate is, so in Maine at 20 cents per kWh, and using 8kWh to charge it will cost $1.60. Here in Michigan, I have a lower rate at night when usage is off-peak.
ChristyGarwood: “@gslippy – How can you compare the Volt to anything when it isn’t on the road yet? All is TBD in reality.”
If GM stops talking about it, so will we.
ChristyGarwood:
I think this is where people will get hosed.
Let’s say that it costs $2 a night to charge my Volt. That’s $60 a month.. $720 a year added to the cost of the car.
Maybe that’s less than the gas, but it sure needs to figure into the Total Cost of Ownership.
American’s (myself included) rarely consider the cost of electricity when we bring home something with a plug on it.
Let’s say that it costs $2 a night to charge my Volt. That’s $60 a month.. $720 a year added to the cost of the car.
Uh no, for areas that are $0.12 Kwh (which is the US Average) the Volt costs 40 cents to charge 40 miles. Not even remotely $2 a night. Electricity is REALLY cheap at night, almost 1/3 the price of day time power.