Pity the automotive industry. With a minimum three-year lead time for new product development, timing vehicle launches to coincide with appropriate fuel price levels is never easy. Chevy’s Volt, for example, was developed and hyped during the gas price spike of 2008 when it seemed almost anyone would pay a hefty premium to ease some of the pinch at the pump. Now though, with gas prices holding steady at around $3, there’s reason to question whether consumers will flock to unproven, expensive vehicles like the Volt, absent a pressing economic incentive to reduce gas consumption. The Freep takes on this topic today, asking with gas prices so low, will anyone buy a Volt? And this is not mere media hype. Bob Lutz fretted about this possibility last year, when he said
If gasoline stays cheap, then the American public says, “I’m not interested in that; I will keep my Tahoe longer.” It puts us in the industry in a position where we are at war with the customer
This would be a depressingly familiar position for GM to find itself in, especially since it would be a product of The General striving to do something different. Gas prices are slowly beginning to go up again, but there’s no sign that this summer will see the kind of energy price volatility that will have the Volt and Cruze (let alone the Nissan Leaf) flying off dealer lots. Do you see gas prices going up soon? How expensive will gas need to be before Americans see cars like the Volt as a mainstream option? What happens to the Volt if gas prices stay level, or even drop? No only are these intrinsically interesting questions, but there’s also lots of money (including lots of taxpayer money) riding on the outcome. What say you?
I don’t know about the Cruze, but if the Prius is used as the measuring stick, then sales of the Volt may not be impacted as much by the price of gas as they will be by negative perceptions about GM in general and GM’s track record with new vehicle launches in particular.
A comment quote (I don’t think this guy is the Lone Ranger)from Consumer Report:
Posted by: Paul D. | Jun 28, 2010 1:35:15 PM
40 grand for an unproven car with unproven technology from a company not known for having good quality or reliability is a huge gamble.
No thanks, I’d rather pocket the 20 grand and buy a Toyota Prius which is into its 14th year on the market with 3 generations, hundreds of thousands of examples on the road and a very good reliability record, or a Honda Insight which is even cheaper than the Prius tho not as good IMO.
If I had to choose an EV, I’d go with the Nissan Leaf since it’s pricetag is in the low 30’s even tho it’s drivetrain technology is also unproven. Based on my experience with Nissan and my Government Motors (GM) vehicles tho, Nissans quality and reliability were always better.
Considering how long this car has been hyped, they’ll be lucky if we’re not just using teleporters by the time it’s released.
People seem willingly to reduce their comfort standards when gas prices rise suddenly, trading down in size and features.
Perhaps some car makers will release pared down models(gas only) to reduce weight.
While safety features will have to remain, lower cost Elantra/Corolla/Accent/Yaris sipper models could eliminate multi-speaker stereos, sound deadening, electric windows, etc. Carpet could be thinned or replaced with vinyl.
Rear seats could become Ikea-like plastic buckets, rigid but light.
Additions could be a digital fuel economy gauge and more prominent PSI indicator.
If such modifications could nudge a car’s mpg rating from say 38 to 40 and lower sticker prices, that could sway thrifty drivers who are leery of cutting edge cars like the Leaf or Volt.
If such modifications could nudge a car’s mpg rating from say 38 to 40 and lower sticker prices, that could sway thrifty drivers who are leery of cutting edge cars like the Leaf or Volt.
I think you overstimate how much savings would result from making a car that much lighter and more uncomfortble.
At $6/gal, double today’s price, someone driving 20000 would save $158 per year for increasing mileage from 38-40. Chicken feed.
Don’t forget start/stop engine technology. Currently, that’s one of the advantages of a hybrid in heavy stop and go traffic. It would go a long way towards helping real world mileage improve in non-hybrids for drivers living in traffic hell.
It’s about perception from easily spooked drivers.
Recall how many hybrid drivers ignored the amount of time they would have to own their hybrid to recover the higher initial purchase cost at that time.
Recall how many people immediately dumped their SUVs and told reporters they could not afford to drive to work anymore when gas prices spiked.
Recall how many times on TTAC two vehicles are compared in a non-eco review and the mpg difference of 2-3mpg between the models is cited.
Chicken feed indeed, for today’s chicken littles.
So my point is that stripped Sipper editions of conventional gas-only cars would hurt sales of bleeding edge Volt’s and Leafs.
Looks like Government Motors has an even larger problem to contend with: a report the Volt’s current propulsion system isn’t up to “speed.”
http://www.telegraph.co.uk/motoring/green-motoring/7851482/Volt-shock.html
But that’s no big deal, right? No one drives 80 mph on the freeways here, and thank heavens our country’s terrain is perfectly flat…
Honestly, I don’t think GM could screw up this launch more if they tried.
I wonder when they are going to announce this undocumented speed/range feature on this side of the Atlantic. GM might not to able to screw up the launch more than they have but we both know they will try.
While gas prices are not going to help GM as much as they might have hoped, live webcam shots of oil jetting out of the floor of the Gulf will probably be almost as good. Their biggest problems with the Volt launch will be a soft economy and uncertainty about the long term viability of the Volt technology. And a lot will depend on what magic MPG number they wind up getting from the EPA.
Although electric cars promise cheaper driving in the future, for now the Volt is not going to save anyone anything. It’ll be more expensive. People know that.
The early adopters will buy the Volt for its green-tinged promise. Gas prices will have nothing to do with it.
No it will not.
The economical case for buying the Volt is already lacking, however the expected customer is already convinced of the technology and I think we all know that gas prices on a longer outlook will undoubtedly increase.
I know a fair number of people who bought Priuses for solo use of California carpool lanes. Did this get phased out or something? If the Volt is eligible but new Priuses aren’t (over the Toyota limit?) then you might expect a few sales of Volts to people who prefer it over a motorcycle.
The carpool lane stickers are supposed to expire Jan 1 2011 and they are no longer issuing stickers (it was capped at 85,000 and all have been issued). So Volt buyers would not be eligible for this little perk unless the state re-ups the provision and issues more stickers.
gas prices could suddenly go up.
think: middle eastern country i1 “protects itself” by
bombing the sh!t out of middle eastern country i2…
The oil produced by I2 has a very high sulfur content and is not really suited to gasoline refinery.
Not a substantial factor.
I think Patrick hit it right out of the park with his assessment. Fuel prices won’t be the killer for the Volt. The fact that there is so much competition for known, reliable cars at that price point will doom the Volt from the start. Sure, there will be early adopters who’ll give the Volt a whirl, but by and large, the relative expense of buying it new versus any perceived savings will make it difficult for the Volt to succeed. In terms of shortening the payback period with fuel savings, I’d have to think that fuel prices would have to jump almost exponentially to make the Volt a financially viable alternative.
You nailed it perfectly. Early adopters, pro environment people, and fashion statement buyers will certainly buy some, but the average person will most likely go to more established means of propulsion. However, a manufacturer would be wise to offer models that offer all levels of economy…kind of hedging one’s bets.
You guys forgot about Jay Leno.
He’ll get one.
PLus, BIG government will keep using our tax money to keep the stupid thing initially competitive.
Reports are it begins at 40K, then with tax INCENTIVES, it gets to around 33K.
That’s a hell of a lot of help!
Plus, thousands of municipal, state, and authority governments will be buying the blasted things, not to mention all sorts of utilities, in order to ingratiate themselves with “green” politicians and “green” lobbyists.
Trailer Trash – but doesn’t that gov’t credit only do something assuming a person has at least $7500 of tax liability? I would assume that a person willing to spend $40K would have enough tax liability to get the credit but I’d like to see the gov’t do something that benefits everyone who buys one – not just the dude/gal with alot of taxes to pay aka well to do.
The Volt will appeal to the “propellerheads” to use an antiquated term, much like the early adopters of the Prius back in 2001. It’s been said before that’s where GM will get it’s sales. Fuel prices will have little impact on those sales.
After experiencing the fuel price shock of 2008, however, we decided to buy no vehicles that aren’t fuel efficient for their size. (No V6 midsizers, unless we’re going to tow with it, for example.) Even though fuel is relatively inexpensive right now, it has nowhere to go but up.
Back in the February-March timeframe, I had heard a report on the radio stating that fuel would be $3.50/gallon (US) by mid summer. If the current trend continues, we may actually get there.
We’re aiming for no less than 35 mpg average mileage on whatever car we purchase next. Our current “big” car (CUV) has averaged 26 mpg over 207K miles with mixed use. If we buy a TDI Jetta wagon we are told we can expect 40 mpg and better. Another CUV might get us upwards of 28-30 mpg. We’ll see.
FWIW gas has basically doubled during the 11 year ownership of our current CUV. I expect it could double (or more) during the next decade so we’ll buy our next vehicle with that in mind.
I love cars and driving but I don’t want to spend a huge percentage of my income on daily transportation. Our weekend fun cars – I’ll spend a little more.
$3/gal gas isn’t cheap, relative to where we were a few years back. We have just become acclimated to those prices. That’s not a low price, save relative to heavily-taxed European fuel, or to temporary supply dips.
http://www.GasBuddy.com/gb_retail_price_chart.aspx?city1=USA Average&city2=&city3=&crude=n&tme=72&units=us
15k miles @ 25 mpg is 600 gallons. At $3/gal that’s $1800/year for fuel. A not-inconsiderable fee, to be sure, but less than many households pay for utilities or for cell phone service.
Price shock aside, people will pay whatever in order to not change their lifestyle.
Gas prices may have very little to do with the initial sales of a $40K eco car. It provides the buyer with the ultimate statement of wrapping themselves in green and red, white and blue all at the same time. I just hope that there will be enough of those buyers to allow GM to break even – and in that regard a speedy economic recovery is much more important than gas prices.
Electric cars are doomed to fail, except for a few niche buyers. MPG is a poor statistic and gallons per mile is what matters. The small increases from the very poor mileage trucks save the most actual fuel. At 15k miles annually, and $3 gas, an SUV driver getting 18 MPG pays $2500. Going to 20 MPG saves $250. Going to 22 saves another $180, and the marginal cost savings keeps going down because the number of gallons saved decreases. Once you price in electricity, and inconvenience, how does a Volt ever come out ahead of a Prius or diesel Jetta? A 2-3 MPG difference does matter when it’s from 20 to 23. But from 36 to 39? Who cares?
You’re right about mpg. It’s a stupid unit.
8 to 10 mpg is a 25% improvement, 38 to 40 is a 5% improvement, yet they’re both 2mpg differences.
All is takes is one major hurricane in the Gulf and gas prices could jump to over $4 again.
Like others said I doubt gas prices alone are going to affect Volt sales, especially for the 1st year. The real question is: can people who are interested in the Volt’s tech or its “green” image actually afford it? The Prius is proven and priced reasonally… the Volt is basically the total opposite so it going to be a huge uphill battle.
The current fuel prices aren’t ‘cheap’ so much as they are tolerable. A dollar and under I cheap.
$3 is cause for concern.
$4 is high.
$5 and people start getting pissed.
$6+ and greedy CEOs and ‘social engineers’ start getting lynched.
I’d have it no other way.
Low gas prices will certainly impact the sales of the Volt. They could have sold a bunch during the $4 gas panic.
But as others have said, the Gulf spill and propeller-headism will help to sell some in the future even if gas prices don’t skyrocket again for a while.
I think that GMs biggest problem is that after all this delay the Volt falls between the cracks with more proven or exciting choices that are and will be available. Prius, plug-in Prius and the Leaf all look like better choices to me. The Prius for its proven efficiency and reliability, the Prius-plugin – because it’s already a Prius and breaks any techno-sod that the Volt might have, and the Leaf because it’s the first of a new generation of true EV vehicles.
I’d like to have the paycheck from anyone that thinks $3 a gallon is cheap. Wasn’t that long ago when people were raising hell over $2.50 a gallon. This is part of the problem, Americans have short memories. Folks are back to buying SUV’s and pickup. These people didn’t learn from the past few spikes since 2006, will be complaining when gas shoots up again. As we have all seen it doesn’t take much for the prices to climb quickly.
Sorry, but in 2010 dollars, $3/gal is cheap by any metric you want to use.
Sorry golden2husky but I don’t follow fuzzy math very well. After paying $2.44 a gallon today my ignorant logic tells me $3 a gallon isn’t cheap.
Loser:
This is from USA Today from about five years ago, but the concept is still valid:
Gas prices appear to be at a historical high, and prices of the past appear to be cheap (17 cents per gallon in the 1930s, a quarter in the 1950s and 50 cents in the 1970s). But this is a classic example of “money illusion.” In real inflation-adjusted dollars, gas prices are the same or lower today than in most previous decades.
Measured in real dollars, gas prices peaked in March 1981 at more than $3 per gallon. We have not even come close to paying the highest real gas price in history — today’s prices are still 30% below the all-time high.
We can compare gas prices over time by calculating the cost of 1,000 gallons of gas purchased at the average price in a given year, as a percentage of per-capita disposable income in that year. For example, in 1935, when gas prices were 17 cents per gallon and annual disposable income was $466, the cost of 1,000 gallons of gas was 36% of average disposable income. Today, it takes less than 7% of our disposable income to buy 1,000 gallons of gas at the current $2.10 a gallon. The “cheap” gas of the ’60s and ’70s cost about 12% as a share of income.
Prices stable
Gas prices since the mid-1980s have not only been more affordable as a share of income than at any time, they also have been remarkably stable. The recent small increase in gas prices relative to income is fairly insignificant.
Further, we can avoid money illusion by pricing gas in “minutes of work at the average wage per gallon of gas,” instead of dollars per gallon. Priced in minutes per gallon, you certainly wouldn’t be longing for yesteryear’s gas prices.
A typical American working today at the average hourly wage of $17.50 works about seven minutes to buy a gallon of gas for $2.10. In contrast, the average worker in the 1930s worked more than 20 minutes to buy a gallon of gas. During the 1940s, it took 12 minutes of work. During the 1950s, it took about 10 minutes per gallon.
Cost in minutes
Americans are paying about the same for gas in minutes per gallon today (7.2 minutes) as during the 1970s, when the retail price was only 40 cents per gallon, and much less than during the early 1980s (more than 10 minutes per gallon) when real gas prices peaked.
Finally, consider the consumers in most other countries. With the exception of members of the Organization of Petroleum Exporting Countries, such as Iran, U.S. gas prices are lower than almost anywhere in the world.
Go to Europe and you’ll pay from $5 to $7 per gallon — even in Finland and the United Kingdom, which are major oil producers and exporters. In Mexico, the world’s fourth-largest oil producer, they pay $3.20 per gallon, about the same as in India, Brazil and Singapore.
Consumers might have a lot of gripes to justifiably complain about, but the illusory high price of gas is not one of them.
The good old days of cheap U.S. gas are here now.
GM’s only planning to build 10K of these in 2011. There’s likely 10K people out there who really, really want an EV (which this is, kinda-sorta) or who want to “get off oil” or just want the latest iPod vehicle and will buy a Volt. Low gas prices won’t screw up GM’s first year.
However, at 10K, the vehicle makes no impression whatever on GM’s bottom line. Would sustained low gas prices cause problems for Volt sales in 2012 when GM would presumably want to ramp up to 50K? Likely, yes, they would.
What’s more likely to hurt GM is the pace of the competition. The Volt has been on the way for several years now and there’s almost 6 more months to wait until vehicle 1 hits a showroom. It’s another year before quantities of Volts arrive. While this is happening, the competition isn’t sitting around on its hands waiting to see whether or not the Volt fails. And everybody else can take advances in battery technology and related items to build a car as good as the Volt – or better – in 2012. A PHEV Prius is almost certainly on the way and, built on a volume platform with minor changes, Toyota can really pump out the product, if they want to. Price is likely to be reasonable.
If gas prices in 2012 are very, very high, then the Volt, even if it’s mediocre, will be selling like hotcakes in the face of intense demand. If it’s good and priced to move, so much the better.
I think we’ll see higher gas prices by 2012 but not high enough for GM to comforabely to sell out 50K Volts at MSRP in the face of increasing competition.
I get my doors blown off everyday by single driver pickups. I laugh when they are getting 15 mpg @ 70 mph while my Suzuki SV650 is getting 69-71 mpg and don’t see them changing anytime soon.
GM will send every Volt they make as it’s the first “domestic” EV. Even though the average Toyota Prius owner had household income of $100,000, Chevy will be pulling in a different demographic. Of course Honda is lowering their prices lately vs the continue Toyota recalling cars every couple of weeks.
Well Said.
I live in the midwest (near the wi) border and can ride my sportbike (gsx-r 600) 8 months of the year. If I hoon I get 42mpg. if I don’t I get just shy of 50. Out of pocket NEW was $8200 all taxes included (2005 dollars…)
Why again am I interested in a Volt?
As long as oil continues to spew into the Gulf and it washes up on our shores it will remind people about what one accident can do to alter the environment and our driving habits.
The spill is bad, but it is definitely good for vehicles like the Volt which are percieved, rightly or wrongly, to be much more environmentally friendly than the common car.
I was looking at homes with a real estate agent last weekend who drove me around in a Lexus RX hybrid. I asked the agent how they liked the car. The first thing the agent said was that the gas mileage wasn’t really that good but that wasn’t the point of owning it. The owner disagreed with the US consumption of fossil fuels and environmental issues it creates and owns the vehicle to make a statement.
I have a feeling the majority of Volt (and Leaf and whatever else) customers will feel the same way. It isn’t about economics, saving money or how much a vehicle costs. It’s about making a statement.
Most new car buyers look at how much a car costs not what it will cost, as in fuel economy, service etc. Yes there are people who will buy the Volt to be green but most of us will balk at paying north of $40K for a Cruze. This is especially true if they can’t see a pay back of the premium price within their time of owning the car. There has been very little talk of how these EVs will fare on the used car lots. A car is a terrible investment at best but if the Volt’s battery is baked before the car falls apart where’s the resale value? Gas prices will go up significantly once the dust settles over the finacial mess. The big money doesn’t want anymore bad press for now and they are busy writing the financial controls legislation for their hirlings in Washington to pass.
Unless the Volt falls prey to the typical GM quality issues (a distinct possibility), I would imagine they can at least count on pre-Katrina Insight/Prius sales levels. Expensive, radical hybrids still sold even during the low gas price, big SUV glory years. It wasn’t until the Katrina gas price run-up that hybrids suddenly ‘made sense’. and the Prius became the car of the decade.
In fact, the Volt could end up as a sort of latter-day Corvair. That car, with its radical drivetrain (for its time) made quite a splash and sold well, up until Nader’s book pointed out that GM’s penny-pinching on the rear suspension created a car that handled much more treacherously than it should have.
Of course, one major catastrophe (natural or not) would throw that all out the window and the guys at GM that green-lighted the Volt would suddenly be seen as marketing geniuses. Frankly, I can see people buying Volts based soley on the concern that a big spike in oil prices directly attributable to the BP oil spill is just around the corner.
$3 per gallon gas is cheap?
I’m still waiting for the $1.20 per gallon for high-test. Now that’d be normal.
Cheap would be going back to the $0.99 per gallon days.
I agree with most here. This isn’t about fuel economy but “greenest”. As long as GM can keep it tightly wrapped in that Green flag this thing has a chance. How big that market is is another thing. I have a suspicion that when it comes down to money on the hood time it won’t be as big as they would want.
My gut feel is that the Volt will become the ultimate halo car for GM, driven more by marketing than actual dollars made.
It’s the middle of the summer vacation driving season. Oil is being pumped into the Gulf, and there’s a moratorium on new drilling. So, why is gas so cheap? Any guesses?
Bilderberg Group?
Big Oil didn’t want to poison consumer sentiment against oil by raising prices is my guess. The spill couldn’t have caused any less disruption than Katrina to the oil business.
Wait until the feds DRASTICALLY increase fuel taxes to assist in paying off the ever-growing deficit.
Of course, the HUGE increase I anticipate will be labeled as assisting the environment, increasing patriotism, to support the troops AND to “protect the children.”
It’s becoming more and more obvious that the key to success these days, at least in terms of high volumes automotive sales, is having a diverse product line coupled with a flexible manufacturing line, and aggressive scheme to update platforms regularly. This way, you’re never caught without at least a few vehicles hitting the niche, the dealerships never get polluted with unwanted lot barnacles, you can easily transition from one previously high volume product to another, and you’ve got one or two vehicles a year that are still considered “new”.
I’m usually against government strong arming private business into doing anything (unless specifically stated in the Constitution), but if BP was forced to filter the crude from the gulf, refine it, and sell it back to us taxpayers for about 99 cents a gallon I think I could get behind that.
Got to remember too that Volt like drivetrain will filter through the four brands, or at least the three passenger car brands. Now Honda has a sub $17K hybrid, it’s green for everyone!
http://green.autoblog.com/2010/06/28/report-honda-to-offer-fit-hybrid-for-16-570-let-the-price-war/