The $41,000 Question: Is the Chevy Volt Worth the Money?
Copyright by Bloomberg News
By JIM MOTAVALLI
July 28, 2010, 4:29 PM
http://wheels.blogs.nytimes.com/2010/07/28/the-41000-question-is-the-chevy-volt-worth-the-money/?hpw
General Motors, after announcing on Tuesday that the Chevrolet Volt plug-in hybrid car would cost $41,000, was unfazed by inevitable comparisons to the Nissan Leaf, a battery electric car that will arrive in select markets at the end of the year, around the same time as the Volt. At $32,780, the Leaf is far less expensive.
“Honestly, they’re two different vehicles,” said Dave Darovitz, a G.M. spokesman. “One is range limited, and the other one offers 40 miles of gas-free driving and then a further 300 miles of travel.”
David Champion, director of automobile testing for Consumer Reports, said the Volt and Leaf are “in two different markets.”
“The Leaf is a commuter car for going back and forth,” he said. “The Volt is the next iteration of the hybrid vehicle — it has the 40-mile electric range, but if you want to drive it from New York to Los Angeles, you can. The Leaf will probably be a second car, whereas the Volt can be your primary car.”
Mr. Darovitz said that initially customers “will be primarily tech enthusiasts and early adopters, typically middle-aged males. A large percentage will be in California.” But he said that demographic will expand to include just about anyone because of the car’s range.
They’ll also have to be people willing to pay BMW prices for a Chevy. The biggest challenge for Chevrolet may be in finding those upmarket customers. According to Edmunds.com, only 13 percent of new vehicles sold this year cost more than $40,000 (not including incentives). J.D. Power & Associates in its 2010 Initial Quality Study said that 15 percent of new vehicle sales (excluding exotics) were of cars with a suggested retail price of $40,000 and above.
Jon Linkov, Consumer Reports’ managing editor for autos, notes that the Volt lacks some creature comforts $40,000 car buyers generally expect. “The seats are a little flimsy and the interior has a small-car feel to it,” he said. But with the Volt’s 340 miles on tap, Mr. Linkov said the extra investment could allow buyers to banish the phrase “range anxiety” that is likely to attach itself to electric cars that run out of charge after 100 miles.
Erich Merkle, an auto analyst and president of Autoconomy, said that environmentally motivated consumers “should have no problem with that kind of upcharge — it’s insignificant over and above the cost of a Chevrolet Cruze if you think it’s helping keep our planet clean.”
The scant options on the Volt include three different colors of premium paint, chrome wheels, rear parking assist and heated leather seats, Mr. Darovitz of G.M. said. With a fully loaded Volt set to cost $44,600, many customers will probably opt for the attractive three-year, 36-month lease deal, which is $350 a month after a $2,500 down payment that includes a security deposit. Chevrolet calculated that relatively low lease payment to include the existing $7,500 federal tax credit, whose value will be transferred from the lessee to the lessor. Volt buyers can use the tax credit to effectively buy the car for a net price of $33,500.
According to another G.M. spokesman, Rob Peterson, the $41,000 price “represents the long-term value of the Volt, and the long-term value also supports an attractive lease price.” The car’s end-of-lease residual value, he said, is elevated by its eight-year, 100,000-mile battery warranty.
Mr. Champion said that G.M. had built the Volt around a selling price of about $40,000. “At that price, will they recoup their considerable development costs in the near future? No. But are they going to sell it at a price that pays back what it costs to make each car plus some of those development costs? Yes.”
G.M.’s Electric Lemon
By EDWARD NIEDERMEYER
Copyright by The New York Times
Published: July 29, 2010
http://www.nytimes.com/2010/07/30/opinion/30neidermeyer.html?th&emc=th
Portland, Ore.
GENERAL MOTORS introduced America to the Chevrolet Volt at the 2007 Detroit Auto Show as a low-slung concept car that would someday be the future of motorized transportation. It would go 40 miles on battery power alone, promised G.M., after which it would create its own electricity with a gas engine. Three and a half years — and one government-assisted bankruptcy later — G.M. is bringing a Volt to market that makes good on those two promises. The problem is, well, everything else.
For starters, G.M.’s vision turned into a car that costs $41,000 before relevant tax breaks ... but after billions of dollars of government loans and grants for the Volt’s development and production. And instead of the sleek coupe of 2007, it looks suspiciously similar to a Toyota Prius. It also requires premium gasoline, seats only four people (the battery runs down the center of the car, preventing a rear bench) and has less head and leg room than the $17,000 Chevrolet Cruze, which is more or less the non-electric version of the Volt.
In short, the Volt appears to be exactly the kind of green-at-all-costs car that some opponents of the bailout feared the government might order G.M. to build. Unfortunately for this theory, G.M. was already committed to the Volt when it entered bankruptcy. And though President Obama’s task force reported in 2009 that the Volt “will likely be too expensive to be commercially successful in the short term,” it didn’t cancel the project.
Nor did the government or G.M. decide to sell the Volt at a loss, which, paradoxically, might have been the best hope for making it profitable. Consider the Prius. Back in 1997, Toyota began selling the high-tech, first-of-its-kind car in Japan for about $17,000, even though each model cost $32,000 to build.
By taking a loss on the first several years of Prius production, Toyota was able to hold its price steady, and then sell the gas-sippers in huge numbers when oil prices soared. Today a Prius costs roughly the same in inflation-adjusted dollars as those 1997 models did, and it has become the best-selling Toyota in the United States after the evergreen Camry and Corolla.
Instead of following Toyota’s model, G.M. decided to make the Volt more affordable by offering a $350-a-month lease over 36 months. But that offer allows only 12,000 miles per year, or about 33 miles per day. Assuming you charged your Volt every evening, giving you 40 miles of battery power, and wanted to keep below the mileage limit, you would rarely use its expensive range-extending gas engine. No wonder the Volt’s main competition, the Nissan Leaf, forgoes the additional combustion engine — and ends up costing $8,000 less as a result.
In the industry, some suspect that G.M. and the Obama administration decided against selling the Volt at a loss because they want the company to appear profitable before its long-awaited initial stock offering, which is likely to take place next month. For taxpayers, that approach might have made sense if the government planned on selling its entire 61 percent stake in G.M. But the administration has said it will sell only enough equity in the public offering to relinquish its controlling stake in G.M. Thus the government will remain exposed to the company’s (and the Volt’s) long-term fate.
So the future of General Motors (and the $50 billion taxpayer investment in it) now depends on a vehicle that costs $41,000 but offers the performance and interior space of a $15,000 economy car. The company is moving forward on a second generation of Volts aimed at eliminating the initial model’s considerable shortcomings. (In truth, the first-generation Volt was as good as written off inside G.M., which decided to cut its 2011 production volume to a mere 10,000 units rather than the initial plan for 60,000.) Yet G.M. seemingly has no plan for turning its low-volume “eco-flagship” into a mass-market icon like the Prius.
Quantifying just how much taxpayer money will have been wasted on the hastily developed Volt is no easy feat. Start with the $50 billion bailout (without which none of this would have been necessary), add $240 million in Energy Department grants doled out to G.M. last summer, $150 million in federal money to the Volt’s Korean battery supplier, up to $1.5 billion in tax breaks for purchasers and other consumer incentives, and some significant portion of the $14 billion loan G.M. got in 2008 for “retooling” its plants, and you’ve got some idea of how much taxpayer cash is built into every Volt.
In the end, making the bailout work — whatever the cost — is the only good reason for buying a Volt. The car is not just an environmental hair shirt (a charge leveled at the Prius early in its existence), it is an act of political self-denial as well.
If G.M. were honest, it would market the car as a personal donation for, and vote of confidence in, the auto bailout. Unfortunately, that’s not the kind of cross-branding that will make the Volt a runaway success.
Edward Niedermeyer is the editor of the Web site The Truth About Cars.
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