* GM losing as much as $49,000 per Volt sold
* Cheap leases likely only exacerbate the losses
* GM still years away from break even on the car
* New plug-in competitors soon from Ford, Honda
By Bernie Woodall and Paul Lienert and Ben Klayman
Sept 10 General Motors Co sold a record
number of Chevrolet Volt sedans in August - but that probably
isn't a good thing for the automaker'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 on each
Volt it builds, according to estimates provided to Reuters by
industry analysts and manufacturing experts.
Cheap Volt lease offers meant to drive more customers to
Chevy showrooms this summer may have pushed that loss even
higher. There are some Americans paying just $5,050 to drive
around for two years in a vehicle that cost as much as $89,000
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
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 models have
been in increasing demand.
GM's quandary is how to increase sales volume so that it can
spread its estimated $1.2-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 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
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 be speeded up a bit with the installation of a
$2,000 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 as low as $199 a month helped propel Volt sales in August
to 2,831, pushing year-to-date sales to 13,500, well below the
40,000 cars that GM originally had hoped to sell in 2012.
Out in the trenches, even the cheap leases haven't always
A Chevrolet dealership that is part of an auto dealer group
in Toms River, New Jersey, has sold only one Volt in the last
year, said its president Adam Kraushaar. The dealership sells 90
to 100 Chevrolets a month.
The weak sales are forcing GM to idle the Detroit-Hamtramck
assembly plant that makes the Chevrolet Volt for four weeks from
September 17, according to plant suppliers and union sources. It
is the second time GM has had to call a Volt production halt
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,"
"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 $7,500 federal tax credit
provided as part of President Barack Obama's green energy
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.
Parks declined to comment on specific costs related to the
The independent cost estimates obtained by Reuters factor in
GM's initial investment in development of the Volt and its key
components, as well as new tooling for battery, stamping,
assembly and supplier plants - a price tag that totals "a little
over" $1 billion, Parks said. Independent estimates put it at
$1.2 billion, a figure that does not include sales, marketing
and related corporate costs.
Spread out over the 21,500 Volts that GM has sold since the
car's introduction in December 2010, the development and tooling
costs average just under $56,000 per car. That figure will, of
course, come down as more Volts are sold.
The actual cost to build the Volt is estimated to be an
additional $20,000 to $32,000 per vehicle, according to Munro
and the other industry consultants.
The production cost estimates are considerably higher than
those for the Chevrolet Cruze, the Volt's conventional
gasoline-engine sister car, which Munro estimates at $12,000 to
$15,000 per vehicle.
Production costs typically include such items as parts,
material, labor and the cost to run the factory, according to
manufacturing expert Ron Harbour, who heads the North American
Automotive Practice at Michigan-based consultant Oliver Wyman.
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 basic model has a higher level of equipment and features
than the Cruze, which is assembled in Lordstown, Ohio, and has a
starting sales price of $17,925. 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
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.
The same risky strategy - gambling on relatively untested
technology - drove massive investments by Toyota Motor Corp
in the Prius hybrid and Nissan Motor Co in the
Leaf electric car.
Toyota said it now makes a profit on the Prius, which was
introduced in the United States in 2000 and is now in its third
generation. Sales of the Prius hybrid, which comes in four
different versions priced as low as $19,745, have almost doubled
so far this year to 164,408.
Other such vehicles haven't done nearly as well. Nissan's
pure-electric Leaf, which debuted at the same time as the Volt
and retails for $36,050, has sold just 4,228 this year, while
the Honda Insight, which has the lowest starting price of any
hybrid in the U.S. at $19,290, has sales this year of only
4,801. The Mitsubishi i, an even smaller electric car priced
from $29,975, is in even worse shape, with only 403 sales.
Toyota's unveiling of the original Prius caught U.S.
automakers off guard. GM, then under the leadership of Rick
Wagoner and Bob Lutz, decided it needed a "leapfrog" product to
tackle Toyota and unveiled the Volt concept to considerable
fanfare at the 2007 Detroit auto show.
The car entered production in the fall of 2010 as the first
U.S. gasoline-electric hybrid that could be recharged by
plugging the car into any electrical outlet. The Obama
administration, which engineered a $50-billion taxpayer rescue
of GM from bankruptcy in 2009 and has provided more than $5
billion in subsidies for green-car development, praised the Volt
as an example of the country's commitment to building more
GM's investment in the Volt has so far been a fraction of
the $5 billion that Nissan said it is spending to develop and
tool global production of the Leaf and its associated
technologies and the reported $10 billion or more that Toyota
has plowed into the Prius and various derivatives over the past
But there will inevitably be more development costs for
future generations of GM plug-ins and it could still could be
years before GM sells enough Volts to bring the cost down to
The average per-car costs for development and tooling will
drop as sales volume rises. But GM will need to sell 120,000
Volts before the per-vehicle cost reaches $10,000 - and that may
not occur during the projected five-year life cycle of the
Parks said the company also is continuously reducing
production costs on the current Volt and its successor. "There
is a strong push on the cost of the Gen 2 to get the car to make
money and to be more affordable . . . Virtually every component
in the next-gen car is going to be cheaper," he said.
One obvious way to pull down costs is to push up volume -
but GM is paying a hefty price to do so.
The automaker just ended a special Volt lease program that
offered customers a low monthly payment of $279 a month for two
years, with some high-volume dealers dropping the payment to
$199 a month after receiving incentive money from GM, with down
payments as low as $250. The company said about two-thirds of
Volt customers in July and August leased their vehicles,
compared with about 40 percent earlier this year.
Before GM resorted to discounting Volt leases, sales were
averaging just over 1,500 cars a month. A huge part of that
reason was consumer push back over the price, according to Virag
of Automotive Consulting.
Volt's nearest competitor, the Prius, is priced at $24,795,
with a newer version, the Prius Plug-In, starting at $32,795.
Parks said the sales pitch for the Volt was "difficult"
because of the sticker price and the car's technical complexity.
But the discounted leases have helped lure more non-GM buyers
into Chevy showrooms. Their number-one trade-in: Toyota Prius.
Raymond Chevrolet, in suburban Chicago, sells an average
1,000 Chevys a month, including three to seven Volts. Dealership
president Mark Scarpelli said that "some people who like the
concept of an electric vehicle find it cost-prohibitive."