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GM Confirms, Yes, We're Losing Money on Every Volt We Build

 
15,643 views Dec 2, 2010
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2011 Chevrolet Volt

2011 Chevrolet Volt

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Doug Parks, vehicle line executive for the 2011 Chevrolet Volt, GM's range-extended electric vehicle, confirmed Tuesday that the company loses money on every Volt it sells.

This should hardly be a surprise. 

It's called R&D, folks


Every major automaker spends billions of dollars a year on research and development costs. And they know that when they launch certain new technologies, they will lose money for some years before costs fall and volumes rise to let economies of scale make a particular new feature or technology profitable.

Toyota's investments in its hybrid program, which has given it roughly two-thirds of the global market for hybrid-electric cars, are estimated to have cost it upwards of $10 billion over 15 years.

2011 Chevrolet Volt test drive, Michigan, October 2010

2011 Chevrolet Volt test drive, Michigan, October 2010

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So it is with the Volt. The expensive 16-kilowatt-hour battery pack, which likely costs GM somewhere between $8,000 and $12,000, is clearly too expensive to let the company build hundreds of thousands of Volts right away.

The price of consumer lithium-ion cells has fallen 6 to 8 percent annually since their 1989 launch; the large-format cells in automotive packs seem likely to follow the same curve.

So by 2020, those packs will cost half what they do today. That will make series hybrids like the Volt more cost-competitive, especially if you make the reasonable assumption that gasoline prices will rise versus today's level.

GM plans to chip away incrementally to lower the costs of the specialized components in the Volt, especially the power electronics.

Motor Trend v Rush Limbaugh

Listening to certain analysts, commentators, and weepy right-wing radio hosts, though, you might get a different idea.

President Obama inspects the 2011 Chevrolet Volt

President Obama inspects the 2011 Chevrolet Volt

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Some clearly don't understand how the auto industry works, nor do they fact-check even their most basic assertions. Rush Limbaugh, for instance, was recently taken to task by Motor Trend for his comments on the Volt.

Among them was the claim (roughly paraphrased) that The Gummint forced GM to spend tens of billions of dollars on A Car That No One Wants. The proof? GM HAS NOT SOLD A SINGLE VOLT !!!

Volt on sale this month

Well, yes. That's because the Volt hasn't actually gone on sale. That happens this month, and many dealers report they could sell far more Volts than they've been allocated.

Just 10,000 Volts will be built in 2011, though GM is working to increase that number. Meanwhile, it quite successfully (and, now, profitably) sells hundreds of thousands of pickup trucks, crossovers, and cars each year.

Commentators who actually understand the auto industry seem more conflicted about the Volt, including Daniel Howes of The Detroit News. His piece entitled "Volt: Promise, pizzaz and politics" both lauds and slams the Volt simultaneously.

Evil Socialist Obama?

On the plus side: He notes the Volt actually is in demand by the buying public, and it allows Detroit to make a "collective obscene gesture" to the "Congressional-and-coastal chorus that spent years cheering the demise of large chunks of the domestic auto industry." Errrrr, right, OK.

First 2011 Chevrolet Volt built on production tooling at Detroit Hamtramck plant, March 31, 2010

First 2011 Chevrolet Volt built on production tooling at Detroit Hamtramck plant, March 31, 2010

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On the minus side: The Volt is "a costly science experiment priced too high for the market to bear" at $41,000 (despite that demand, apparently).

Trucks are good, green is bad

Reading Howes, you'd almost think Evil Socialist Obama himself spends his Oval Office hours plotting to force GM to build "smaller, greener, more expensive vehicles subsidized by American taxpayers, most of whom probably wouldn't choose to buy one of them, all things being equal." (His words, not ours.)






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Comments (34)

  1. Chris Posted: 12/2/2010 9:44am PST

    Show us the quote where Doug Parks said that. Based on actual production costs (parts and labor) the Volt is actually being sold AT cost. Their decision to not bleed money on production is why it is priced so high! Sure, they won't immediately recover the money sunk into developing all the the Voltec drivetrain technology, but on a production basis they are NOT losing money "on every Volt they build". That's terribly misleading.
    You're going to find that you're wrong, but not before the right-wing nutjobs run with this headline. You can't put the toothpaste back in the tube. Thanks a lot.
     
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  2. ModerationIsBest Posted: 12/2/2010 10:27am PST

    all. think the points around the car are mostly valid. however, the tone and the obligatory references to silly rush limbaugh and "right wing" stuff detracts a bit from the discussion. as is now patently clear, there are so many "left wing" comedians as well who deserve the same level of shaming (olbermann, ed henry, rachel m, ...). bottom line, the car will lose money as it's new technology and that investment will need to be spread over a lot of sold cars before it's recovered. worrying about "rush", et al is as useless as worrying about alan grayson and nancy pelosi - not worth it.
     
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  3. fb_1001015277 avatar John Briggs Posted: 12/2/2010 11:23am PST

    I don't understand these battery number in the story. $8000-$12,000 for the batteries. That is $500 to $750/KWH. Large format Li-Ion batteries can be purchased in small quantities for EV hobbists at $400/KWH, e.g Thundersky. Any chance this is a BS number? I am definitely missing something here.
    Why do you believe anyone's public statements about the price of the batteries? They don't need to be truthful.
     
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  4. Khadgars Posted: 12/2/2010 1:02pm PST

    I agree with Chris, where did he ever say they are losing money on every volt sold? From the information I've looked at, they're selling them at cost, if not a small profit.
    Saying they are losing money on every vehicle is extremely misleading.
     
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  5. john_v avatar John Voelcker Posted: 12/2/2010 3:41pm PST

    @John Briggs: Those are *cells* from ThunderSky, not completed *battery packs*. Packs cost more than the cells within them. The cost number refers to completed packs, not simply the cells.
     
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  6. Paul Posted: 12/2/2010 4:36pm PST

    The battery cost is where the R&D expense is. To quote $750 kWh for large format LG cells means they have a long way to drop. 18650 cells as used in the Tesla Roadster costs around $300 kWh. When sufficient volumes are reached Large Format cells should be cheaper per kWh because they use less enclosure material per kWH. The President of the US and LG Chem CEO Bahnsuk Kim told Reuters they expect battery prices to drop 50-70% by 2015.
     
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  7. Chris Posted: 12/2/2010 5:45pm PST

    Here we go:
    http://politics.slashdot.org/article.pl?sid=10/12/03/0028214
    Thanks a lot, Mr. Voelker. You can't undo bad reporting like this, you know.
     
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  8. cdspeed Posted: 12/2/2010 8:01pm PST

    Jumped the gun on this article didn't we. And we know the government is pushing for clean energy but there is a mass of consumers going green that want their cars to do so as well. GM won't know to what degree the the Volt's profits will head until well after it's launch, so this article isn't even valid as the Volt hasn't launched. Get a check in the mail from Chevron for Christmas did we?
     
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  9. James Posted: 12/2/2010 11:02pm PST

    The author of this article seems to be defending the concept of companies losing money. How is it sustainable for a company to do that? Oh, that's right, you strap it on the backs of taxpayers.
     
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  10. fb_1001015277 avatar John Briggs Posted: 12/3/2010 4:37am PST

    @John Voelcker. I understand what you are saying, but I find it difficult to believe that is the answer. First, the Thundersky batteries are large format. So you don't need that many of them for a car, say 20. Secondly, the enclosure for the battery just cannot be that expensive. Do you really thing it costs thousands of dollars to package up the batteries. Thirdly, the $400/KWH price on the Thundersky batteries is retail. Surely someone like GM could get them at more like $300/KWH.
     
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  11. fb_1001015277 avatar John Briggs Posted: 12/3/2010 5:04am PST

    I guess for me a lot of this comes down to believability. Who are you going to believe, some company representative (or industry "expert") or a Chinese company that is actually selling the batteries.
     
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  12. john_v avatar John Voelcker Posted: 12/3/2010 6:13am PST

    @Chris, @Kadgars: Parks said GM isn't making a profit on the Volt. For a GM exec to admit that is clearly saying, "We're selling it at a loss."
    But he's not the only one. In a separate piece, Automotive News quotes GM CEO Akerson saying the company can sell Volts "for close to cost."
    Which means they're not covering their costs. Which means they're selling them at a loss.
     
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  13. john_v avatar John Voelcker Posted: 12/3/2010 6:17am PST

    @John Briggs: LOL, Chinese companies are known for exaggerating sales goals, performance, schedules, etc. I definitely know who I believe. Trust, but verify.
    As for the costs, have you ever looked inside the battery pack of a modern electric vehicle? It is far from simply a case to hold cells. It includes circuitry, instrumentation, power electronics, and many other components. GM and other major carmakers understand that while *cells* are a commodity, the ability to build them into *packs* that are reliable and durable (via extensive monitoring, balancing, and output control all through the control software) is the key intellectual property that make EVs possible.
    A very rough rule of thumb is that the pack can cost up to as much as the cells themselves, meaning total pack cost is 2x the cell cost.
     
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  14. David Murray Posted: 12/3/2010 7:21am PST

    The question is, are they including the development costs in the 10,000 volts they are selling? If so, then of course it will be a loss. The math just doesn't add up for me. Even if it costs them $12,000 for the battery pack, that would be the rest of the car costs $29,000 to build. I just don't see that as being likely.
     
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  15. fb_1001015277 avatar John Briggs Posted: 12/3/2010 7:54am PST

    @John Voelcker. RE, Execs, say they are loosing money. You are really reading the "tea leaves" here rather than dealing with facts. It would seem just as likely that the GM executives are speaking to a congressional audience to keep government support coming in the form of incentives. Personally, I think they are gaming congress and the media. Again, there is no reason to believe them. They also said the Volt would get 230MPG, do you believe that?
     
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  16. fb_1001015277 avatar John Briggs Posted: 12/3/2010 7:56am PST

    @John Voelcker RE chinese battery pack. Perhaps you lost the thread here, the Chinese are not exaggerating anything, they are offering the batteries for sale.
    This is a little bit like GM telling you that AA batteries cost $1 each and you believe them despite the fact that you can buy them at $0.50.
     
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  17. fb_1001015277 avatar John Briggs Posted: 12/3/2010 7:59am PST

    @John Voelcker, RE balance of components in a battery pack. You bring up some good points. Also, the battery pack for the Volt has fluid lines for heating and cooling. On the other hand, the LEAF battery pack should be much more simple with only air cooling.
    But you make it sound like the BMS and battery together is $500/KWH. Not the battery is $500/KWH. Are you suggesting that the whole BMS is integrated in to the pack.
     
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  18. William Posted: 12/3/2010 8:04am PST

    Products are often sold below cost of production, this is not a big deal. Look at what parts cost for repair and maintenance, that's where most manufacturers make their real money. Service after the sale. You all know this if you just use your heads and think about what you hear and read.
     
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  19. fb_1001015277 avatar John Briggs Posted: 12/3/2010 8:18am PST

    @John Voelcker, The LEAF battery pack looks pretty simple.
    http://ow.ly/i/63cO/original
    Sure there is a case, some wires, and a small amount of electronics, But I don't think we are talking thousands of dollars for that.
     
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  20. john_v avatar John Voelcker Posted: 12/3/2010 9:52am PST

    @John Briggs: This is the last response from me on this topic, since you obviously have pretty strong beliefs about GM, its truthfulness, what battery packs should cost, and other topics.
    GM's 230-MPG Volt claim was based on a selective use of a proposed (not final) EPA methodology that the EPA subsequently didn't go for. See here:
    http://www.greencarreports.com/blog/1047262_remember-the-2011-chevrolet-volts-230-mpg-claim-forget-it
    It was a dumb PR move, in hindsight, and probably didn't do them any good now that the Volt is rated at 37 mpg in gasoline mode.
    Technically, some elements of the BMS are included in the pack and some may be separately located. But the BMS also includes many sensors and various circuitry to monitor cell performance. Saying it's "a case, some wires, and a small amount of electronics" is laughably reductive. Talk to any battery engineer at an automaker and perhaps they can explain in more detail.
     
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  21. Evan Flink Posted: 12/3/2010 11:40am PST

    The Volt has been described as "a $16,000 Chevy Cruze with a $12,000 battery pack". If you accept that, you're talking about a $28,000 vehicle marked up to $47,000. So, where does the extra $19,000 in expenses come from? Are they trying to recover all R&D, tooling, etc in one year or are those low rolling resistance tires really expensive?
     
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  22. fb_1001015277 avatar John Briggs Posted: 12/3/2010 12:12pm PST

    @John Voelcker, fair enough, you can only respond to the idiots for so long.
    Having worked with battery systems for renewable energy systems, I assure the system is the batteries, the case (or rack), the wires, and a bit of electronics. This is not "laughably reductive" it is a comprehensive statement. Now if they need something more for the battery packs for the Volt, I would like to know why.
    I can't believe you will not simply say you are blindly believing GM. You are taking what they are saying on face value. Fine, I understand. But why not just say so. We all have to make these judgments.
    I have been though this situation before. I remember when the TV manufacturers said it would cost $250 per set to add digital tuner to them a few years back. They said this despite the fact that you could purchase, at retail, a digital tuner for $200.
    But I suppose you would just report that the same way. The manufacturer says that it is $250 so therefore it must be true. It wasn't "true", it was a "self-serving statement".
     
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  23. Angry Gamer Posted: 12/3/2010 7:02pm PST

    Ignorant Lib-passive-aggressive...
    You must really think people are FOOLS to create this trash.
    "It's called R&D, folks" - yeah like you know what Research and Development is... here's a bet the author didn't even pass College Algebra. So it's no wonder they naively say
    "Toyota's investments in its hybrid program, which has given it roughly two-thirds of the global market for hybrid-electric cars, are estimated to have cost it upwards of $10 billion over 15 years."
    Complete Ignorant Regressive you are
     
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  24. Angry Gamer Posted: 12/3/2010 7:12pm PST

    Here is something to think of...
    Yes Toyota is getting "some" of it's huge R&D back on it's Hybrid sales. BUT... what about Honda? Honda spent money too... did they get any big payoff from the Insight??? No? Hmmm... so maybe this R&D thing is a bit more complicated that "It's R&D folks".
    Reality Check time the US Gov (that's us taxpayers) GAVE GAVE GM 3 Billion to create a brand new Battery manufacturing plant. GM didn't have to do anything but buy materials and pay workers... AND after a 3 Billion head start (3B will buy you a Space Shuttle btw for comparison)
     
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  25. Angry Gamer Posted: 12/3/2010 7:13pm PST

    3 Billion later
    GM STILL can't make the economics work. They STILL have to sell the dang thing at 40k which is above many luxury car price points. AND they still can't get a completely plug in car.
    So we the US taxpayers have paid 3 Billion plus the GM bailout money 10 Billion, Plus the 50 Billion loss on the Debt exchange to Stock Treasury move. For a company that makes a car whose concept TOYOTA gave up on in the 80s (er yeah... Toyota makes Hybrids... not complete electric cars)
    This is what you get when Demo-Regressives buy businesses. They stink at it!
     
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  26. Angry Gamer Posted: 12/3/2010 7:32pm PST

    Sorry for all the posts 750 length has me concerned.
    Here is another one that just makes my head spin.
    @John V.
    "A very rough rule of thumb is that the pack can cost up to as much as the cells themselves, meaning total pack cost is 2x the cell cost. "
    OMG - So let me get this straight. (must concentrate through rage...) WE spent 3 Billion to set up a factory to make Cells Cheaper with mass production (because no one makes them, hmm I wonder why does no one make cells ... grit teeth). But wait hold on THAT ONLY PROVIDES COST BENEFIT TO HALF THE BATTERY UNIT????!!!!????
    Unbelievable, and to think that no one has been in this business before. It's astonishing to me that no intrepid capitalist has not stumbled on to this money making opportunity.
    I can just see a new Henry Ford of electric cars waiting in the wings. Oh by the way what is Ford doing about electric cars... Nothing Oh well what do they know... All the cool kids bankrupt themselves these days.
     
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  27. John Posted: 12/4/2010 5:49am PST

    Ooooh! At ten thousand a year they ought to be able to find enough saps to buy them in a nation of 305,000,000 people. Especially when they quietly reduce the cost of the silly things.
     
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  28. ev enthusiast Posted: 12/4/2010 9:49am PST

    hi john briggs,
    while i think this is a great site, it has been my observation that many authors on this site have a liking for gm. this is especially true of the author of this article.
    i dont quite get that loyalty, when you look at the facts. but, oh well.
     
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  29. fb_1001015277 avatar John Briggs Posted: 12/4/2010 1:52pm PST

    @ev enthusiast
    It is a great site and John Voelcker gives some great coverage and insight on the green vehicle industry. But the belief in GM and its public statements, as well as the distain for the Prius is more than a little difficult to understand.
    Well at least it is better than AutoLine Daily or TopGear where they hate EVs.
    Later
    John C. Briggs
     
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  30. Bill Posted: 12/4/2010 6:10pm PST

    I would buy one if the warranty was good enough...
     
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  31. john_v avatar John Voelcker Posted: 12/5/2010 3:15am PST

    @ev enthusiast, @John Briggs: [chuckle] The language you use suggesting we favor GM is precisely the same language used by other critics on other articles who seem to feel we're biased heavily for Nissan and its Leaf and *against* GM.
    So we must be doing something right.
     
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  32. fb_1001015277 avatar John Briggs Posted: 12/5/2010 1:55pm PST

    @John Voelcker, Or perhaps your are wrong in both cases. Some details of the LEAF you get wrong and some details of the Volt you get wrong. It is when people are saying nothing that you are brilliant. Ah the word "wrong" isn't really what I want to say. Wish I had Voelcker's give of language.
     
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  33. ev enthusiast Posted: 12/7/2010 7:36am PST

    hi john voelker,
    just look at all the articles that you continue to post about gm. they are always positive. it appears to me that you go out of your way to promote gm.
    even when all of us were mad about gm coming out and bashing evs to try to sell the volt, you came back with "you couldnt understand our dislike of gm".
    just look at all the articles that you continue to post about gm on this site and on greencars.
     
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  34. ev enthusiast Posted: 12/7/2010 7:39am PST

    correction : since this is green cars, the other site i was referring to was allcarselectric, for those of you who are not familiar with that site.
     
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