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If You Want To Attack The Volt, Try To Get Your Math Right

 
10,229 views Dec 23, 2011
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2011 Chevrolet Volt drive test, March 2011

2011 Chevrolet Volt drive test, March 2011

Enlarge Photo

Few things seem to set off a certain part of the political spectrum like the Chevrolet Volt, the extended-range electric car from General Motors.

It's been on sale exactly one year, so we think it's rather too early to deem the Volt a success or a failure, though that hasn't stopped its critics.

When criticizing anything, however--the Volt included--it's usually incumbent on the critic to get the math right.

Off by a factor of 10,000

Yesterday, The Street posted a lovely takedown of the math offered by a critic who claims Volts carry quarter-million-dollar subsidies. The Street's contributor Anton Wahlman gently points out that the calculations were slightly off.

In fact, he suggests they were wrong by a factor of 10,000--or four orders of magnitude. That's what you would call an embarrassing error.

It's worth pointing out that Wahlman emphasizes that he is against government subsidies to industry, calling himself "somewhere way to the right of Rush Limbaugh" on that topic. Which makes his analysis all the more trenchant.

He also notes that, "the idea that the Volt was somehow a government invention is about as accurate as the idea that Al Gore invented the Internet. It has no relation to the truth whatsoever." He liked the Volt he tested, by the way.

2011 Chevrolet Volt

2011 Chevrolet Volt

Enlarge Photo

Here's the story. Four days ago, we dissected in some detail Matt Drudge's uninformed war against the Volt. He promptly posted two more anti-Volt headlines the next day.

One of them linked to an article on Michigan Capital Confidential citing a study by James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

A quarter of a meeeeellion dollars !!

The report claims that every Chevrolet Volt is the beneficiary of a quarter of a million dollars of state and Federal subsidies. Yes, the car with a 2012 retail price of $39,995 carries $250,000 of Your Tax Dollars in its load bay.

Hohman added up all the known state and Federal incentives to obtain a "total value offered to the Volt," not only for General Motors but also its suppliers.

A total of "18 government deals that included loans, rebates, grants and tax credits" are included. The total loan amounts are apparently listed in full, even though the loans are intended to be be paid back with interest.

Hohman then divided the sum by the number of Volts sold as of November 30. The result prompted him to call the Volt "the most government-supported car since the Trabant," the East German plastic-bodied two-cylinder minicar.

The denominator problem

As Wahlman notes, the egregious flaw in this calculation is "the denominator problem"--to what base of cars do you apply the analysis?

2011 Chevrolet Volt Production Line

2011 Chevrolet Volt Production Line

Enlarge Photo

Dividing the number of Volts sold to date (6,468 as of November 30) into the total incentives that apply to all Volts past, present, and future is either dopey or intellectually dishonest.

You could as easily say that on December 15 last year, the day the first Volt was delivered to a retail buyer, it carried a stunning, incredible, unconscionable $1.5 BILLION in subsidies. You'd be doing the same thing: dividing by the number of Volts sold, or 1.

More reasonably, fast-forward to the end of next year, by which time the two-year total of Volt sales is likely to be about 60,000. The number plummets to $25,000. And so on.

Actual number: $25

Wahlman instead divides the supposed $1.5 billion in incentives by a projected total of 60 million cars over the next 25 years that will use elements of the Voltec range-extended electric drive technology in today's Volt. That calculation puts the amount at, ummm, $25. Or a dollar a year.

Slightly different, eh?

We personally tend to think that a dollar a year is a reasonable amount to subsidize a domestic battery-electric car industry. Reasonable minds may differ, however.

We can address the question of whether the $1.5 billion total in state and Federal incentives is valid another time. Critic Hohman notes that depending on various factors, it could vary from $300 million to $3 billion.

We recommend reading Wahlman's entire article on The Street (note that there are four pages, but the links are tiny).

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Comments (31)

  1. evilattorney avatar Evil Attorney Posted: 12/23/2011 10:57am PST

    Thanks John. I think Hohman may have ultimately helped GM here as the real numbers come out. I mean, $25/car is a fraking bargain when you look at what has and will come out of the investment.
     
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  2. DrInnovation avatar dr innovation Posted: 12/23/2011 11:41am PST

    Thanks for your effort to set the record straight. Either these folks are incompetent, or pushing an adenda knowing they are wrong. Either way they have no business informing policy or being reported as "news". And every site that just blindly reposted the news should be questioned as a source.

    GreenCarReports, however, is keep it clean. Thanks
     
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  3. fb_100001820822595 avatar Charlie Harnett Posted: 12/23/2011 12:25pm PST

    While I think subsidizing a domestive xEV capability is a worthy goal, the part that's effectively being subsidized is the part that's economically not ready for prime time.
    Which is the battery, in particular the cells.
    Which are sourced from LG.
    Which is a Korean company.
    This subsidy is helping to get LG positioned out front in the battery market. They're able to plow our subsidy into R&D and manufacturing improvements for LG.
    Not the best plan.
    The right thing to do, all along, has been to make oil (and coal) cost what they really cost (in terms of defense dollars, pollution, disaster cleanup, GHG emissions) and let the market figure out what other technologies should come along.
    Consumer subsidies of selected techs are a lose.
     
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  4. john_v avatar John Voelcker Posted: 12/23/2011 1:09pm PST

    Only thing I would add: LG Chem is building a lithium-ion cell manufacturing plant in Michigan to supply North American-built plug-in cars. Nissan is doing the same (with ATVM loans) in Tennessee.
     
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  5. fb_100001820822595 avatar Charlie Harnett Posted: 12/23/2011 12:33pm PST

    By the way, Al Gore didn't invent the internet but he also didn't claim to have invented it. He claimed, and correctly, that he took the initiative with legislation to create the internet.
    Vint Cerf, Robert Kahn and other tech giants of TCP/IP and other critical networking technologies, are on record as agreeing that Al Gore was extremely important to the development of the internet.
    I'm sick of hearing Al Gore trashed in this way, I resent it, and, having corrected you, I don't expect to be reading such again in this forum. Got that?
    http://www.snopes.com/quotes/internet.asp
     
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  6. john_v avatar John Voelcker Posted: 12/23/2011 1:11pm PST

    @Charlie: We're always interested in hearing the various things our readers resent.
     
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  7. James Davis avatar James Davis Posted: 12/23/2011 12:54pm PST

    John, there is something seriously flawed in your article. You didn't include the $150 billion subsidies the government handed over to GM and you didn't compare the gas hybrid Volt with another gas hybrid that didn't get that $150 billion or any sensitives at all. You could not had meant $25.00 or $1.00 a year; you must had meant $25 million dollars and $100 thousand a year. If the Volt was as great as you claim, it would be selling like hot cakes instead of a bottle of acid.
     
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  8. fb_1001015277 avatar John Briggs Posted: 12/23/2011 2:07pm PST

    Prefer my acid in microdots.
     
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  9. john_v avatar John Voelcker Posted: 12/23/2011 2:08pm PST

    @James: Please provide a source for that so-called $150 billion in subsidies for GM. I doubt that you can find one. The latest estimate by OMB is that the U.S. government would lose roughly $14 billion on its rescue of GM if it were to sell all its remaining stock today, which it shows no sign of doing. That is, of course, less than one-tenth the figure you cite.

    And, once more, for the record, the Volt's sales were never intended to be high. It will have built about 12,000 by the end of the year, and sold about 7,500. We will see if Volts pile up on dealer lots next year when production for the U.S. market rises to 45,000. But today, California dealers have waiting lists for Volts.
     
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  10. James Davis avatar James Davis Posted: 12/24/2011 3:44am PST

    John, that $150 billion is the welfare cheque the gov. gave GM. I do not believe they were expecting to get any of it back, and I do not believe GM intended to ever repay the handout. Now they call that welfare cheque incentives because GM priced the Volt out of the reach of the majority of Americans.

    I believe GM intentionally built a really crappy dangerous car because they are still trying to kill the electric car. When the Volt came out it had numerous problems that would've forced anyother manufacturer to recall everyone of them. Cont...
     
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  11. James Davis avatar James Davis Posted: 12/24/2011 3:57am PST

    The first two flaws are: their plug-in melted, the front of the car was so low to the ground that it would drag on a gravel in the middle of the road; the dashboard would black out. Any new or used car with an electrical problem like that would be recalled, but not the Volt. Then two mysterious fires appear around it and a third one with its battery pack. Any other car would be recalled, but not the Volt. I don't care what GM's crones and loyal followers say; the car is dangerous and not worth $45,000. GM knows that the Volt is crappy, that is why within its first year they haven't started mass producing it.
     
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  12. James Davis avatar James Davis Posted: 12/24/2011 4:02am PST

    They know that anyone who is aware of these built in faults will not buy the Volt and will be shaky in letting their family ride in it. This is not the first car GM has built, so why did they make so many mistakes with the Volt?
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  13. john_v avatar John Voelcker Posted: 12/24/2011 4:36am PST

    @James: Let me repeat, please source this mysterious figure of "$150 billion" of "welfare" the "gov. gave GM." I honestly don't know what you're talking about. As noted above, if it's the bailout funds, the total U.S. loss at current GM stock prices would be $14 billion.

    Your assertion that "GM intentionally built a really crappy dangerous car" is laughable. Whatever the merits of the Volt, pro or con, product-liability laws would expose GM to enormous claims if that were true. Which it isn't.

    NOTE: Please try to keep your paranoia and anger within some semblance of reality if you want to continue to have your comments on GreenCarReports articles accepted by the moderators.
     
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  14. JeffU avatar Jeff Uren Posted: 12/23/2011 2:26pm PST

    James the Volt IS selling like hot cakes. All Volts made by GM are sold. The number of Volts sold looks small as the number of Volts made is small. Until now the Volt has been in limited production and sold in only a few dealerships. Starting now GM is ramping up production of the Volt to over 200 a day. As John said, it's too early to tell the Volt sales story. Only when the supply ramps up to the demand for the Volt will we see how well a car that allows you to drive on your houeshold current will sell with American car buyers. It will be exciting to watch as this could be a real start to the end of relying on foreign oil for our country. No one thing will have a bigger impact on our economy than the reduction of gasoline use. Go America!
     
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  15. jeoten avatar J Ten Posted: 12/23/2011 3:00pm PST

    Do you actually think 60,000 will be the number by the end of 2012? GM has a huge challenge to get to that number.
     
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  16. john_v avatar John Voelcker Posted: 12/24/2011 3:53am PST

    The highly-touted shortfall of 2,500 for the first year, on a prediction of 10,000 sales, is actually about one car per qualified Chevy dealer--easy to make up next year. And Chevy has said it will sell 45,000 Volts in the U.S. during 2012. We'll certainly report on the monthly sales here at GreenCarReports the day they happen. For the total, we shall see, won't we?
     
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  17. fb_12418088 avatar Juan Barnett Posted: 12/23/2011 8:28pm PST

    "Wahlman instead divides the supposed $1.5 billion in incentives by a projected total of 60 million cars over the next 25 years that will use elements of the Voltec range-extended electric drive technology in today's Volt."

    What if everyone of those 60 million cars will require a $7,500 subsidy? What does that total come to?
     
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  18. john_v avatar John Voelcker Posted: 12/24/2011 3:50am PST

    The $7,500 Federal credit for electric-car purchase is capped at 200,000 credits per maker. So even if you assume that there will be that number of plug-in cars sold over 25 years by, say, 15 global makers (GM, Ford, Fiat-Chrysler, Toyota, Nissan, Honda, Mitsubishi, Subaru, Hyundai, Kia, Volkswagen, Daimler, BMW, and a couple of Chinese makers), that still gets you to only 3 million credits. That leaves you 57 million plug-in cars sold without the tax credit.
     
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  19. fb_12418088 avatar Juan Barnett Posted: 12/24/2011 3:53am PST

    Good point, John. I am and always will be a big supporter of alternative powered vehicles and I even support gov funding for R&D...I just don't like loans and subsidies
     
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  20. Chris O avatar Chris O Posted: 12/24/2011 12:48am PST

    Not surprising Fox News gave Big Oil subsidized Mackinac Center for Public Policy a platform to plant the notion that the Volt is subsidized to the tune of $250K a pop in the mind of the kind of people who take the things they hear on Fox News (Fox Business) seriously. Watch the video here:

    http://mediamatters.org/blog/201112220018

    In all fairness the anchorman does ask James Hohman about the denominator problem suggesting cost per vehicle will come down as more cars are sold. Mr.Hohman reply is that he doesn't know if even a single more Volt will be sold and swiftly changes the subject to the top half of the equation.
     
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  21. fb_1470388190 avatar David Laur Posted: 12/24/2011 8:49am PST

    I think the Volt is a great car and will fill the needs of many trying to reduce their oil consumption but this "fighting fire with fire" response is just as pathetic as the first comment. $25 per car invested over how long? are we to assume that this Voltec is so good that we dont need to work on improving it for 25 years??

    or that the money is interest free?

    just as the quarter million statement is invalid, the $25 holds not even a shred more merit.
     
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  22. fb_1797878866 avatar Jack Rickard Posted: 12/24/2011 9:05am PST

    Your article is too shrill and too biased to carry any credibility. And too full of misinformation. Al Gore DID help create the Internet, which is what he originally stated. Anyone who was involved in the development of the Internet is completely aware of this. You've taken what ONE misdirected journalist took from ANOTHER misdirected journalist, and then repeated it yourself, perpetuating a joke WITHIN a joke and the joke is that journalists never have a clue what they are talking about.

    You decry a thoroughly normal process of apportionment of costs, done by ALL automakers EVERY DAY, and declare it intellectually bankrupt - by your august standards no doubt.

    And then you magically project 60,000 sales of Volts by the end of year?
     
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  23. fb_1797878866 avatar Jack Rickard Posted: 12/24/2011 9:08am PST

    IF the Volt has sold less than 7000 cars in it's first what 14 months, on what basis do you make this magic prediction of 60,000 vehicles by the end of 2012? Based on what data? And what expertise?

    Jack Rickard
    http://WWW.EVTV.ME
     
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  24. john_v avatar John Voelcker Posted: 12/24/2011 10:47am PST

    @Jack: You are correct that automakers apportion costs every day. The flaw in your logic is that do so using the *total projected production run* of the model, not the number that happen to have been sold at some arbitrary date early in the model life.

    And the projection of about 60K Volts sold by the end of 2012 is 2010 sales (326) + 2011 sales (~7,500) + 2012 sales. GM only built 10K-12K Volts in 2011, as they have said they would for three years now. In 2012, they will build 60K, of which 45K will be for North American sales--both to retail buyers and fleets. GE expects to buy more than 10K Volts, for example.

    [continued below]
     
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  25. john_v avatar John Voelcker Posted: 12/24/2011 10:50am PST

    [continued from above]

    So, as noted previously and as I've written several times now, the rollout year of a production-constrained model that is being spread across dealers in 50 states has very little to do with actual market demand for the car.

    Which of course hasn't stopped armchair experts from deeming the Volt a "sales flop" without bothering to understand the context or indeed the auto industry as a whole. Need I note, again, that there are waiting lists in California for Volts that their dealers can't get?

    (Witness Rush Limbaugh's statement this week that GM had sold "1,100" Volts, for instance.)
     
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  26. MrEnergyCzar avatar Mr EnergyCzar Posted: 12/24/2011 8:18pm PST

    We subsidize everyone's gasoline and hide costs of protecting the middle east oil flows from pump prices to a much higher degree than some Oct 2008 Bush EV tax credit...drop in the bucket.

    MrEnergyCzar
     
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  27. fb_1327310986 avatar Mike Wadas Posted: 12/28/2011 8:14am PST

    I am an avid supporter of EV technology, but I am no fool when it comes to price gouging or poor marketing. The GM Volt (Subsidies or no subsidies) is priced out of the market. This car only caters to about 5 percent of the wealthy who can already afford this car; while these tax payer funded rebates go into the pockets of those that can already afford the car or could afford the gas of a conventional vehicle. If GM was serious about catering to a mass market they would re-release the EV1 and sell it as an economy car. Then you would see real change in the way we drive. When the government no longer relies on the multi-taxed income of petroleum; then maybe we can find alternatives. Until then I guess we will just dream about the future...
     
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  28. fb_620969991 avatar David Austin Posted: 12/31/2011 9:10am PST

    Yeah, and Tesla should sell their cars for $20k a piece. No offense, but you really don't understand the process by why technology transforms society in a free market, do you?
     
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  29. fb_100001860262545 avatar Steve Angell Posted: 1/2/2012 3:04pm PST

    Funny complain that this article overestimated cost then use far more devious devices to make a far far less honest guess.

    I mean you do not even count the current Government Rebate for buying an Electric Car. You assume huge sales even though sales have been horrible.

    Fords electric will be far better from what I have seen better mileage, range and half the charging time with a better charger even will interface with your phone to offer tons of information. Question is who would buy a Volt when Ford Focus Electric comes out most likely sometime this year.
     
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  30. john_v avatar John Voelcker Posted: 1/2/2012 5:16pm PST

    @Steve: That one's easy. Some people simply won't buy a car with a range of roughly 100 miles. The Volt is electric for much of its daily use (as GM will tell you ad nauseam, more than 70 percent of U.S. cars do less than 40 miles a day) but will let you drive several hundred miles if needed.

    Since the two cars cost about the same, that seems a rather obvious reason that some will choose a Volt--no?
     
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  31. Bearing avatar Mark Bearing Posted: 2/23/2012 7:49am PST

    Now that initial sales are in for Jan it's interesting to look back on this article. Worst sales month since August last year and GM has officially stoped publishing sales targets and will produce to meet demand. GE jumps in and pledges to buy 12,000 Volts - Gosh I wonder what is behind that decision? What could possibly be in it for GE? Perhaps charging stations, or did you know that charging an electric car uses more electricity then the average house on a daily basis? Hmmm - top it off with a tax incentive to a company that doesn't even pay taxes....
     
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