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How Much Money Is GM Losing On Every Chevy Volt?

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2012 Chevrolet Volt

2012 Chevrolet Volt

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Compared to its electric contemporaries, Chevrolet's range-extended Volt is currently proving the most popular plug-in, posting its best-ever sales figures during August.

It's out-punching the Leaf consistently, and other electric cars aren't even getting a look-in. It's even outselling Toyota's Plug-In Prius.

But overall, Chevy is still a long way from meeting its projected 45,000 target for this year, with year-to-date figures around the 13,500 mark.

And, says Reuters, GM could be losing as much as $49,000 on every Volt it makes.

Packed with technology, the Volt is an expensive car to make, and GM isn't making a great deal of money back on each one, despite the $39,995 base price. With some lease deals allowing customers to drive around in a Volt for as little as $5,050 over two years, GM's return looks insignificant.

High production costs, low sales

Some industry analysts predict that each Volt costs at least $75,000 to manufacture, though some suggest this figure could be as high as $88,000.

The numbers are compiled by industry experts like Michigan-based Automotive Consulting Group and Munro & Associates, and factor in the Volt's total development and tooling costs to date, divided among the 21,500 Volts sold to date.

So far, it puts average costs at just shy of $56,000 per car--though it's worth remembering that this figure will go down with every Volt sold, and unit production cost can only truly be calculated over the course of a full production run.

On top of the current unit cost, it's estimated that manufacturing cost for each car is between $20,000-$32,000 per vehicle, resulting in the final figures.

By contrast, the standard gasoline Chevrolet Cruze is estimated to cost between $12,000-$15,000 to build. To bring the Volt down to around $10,000 per car to build, GM would have to sell around 120,000 per year--but in an effort to push up sales, the low-cost lease deals are part of the problem while volumes remain low.

Another part of the problem is thought to be the Volt's relatively low production volumes, resulting in some parts suppliers pushing up component costs. A high quantity of unique parts over other cars on GM's Delta II platform--such as batteries, the electric motor and power electronics--also pushes up the unit cost.

GM's Doug Parks confirms that GM isn't yet making money on the Volt, but declined to comment to Reuters on any specific costs.

Cadillac ELR

Cadillac ELR

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Other benefits

GM isn't yet fazed by the loss-making Volt--at least outwardly--citing other benefits to the Volt project.

Firstly, the Voltec system will attract greater economies of scale when it sees further service in other GM vehicles down the line, such as the 2014 Cadillac ELR luxury coupe.

GM is also learning technological lessons from the Volt project, some of which can be used even on vehicles that don't use the Voltec drivetrain.

"It wasn't conceived as a way to make tons of money. 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," explains Parks.

A similar strategy has paid dividents for Toyota, whose multi-million selling Prius line now consists of four models, despite being a slow initial seller. And the Volt is attracting the same sort of customers as Toyota's hybrid--dealers say the Prius is the number one trade-in for Volt customers.

It isn't hard to imagine Volt sales steadily increasing just as the Prius did--though this does hinge on how many GM will sell when incentives end--but while the competitive lease deals are making the Volt fantastic value for consumers, it could be a long while before the car makes any money for GM.

[UPDATE: Want to know what Bob Lutz has to say about the Chevy Volt's production costs? Head over to our follow-up story]

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Comments (19)
  1. If you read Bob Lutz's book, he never really felt this would be about money (at least initially). This was about creating a halo car for the Chevy brand. It would be a chance for GM to stand up to critics that say all innovation comes from companies like Toyota in Japan.

    Well, I would say the Volt is the technology leader in this segment and the positive Press is worth the investment. GM is an innovator and leader in this area. Toyota seems to be lagging a little in comparison, really a win for GM.
     
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  2. Those idiots at Reuters didn't even factor in the number of Ampera models sold from the same production line as the Volt. There are some many faulty economic details in this piece of shoddy Reuters "tabloid press" that it is really laughable. Just looking at the "distribution point" for assigning total development cost at this early marketing point, when the projected volume of Generation 1 Volt vehicles should easily exceed DOUBLE the current point means that the "cost figure" is double what it should really be....Headlines for idiots.
     
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  3. But isn't it true that 49-51% of the population just eats up these types of headlines? It's a sizeable target audience that they want to cater to, a very dedicated, depressed, and unfulfilled audience, so I call it savvy marketing :-)
     
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  4. Interesting how the basis of the article is "according to estimates provided to Reuters by industry analysts and manufacturing experts". Notice how the word "estimates" is used. I would like to know how these "analysts" and "experts" arrived at their "estimates"? Did they audit the books? Also, who do the "analysts" and "experts" really work for? We seem to have a couple of unanswered questions.
     
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  5. Experts=LOL

    Every "expert" has an agenda so the buck never stops at the opinion of some "expert".

    Too bad, it would be convenient if we could just turn to experts to tell us the truth is but alas, that's just not how it works. The truth is a rare commodity in this world and rarely available from self proclaimed "experts".
     
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  6. No "all new car" will ever make money from the beginning. The total cost of engineering, tooling, and capital expense cannot be recouped with the first batch of 1000 units, or 10,000, or even 100,000. Will the Volt ever be profitable? I think so but it's a long-term bet with unknown payout... They could just be making Cruzes and Silverados now since they're both selling well and are profitable but it took a big bet on the former one.
     
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  7. Thank you to the first three comments here. An actual understanding of what GM really meant to accomplish, a deserved attack on the ridiculously misleading "cost," and a good reminder about what exactly a new vehicle or new vehicle platform means.

    GM was trying to improve its technology and expand its customer base, not targetting short-term profitability. If GM is able to use this technology and future variants, then they've done well in my opinion. I certainly had no intention of visiting a GM dealer before the Volt came out, so mission partly accomplished...

    What's next,a blog from the 1990s stating that Toyota is losing money on the first generation Prius??? Perspective, please.
     
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  8. I actually read the "STUPID" reuter's link and I have to comment here. The Volt is "currently" NOT making money due to the "R&D" initial investment. Well, that is the CASE with EVERY brand new platform and product. The same article pointed out that Cruze sell for about $17k but cost $12k-$15k to build. That is $2k- $5k in profit. Volt cost $20k-$32k to build (huge variant, shockingly stupid estimate), but sell for $40k - $45k. That is $8k-$13k in profit. How can those STUPID reuter writer complain about Volt NOT being profitable? B/c they said Volt cost $1.2Billion for all the tooling, investment and R&D. So, 1.2 Billion would take about 100,000 Volt to break even... Volt is 1/4 way there after 2 years. That is pretty fast.
     
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  9. Also, what was Cruze's R&D cost? At a much lower profit margin, it will take even longer to recover the cost...
     
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  10. It's annoying how people who want to prove that the Volt is a failure tend to suggest that GM looses money on every volt by looking at the average production cost of the Volt at that moment rather than the marginal cost. The previous example of that sort of manipulation that went viral in the media was by James Hohman at Michigan’s Mackinac Center who pegged Volt cost at $250K a pop based on 6000 units sold up to that point. Point is of course that average cost decline as sales increase making the number meaningless in this context.

    Pegging marginal cost somewhere between $20-$32K is pretty vague but at least indicates that the first paragraph of the Reuters article is misleading: more sales are unlikely to increase losses.
     
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  11. Exactly. But how many of the generic public understand "MARGINAL cost"? That should have helped all sort of media manipulations.

    On the other hand, shouldn't reducing "average cost" from $250k to $88k be considered an awesome victory? We'll probably see the same media reporting $60k one year later, $45k two years later...until it does longer matter as the car is seen way too often on the public street.
     
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  12. On the other hand, $20k-$32k marginal cost does sound good. That will allow Volt to generate positive cash flow even without federal tax credit - the car sells for $32k after that. And did I mention the ever-dropping battery price?

    And now I understand why GM/Ally can provide lease deals that sound ridiculously cheap ($199/mo) a few months ago. The cost to Ally on each base car could be only $30k after federal+state incentives, and GM might be offering further discounts (while still having marginal profit). They are probably not to earn much profit from that, but it's far from being a money pit.
     
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  13. An interesting article from Bob Lutz: http://www.forbes.com/sites/boblutz/2012/09/10/the-real-story-on-gms-volt-costs/
     
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  14. Interesting link. Note that Lutz pegs battery cost at~$350/KWH. That's the sort of relatively low numbers EV sceptics tend to ignore because it doesn't fit their view that battery prices are very high and only drop by a few percent per year and therefore EVs will only be a relevant factor in the very long run.
     
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  15. Well, @ $350/KWh, Tesla's 85KWh battery pack cost about $30,000. Its $40KWh battery pack would cost about $14,000.

    Both of them are "realistic" numbers. Those are just battery cell cost.
     
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  16. Why do you re-print this garbage without correcting it first. It does not cost $80k to make a Volt, only 3/4 through the article does it say a more reasonable $32k, so you are being self contradictory.

    GM never had a sales prediction of 45k Volts. What they said was that they were prepared to manufacture that many if the sales went that high.
     
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  17. but I speculate that GM has a new plan: 15,000 Volts will be sold by next year
     
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  18. The way I see it, the Volt is basically a Chevy Cruze with a new drivetrain and a lot better detailing, so it's the high end platform with the engine only "cadillac" is allowed to sell.

    figure a new platform is a billion dollars, (Tooling, Design, Homologation) so the Voltec engine can't be more then 400 Million. The cost of the Volt is an Ampera body/Chassis with the Voltec engine. Now a Cruze sells for 22K, and the Volt sells for $42K, so they've had $20K extra margin for the 30,000 units sold to date.

    So GM has had over $600 Million in revenue to offset the VOLTEC and advertising and dealer training, etc,,,,

    Not a huge margin, but, i suspect GM is not unhappy.
    Bear in mind, this is not standard program accounting
     
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  19. Only problem is with GM using tax payer dollars to support its vehicles we are in debt up to our ears. Companies like this should have been allowed to fail and dealt with properly with a company that does not have Union members that soak up their profit.
     
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