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
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
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
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.)
2011 Chevrolet Volt
Howes has penned perceptive analyses of the domestic industry and its sins in the past, so we're disappointed to see him slip so easily back into the usual "car buyers only want big trucks, and green is stupid" line of thought that helped contribute to the demise of General Motors and Chrysler.
Best thing since Henry Ford?
We think the restructuring of the bankrupt U.S. companies by the Obama administration did a huge amount of good, and will prove not only prescient but perhaps even profitable.
Still, the nattering over the Volt is a good reminder that for a variety of reasons, many people still hate GM. Howes, instead, chooses to hate The Gummint.
The one that saved General Motors.