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Tuesday, August 6, 2013

Chevy Announces "Fire-Sale" on Volt-- As Sales For The Government-Ordered Product Continue to Tank!

The Chevy Volt was ordered to market by GM's owners (the Obama Administration) before it was fully developed and before there was consumer demand. This president wanted the Volt to be the "signature" product of the new General Motors and his "global warming" strategy.

Since its introduction, General Motors can't even give away the Chevy Volt.  Despite rebates and heavy government subsidies sales of the "plug-in hybrid" continue to be way below projections. According to Kelly Blue Book, GM has sold only 11,643 Volts so far this year. In 2012, GM sold 23,461 of the cars.

Today, General Motors announced that it will knock another $5,000 off the sticker price of a new Chevy Volt, making it the latest electric car to be steeply discounted as automakers battle to find people who will purchase their cars even at a steep discount:
Customers will be able to get the discount on 2014 Volts, reducing the car's starting price from $40,000 to $35,000. Government tax rebates can bring the price down as low as $27,495, GM says.
Pricing and incentives on electric cars have been getting more aggressive recently as automakers try to create a marketplace for a product where few buyers exist.
GM has already offered steep rebates on the 2012 and 2013 editions of the Volt. In similar fashion, Nissan and Honda have offered aggressive discounts on their Leaf and Fit EV electric cars.
"We have made great strides in reducing costs as we gain experience with electric vehicles and their components," said Don Johnson, a vice president at Chevrolet. "The 2014 Volt will offer the same impressive list of features, but for $5,000 less."
Alec Gutierrez, senior analyst at Kelley Blue Book, said that GM is likely to follow the price cut with a more aggressive leasing program that will appeal to a wider consumer base.

"Chevrolet has quickly discovered that when price savings at the pump and ultimately value are your key selling points, a $40,000 cost of entry makes for a difficult hurdle to overcome for most budget conscious consumers," Gutierrez said.
Two of the Japanese manufacturers are moving away from the electric car market proving you can lead a horse to water, but you cant make him purchase a crappy car. At least the the message from the marketplace to the auto manufacturers. High cost and short range have kept the Electric Car market from igniting (although some garages have ignited from electric cars). Toyota and Nissan, unburdened from government interference are moving away electric car development and making hybrids and hydrogen car development a bigger priority.

Even with the built-in tax breaks for eligible buyers, electric vehicles have struggled to gain market share. No more than a few thousand Volts are sold each month in the U.S., a tiny fraction of overall auto sales.
"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.
A normal company would cut its loses and stop producing the car. Sadly for General Motors, this is not a normal company, it takes its orders from Washington DC, who doesn't mind wasting taxpayers money.

Estimates given to Reuters by industry analysts and manufacturing experts back in September 2012 demonstrated that General Motors loses $49,000 on each Chevy Volt it manufactures. Those numbers may be on the conservative side because there are leasing deals offered this summer where customers are paying a little over $5K for a two year lease on the Volt which costs as much as $89K to build.
Adding insult to injury, much of the taxpayer-supplied subsidies for the Volt will go towards leases (also supplied by government-owned Ally Financial) that put drivers on the road for as short a period as two years. I have previously calculated that taxpayers are paying about $10 per each gallon of gas saved in these scenarios. The non-partisan Congressional Budget Office has reported that overall plug-in electric car subsidies are estimated to cost taxpayers about $7.5 billion over the next few years for little or no benefit.

$14,000 of incentives on a Chevy Volt and GM still does not seem to be able to sell more than about one tenth the amount of Toyota Camrys that sell in a month. GM and its shareholders lose money, as do taxpayers. Maybe it is time for GM to stop the farce and cut losses for those that are footing the bill to push a green agenda that centers on plug-in electric cars that can not succeed without massive subsidization.
Chevy Volt may turn out to be one of those infamous Harvard Business School case studies where MBA candidates explain why a product failed.   In the case of the Volt, the reason is simple, most drivers  don't want tiny energy efficient cars, especially the electric ones with their limited range between charges and their very high out of pocket costs.

The Volt is just another classic example of what happens when the government picks winners and losers in the marketplace, not only are they generally wrong, but they end up costing the taxpayers money.


Dave Armstrong said...

Imagine that. The market knows more than the Obama Administration.

Evi L. Bloggerlady said...

This is how the old USSR used to do it. How did that work out?

Lee said...

Typically what happens when economic decisions are made for political reasons.

Ask not for whom the losses mount. They mount for thee.

Bob Engler said...

Who's paying for this discount? Oh. Wait. I am. And you. And you. And you.

nun said...


Bob59 said...

Remember, many electric cars ultimately run on coal.

Thucydides said...

But when you look at the incentive structure (i.e. who is actually benefiting from this), I expect you will find lots of Democrat Crony's with their hands out and who will fight to the last taxpayer to keep the gravy flowing.

Jeff H said...

"Customers will be able to get the discount on 2014 Volts, reducing the car's starting price from $40,000 to $35,000. Government tax rebates can bring the price down as low as $27,495, GM says."

SUCH a bargain...

Enough to buy over 50 houses in Detroit!!!