Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.
Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher. There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce.
And while the loss per vehicle will shrink as more are built and sold, GM is still years away from making money on the Volt, which will soon face new competitors from Ford, Honda and others.
And in a sign that there may be a wider market problem, Nissan, Honda and Mitsubishi have been struggling to sell their electric and hybrid vehicles, though Toyota's Prius range has been in increasing demand.
Lol, did you know George H.W. Bush bought one for his son's birfday?
Lol, did you know George H.W. Bush bought one for his son's birfday?
There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce.
"Please Don't Buy Our Cars, We Are Losing Almost 50K A Pop"
Alright, so how did they come to the conclusion that GM spends “up to $88,000″ per car to build the Volt from this quote?
First, they took Doug Park’s estimate that GM has spend “a little over” 1 billion dollars in developing the car, and then rounded that up to $1.2 billion (with the help of experts).
Then Reuters divided that number by the 21,500 cars GM has sold in the US since it started production in December of 2010 (let’s forget about those pesky Canadian and European Ampera/Volt sales), and assume they won’t sell anymore.
Responsible journalism at its best.
In a related news item, I heard that Ford has delivered the first dozen C-Max hybrids, and it cost the company about $500 million to develop the program, and therefore Ford is losing $41,666,667 on every copy they sell.
Tucked inside this 1,000+ word essay on why their outrageous headline makes sense, is this admission by their experts:
“The actual cost to build the Volt is estimated to be an additional $20,000 to $32,000 per vehicle (nice range estimate), according to Munro and the other industry consultants.”
So, given that the $1.2 billion $1.0 billion is all in a one-time development cost to begin an entirely new breed of automobile, and will be amortized over whatever the end result of production will be (perhaps in the hundreds of thousands), this figure has nothing to do with the ongoing cost of producing the Volt at all, and their statement that selling new Volts “probably isn’t a good thing for the automaker’s bottom line,” or that GM is “losing as much as $49,000 on each Volt it builds” is total nonsense.
In actual fact according to their experts, GM may be making $7,000 to $19,000 for every new sale the company logs. That is the story they should have wrote.
Now, if you want to talk about if GM makes money on the Volt after they pay for all the advertising and marketing of the vehicle they do, that is another story…but Reuters is out to lunch on this one.
I want to know what deal this one is.
I'm surprised Obama doesn't pass a law requiring every American to buy a Volt, or pay a tax penalty.
That's what happens when the government goes into business.
Gillette spent 750 million dollars developing the mach 3 razor, making the loss on the first 10,000 razor's sold as much as $74,990 bucks per razor. Drug companies spend as much as 11 billion developing a new drug. Does that mean the first 11 pills cost the company 1 billion each?
I do believe that GM is mishandling the economics of the car (if anything not pricing it low enough to steal some prius loyalty), but you don't completely change a 100 year old car culture in two years and you certainly don't try to calculate final ROI on a program until the program is terminated. Even then that doesn't account for the complete value of the R&D as portions of it are likely to be used elsewhere for years.
Apples and oranges. The article mentions the parts and labor cost to produce the car, not R&D.
http://www.chicagotribune.com/business/breaking/chi-gm-losing-up-to-49000-per-volt-20120910 said:It currently costs GM "at least" $75,000 to build the Volt, including development costs, Munro said.
http://green.autoblog.com/2012/09/10/chevy-volt-costs-80k-to-build-not-true-says-gm/ said:That 80k breaks down this way: Each Volt currently has $56,000 in fixed costs – $18,650 in development costs and $37,350 in tooling costs – as well as $24,000 in parts and labor, according to the consultants. With each Volt sold, the $56,000 will drop by a little bit, but it's a slow process.
http://green.autoblog.com/2012/09/10/chevy-volt-costs-80k-to-build-not-true-says-gm/ said:GM Response to Reuters Story on Chevrolet Volt Development Costs
2012-09-10
DETROIT – Reuters' estimate of the current loss per unit for each Volt sold is grossly wrong, in part because the reporters allocated product development costs across the number of Volts sold instead of allocating across the lifetime volume of the program, which is how business operates. The Reuters' numbers become more wrong with each Volt sold.
In addition, our core research into battery cells, battery packs, controls, electric motors, regenerative braking and other technologies has applications across multiple current and future products, which will help spread costs over a much higher volume, thereby reducing manufacturing and purchasing costs. This will eventually lead to profitability for the Volt and future electrified vehicles.
Every investment in technology that GM makes is designed to have a payoff for our customers, to meet future regulatory requirements and add to the bottom line. The Volt is no different, even if it takes longer to become profitable.
GM is at the forefront of the electrification of the automobile because we are developing innovative technologies and building an enthusiastic – and growing – customer base for vehicles like the Volt.
Try again:
"The actual cost to build the Volt is estimated to be an additional $20,000 to $32,000 per vehicle (nice range estimate), according to Munro and the other industry consultants.” - frome the article. The 49k number is with R&D, the 20-30k number is without.
Try again.
The volt was a project a few years in the making, with robust support from within GM's management structure, all well before Obama took office.First Obama buys GM with tax payer money, with a lose of over 20+ billion and then Obama forces GM to build the Volt, another loser, so what do you expect. He never ran a lemonade stand.
And while the loss per vehicle will shrink as more are built and sold, GM is still years away from making money on the Volt, which will soon face new competitors from Ford, Honda and others.
GM's basic problem is that "the Volt is over-engineered and over-priced," said Dennis Virag, president of the Michigan-based Automotive Consulting Group.
And in a sign that there may be a wider market problem, Nissan, Honda and Mitsubishi have been struggling to sell their electric and hybrid vehicles, though Toyota's Prius range has been in increasing demand.
GM's quandary is how to increase sales volume so that it can spread its estimated $1.2-billion investment in the Volt over more vehicles while reducing manufacturing and component costs -- which will be difficult to bring down until sales increase.
But the Volt's steep $39,995 base price and its complex technology - the car uses expensive lithium-polymer batteries, sophisticated electronics and an electric motor combined with a gasoline engine - have kept many prospective buyers away from Chevy showrooms.
Some are put off by the technical challenges of ownership, mainly related to charging the battery. Plug-in hybrids such as the Volt still take hours to fully charge the batteries - a process that can been speeded up a bit with the installation of a $2,000 commercial-grade charger in the garage.
The lack of interest in the car has prevented GM from coming close to its early, optimistic sales projections. Discounted leases as low as $199 a month helped propel Volt sales in August to 2,831, pushing year-to-date sales to 13,500, well below the 40,000 cars that GM originally had hoped to sell in 2012.
Volts won't kill you, but amps will.
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