Last Updated:October 25 @ 08:07 am

GM discounted the Volt 25% to move them off the lots

By Tom Krisher

DETROIT (AP) - General Motors rolled out the Chevrolet Volt two years ago with lofty sales goals and the promise of a new technology that someday would help end America's dependence on oil.

So it seemed like a good thing in August when sales of the $40,000 car set a monthly record of 2,800. But a closer look shows that things aren't what they seem for the cutting-edge car.

Sales rose mostly because of discounts of almost $10,000, or 25 percent of the Volt's sticker price, according to figures from TrueCar.com, an auto pricing website. Other pricing services gave similar numbers, and dealers confirmed that steeply discounted Volts are selling better than a few months ago.

GM's discounts on the Volt are more than four times the industry's per-vehicle average, according to TrueCar estimates. Edmunds.com and J.D. Power and Associates say they're about three times the average. Discounts include low-interest financing, cash discounts to buyers, sales bonuses to dealers, and subsidized leases.

Americans have been slow to embrace electric cars. But the Volt's August sales show they're willing to buy if prices are low enough. Even so, electrics have a long way to go before they enter the mainstream and make money for car companies. Electrics and gas-electric hybrids account for just 3.5 percent of U.S. auto sales this year. GM is losing thousands of dollars on every Volt, raising the question of how long it can keep eating the steep losses.

For the foreseeable future, carmakers will have to cut prices to move electric vehicles off dealer lots. The nonpartisan Congressional Budget Office says the cost of electric cars must drop to be competitive with gasoline-powered ones.

GM executives have conceded from the start that they were losing money on the Volt, and that was before the big discounts.

Now the losses could be even higher. It costs $60,000 to $75,000 to build a Volt, including development, manufacturing and raw materials, estimates Sandy Munro, president of Munro & Associates, a Troy, Mich., a company that analyzes vehicle production expenses for automakers. Much of the cost comes from an expensive combination of two power systems — electric and gasoline. With a sticker price of $40,000, minus the $10,000 the company pays in incentives, GM gets roughly $30,000 for every Volt. So it could be losing at least $30,000 per car.

"It certainly wasn't a rousing success," says Carter Driscoll, senior analyst for CapStone Investments who follows electric cars, discussing the Volt.

GM confirmed there are incentives on the Volt and that the company loses money on the car. But the automaker declined to give figures for the discounts or the losses. The figures exclude a federal tax credit that goes to buyers.

The automaker says Munro's estimate is high because it doesn't spread the Volt's costs far enough into the future, when more Volts will be sold. Automakers typically spend $1 billion or more to develop a car, and sometimes don't recoup the investment and start making money until late in its life. Also, Volt technology will be used in future cars and trucks, eventually leading to profits, the company says.

GM spokesman Jim Cain says most of the Volt discounts come in the form of lease deals, which account for about two-thirds of sales. In some markets, Volts can be leased for $249 per month with $2,400 down.

"We're trying to create a market for a brand-new technology," Cain says.

NO SPARK AT THE START

The Volt, a four-seat compact, was rolled out in a few states in December 2010 with a starting price of $41,000.

GM had high hopes. The car's features stacked up well against the Nissan Leaf, a pure electric car that debuted about the same time and is the Volt's closest competitor. The Volt goes about 35 miles on battery power, then a gasoline-powered generator can take over, giving it the same range as a car with a gasoline engine. And the battery can be recharged in 10 hours from a standard home electrical outlet for about $1.50.

But the timing of the launch was poor. The pricey car hit showrooms when many buyers were reeling from the bad economy and turned off by the government's $50 billion bailout of GM.

"Let's face it, over $40,000 is asking a lot for a compact car," says Bob Lutz, a retired GM vice chairman who led the development of the Volt.

Even a $7,500 federal tax credit, which dropped the Volt's sticker price to $33,500, did little to promote sales. The car cost $7,000 more than the Leaf, and $13,000 above a well-equipped compact with a gas engine.

As it reached more dealers in 2011, the Volt had to overcome more than a high price and recession-weary Americans. The government found that the battery could catch fire after crash tests. In California, a key market because of its tech-savvy population, another roadblock emerged. Volt drivers traveling alone weren't allowed to use carpool lanes because the car didn't qualify for a state exemption. Drivers of the Toyota Prius hybrid, meanwhile, could use those lanes, thanks to the exemption for lower-polluting vehicles.

U.S. Volt sales totaled just 7,700 in 2011, short of GM's goal of 10,000 and a fraction of the 136,000 for the Prius hybrid, the world's best-selling alternative fuel vehicle. Volt sales have climbed to more than 13,000 this year. But at their current pace, sales will still miss the company's 2012 target of 60,000 worldwide.

MOVING THE NEEDLE

Faced with disappointing sales, GM began toying with discounts. In June of 2011, the company knocked $1,000 off the Volt's starting price, but it didn't help. So early this year, GM started offering many more discounts, which soared to $10,000 per car in August.

The Volt is now the top-selling electric car in the U.S. — 7,400 ahead of the Prius Plug-in. Nissan's Leaf is a distant third, and analysts say Volt sales could reach 20,000 this year.

Spikes in gas prices also have helped sales, especially when incentives rise at the same time. The national average price of gasoline rose at least 24 cents a gallon in March and August. Those were the Volt's two best sales months.

Other changes have helped boost the car's appeal. Engineers figured out that the Volt fires were the result of a coolant leak that caused electrical shorts after side-impact crash tests. GM retrofitted the car with more steel to protect the battery. No fires were ever reported on real-world roads.

The carpool problem, which had cost sales on the West Coast, also was resolved. California has 1,500 miles of freeway lanes that can be used only by cars carrying two or more people. But there are exceptions allowing lower-pollution vehicles with one person. Initially, the Volt didn't qualify because its gasoline-powered generator didn't meet the pollution standards.

But engineers eventually cut the generator's pollution, and the Volt won an exception in late February, immediately boosting sales in a state where one-quarter of all Volts, or about 3,400, were sold this year.

Before the cheap leases and the carpool exemption, Bunnin Chevrolet in Culver City, Calif., was selling three to five Volts per month. The dealership sold 36 last month, mostly leases, and it is struggling to keep Volts in stock, says sales manager Chad Kelman.

"It definitely helps to discount," Kelman says. "The market in L.A. is fiercely competitive."

Gas in Los Angeles, which now runs more than $4 per gallon, was the big reason that Donald Keller traded in his 2007 Lexus ES350 for a 2012 Volt in July. But he might not have bought it without $5,000 in discounts from Bunnin Chevy.

Keller, 82, who volunteers to take senior citizens to the grocery store and medical appointments, says he's driven more than 1,100 miles in his Volt, and hasn't bought any gasoline. Charging the car has boosted his electric bill by about $40 per month, but he used to spend $200 a month on gas for the Lexus.

"I don't go to the (gas) station and I don't have to worry about the price," he says.

AIMING FOR THE MAINSTREAM

While the Volt isn't helping GM's bottom line, it's not in danger of being canceled anytime soon.

GM can subsidize the Volt's cost from profits on other cars, says CapStone's Driscoll. But eventually GM will have to get closer to breakeven or make money, he says. GM earned almost $2.5 billion overall in the first half of this year.

Discounting the price should help Volt sales expand beyond early adopters, says Michael Lew, an energy efficiency analyst for the Needham & Co. investment firm. That's important because if sales increase, GM will have more negotiating power with parts suppliers to cut costs and stanch losses, he says.

GM says that the Volt has helped the company, even if it never makes a dime. The car has pulled in customers from rival brands, and helped Chevy wrestle at least part of the environmental halo from Toyota's Prius, executives say. It also will help GM meet tough government fuel economy standards.

GM's Cain says the company wants all cars and trucks to be profitable, but some take longer than others.

"Its prime purpose was to introduce a new generation of technology," says Lutz, the former vice chairman. "And at the same time ... demonstrate to the world that GM is way more technologically capable than the people give it credit for."

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GM discounted the Volt 25% to move them off the lots, 5.2 out of 10 based on 17 ratings





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21 Comments

  1. pistol packing mamaComment by txgoatlady
    September 24, 2012 @ 10:49 am

    The Volt is an electric version of the Cruze. I can’t imagine someone used to driving a Lexus is comfortable in a much smaller and less luxurious car.

    Does anyone suspect that the gas price increase is intentional? After all, Obama wants gas prices that are $10/gallon. He makes noises about releasing oil from the strategic reserve (which won’t do much to lower prices) but isn’t willing to give us a gas tax holiday. A gas tax holiday would lower prices substantially.

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    Rating: 4.9/5 (12 votes cast)
    • lwessonComment by lwesson
      September 24, 2012 @ 11:06 am

      Hi. The Left has openly talked of major tax increases on gasoline! Unlike our American Natural Gas, oil, gasoline floats on a speculative Global market. Obama’ idiotic talk of tapping our Strategic Oil Reserve, is just another stab at weakening the country. The Reserve is to protect our Navy, Military…, which largely runs on oil, in a major shut off or Global supply.

      Actually, we & Canada eh, have lots of the black gold, but we do not keep it, with In House pricing. Imagine what Natural Gas prices would leap to, if it went Global? (there are some serious hints that there are forces trying to do just that)

      And finally, our beloved glorious Socialist State Fearless Leaders, are talking about tracking our mileage that we drive, and taxing us accordingly! Progressive Insurance, owned by a Leftist, has the tech on hand and is promoting it to it’s sheeple. Thanks Comradechik, Flo!

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    • nickster99Comment by nickster99
      September 24, 2012 @ 11:18 am

      I have heard rumors about keeping all the Bush tax cuts in place and raising the federal gasoline tax by 1.00-1.50 per gallon if Obummer is re-elected to make up the difference. I hope it is not true! This would really put a damper on the economy! That’s $30.00 in taxes every time you fill up your car if you have a 20 gallon tank! $1500.00 per year on average!

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    • chamuielComment by chamuiel
      September 24, 2012 @ 3:29 pm

      And using a Volt to take other elderly people to run errands. Where does he put them and their Groceries?

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      Rating: 5.0/5 (2 votes cast)
  2. lwessonComment by lwesson
    September 24, 2012 @ 10:51 am

    The Socialist Government Tax Credit of $7,500, is the tip of huge social engineering projects from the failing “company” called, The United States. Of course this “company” has claimed the exclusive right, to print money out of nothing, devaluing the dollar… . Another topic novel worthy… .

    That said, Thomas Edison said of electric cars, something to the effect that they are excellent, save for the dreadful batteries on hand. That is changing. Every major player in automobiles have various electric cars in the pipeline. And there are start ups as well, like Tesla & Fisker, to name just two.

    The early days of cars, well, they were fantastically expensive. You could easily buy a nice little house, or several, vs a car. Early autos were also, rather dangerous and quirky. Electrics took the mess and bother out of the equation, save for no decent range. And of course there was steam… .

    The 1840′s were the start of electric dabbling in motors and batteries. So later on, for many, a horse was, despite the upkeep, and danger, was the way to go. My Great Grandfather finally gave up his horse & wagon for a Model T truck, and likely used at that, in the late 1920′s.

    The Volt was in the pipeline well before Obama and Obama Motors. Ad hominem attacks are likely, anyway. Government Bailouts, short circuited what should have happened in Bankruptcy proceedings giving Unions, Company officials gilded outs, and shareholders…, the you know what. The only good thing is that maybe Communist China did not pick up GM and Chrysler in a “fire sale”. For the taxpayer, the thank you was that GM continues to expand manufacturing, in other countries. Thanks GM!

    But high fuel costs with a dwindling currency, economy, are driving forces for alternatives. A friend whose middle name might as well be Exxon, is doing very well, but admitted that such companies are looking down the road, and that says much.

    A friend just back from Alaska, says gasoline goes for $7 a gallon! Imagine commuting in a sprawled out city like Houston, at $7 a gallon and really, there is no need to imagine that, there is plenty of oil…, but Obama and his fellow travelers do.

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    • lwessonComment by lwesson
      September 24, 2012 @ 12:17 pm

      Nice counter point!

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      Rating: 3.7/5 (3 votes cast)
  3. middlegroundComment by middleground
    September 24, 2012 @ 11:27 am

    Gasoline at the pump is one product taxed at every level or essentially a VAT or Consumption Tax. Everyone only looks at the stated tax on the pump, but the hidden taxes are staggering including Obama’s latest one to stop North Dakota oil from being piped to Gulf Coast refineries and then to the rest of the country. His action also action also caused the Canadian-area of the Baaken field to ship to China, what was probably his real purpose.

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    • theoldsargeComment by theoldsarge
      September 24, 2012 @ 9:30 pm

      You are correct. I did some research on the subject a few years ago. From the time that oil is taken out of the ground, until it is gas being pumped in your car, it has gone through a number of taxes each time it changes hands. Those taxes are passed on to the next buyer. At the end, the person paying all those taxes is the person at the pump.

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  4. elliewhoComment by elliewho
    September 24, 2012 @ 11:47 am

    My sister bought a hybrid 3 years ago to save on fuel costs. Last week she was told by the dealer that she needed a new battery which was no longer under warranty. The new battery cost $3500 dollars!

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    • lwessonComment by lwesson
      September 24, 2012 @ 12:15 pm

      We jettisoned our VUE hybrid, as the nickle metal hydride battery kept failing and leaking. Old tech battery compared to lithium ion, and others. GM picked up the tab for 4 batteries! We did not want to be paying for an eventual replacement.

      My guess is that GM calculated, (badly) and went on with a cheaper battery. Cent wise, pound foolish. It still was a costly vehicle for us, as we had to, let it go, as Eastwood says.

      Motor, and transmission replacement were common in the early era of motor cars, with high maintenance. Learned to replace the points and condenser, set the dwell, timing, carburetor… on my own cars, as Grand Dad was a master auto mechanic. There is little to do now, usually and thankfully!

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    • BrokerbobComment by Brokerbob
      September 24, 2012 @ 2:00 pm

      Don’t worry about the Volt. Obama plans to buy all the left over Dolts for Government fleet use so only the rich taxpayers will pay and I’m sure the government will get a great deal, probably only $100,000 per car.
      GM had Great last quarter but the government accounted for 79% of their sales in June and they counted trucks delivered to dealers as SOLD

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      Rating: 5.0/5 (9 votes cast)
  5. cgretiredComment by cgretired
    September 24, 2012 @ 12:31 pm

    “GM can subsidize the Volt’s cost from profits on other cars, says CapStone’s Driscoll. But eventually GM will have to get closer to breakeven or make money, he says. GM earned almost $2.5 billion overall in the first half of this year.”

    Hold on a second here. Who ia subsidizing the Volt? Who’s money is it, really. When they pay back, and I mean pay, not write off, the money that was given to them by ozero, then perhaps they can say THEY subsidize the thing, and not before.

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    • bna42Comment by bna42
      September 24, 2012 @ 2:11 pm

      “GM is losing thousands of dollars on every Volt, raising the question of how long it can keep eating the steep losses.”

      As long as Obama and the government have a hand in government motors and can keep passing the “steep losses” onto the taxpayer.

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      Rating: 4.5/5 (8 votes cast)
    • lwessonComment by lwesson
      September 24, 2012 @ 2:56 pm

      Rumors are seeping out, that GM is heading towards bankruptcy, just the same.

      If the US was a company, it would have gone out of business long ago, it’s CEOs would be in prison for various Ponzi Scams, general fraud…, and it would be used as a textbook example of how not to, ever, run a company.

      Having police state powers, a printing press makes it all a self perpetuating, Fantasy Island.

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      Rating: 4.7/5 (13 votes cast)
  6. Pingback: Better in their words… » Blog Archive » GM discounted the Volt How Much!?

  7. brendajaneComment by brendajane
    September 24, 2012 @ 2:55 pm

    What’s the matter….Government Owned Motors can’t sell their new albatross around America’s Neck?

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  8. lpenComment by lpen
    September 24, 2012 @ 3:03 pm

    All Government Motors has to do is change the name from Volt to Obama then the sales will go through the roof. Until they find out the replacement battery cost $11000.

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    • brendajaneComment by brendajane
      September 24, 2012 @ 3:08 pm

      Ipen…GOOD POINT>>>PLUS,What about our LANDFILLS…My husband seems to think the batteries will be recycled??? Eventually they will reach our landfills…We are concerned about that little plastic grocery bag, what about all these batteries full of acid????

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  9. chamuielComment by chamuiel
    September 24, 2012 @ 3:28 pm

    “In California, a key market because of its tech-savvy population”

    All those illegal aliens are tech-savy?

    Now, who would have thought?

    35 miles on a battery charge, a battery which if you have to replace will run you $8,000.

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  10. James AgansComment by James Agans
    September 24, 2012 @ 5:40 pm

    I think that the threshold is 250 miles on a charge. 100 miles is ****.

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  11. cfhardersonComment by cfharderson
    September 25, 2012 @ 1:04 am

    I can not understand why the development of the Volt was so expensive and time consuming. General Motors developed the EV1 in the mid-1990′s as their attempt to meet the new proposed emissions limits that were considered in California. What happened to those cars, their plans and their engineering?
    Did GM collect any data from the operation of those cars?

    General Motors has not been a leading car manufacturer since the Chevrolet Impala of the early to mid-60′s.

    Congress had passed mandatory air bugs starting in 1984 until rescinded by R. Reagan in 1981. Chrysler Motors started in 1988 and Ford in 1990. GM didn’t start installing air bags until 1992. Again late to the party rather than a leader.

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  12. plunderpowerComment by plunderpower
    September 25, 2012 @ 12:35 pm

    How many times do taxpayers have to pay for a car before they get to drive it? These cars should be issued, especially if they’re so environmentally necessary.

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