In an attempt to find the economic sweet spot for electrified vehicles, General Motors (GM) announced this week it would cut $5,000 from the price of the Chevy Volt.
With the cut, the 2014 Volt will sell for $34,995. Subtracting a $7,500 federal tax credit, the initial price could drop to $27,495. Further incentives, such as state rebates, could ultimately take it as low as $22,495 in some states.
With these most recent price cuts, GM joins a succession of manufacturers that have chopped the prices on their electric cars and plug-in hybrids. Those include Ford's Focus EV ($4,000 cut), Nissan's Leaf ($6,400), and Honda's Fit EV ($259-a-month lease). GM also previously offered an incentive of $4,000 on the 2013 Volt, but that incentive was not reflected in the car's initial price.
GM hopes a $5,000 price cut will position the Volt as a head-to-head competitor to the Toyota Prius. (Source: GM)
"The automotive industry realizes now that electric vehicles aren't selling like hot cakes, as some of them had expected," Thilo Koslowski, vice president and distinguished analyst for Gartner Inc., told Design News. "They know they have to reduce the pricing in order to bring the cost-benefit ratio to a level that consumers will find more attractive."
GM said that by cutting the initial price, instead of offering an incentive, buyers will see the new price when they look it up online. The giant automaker hopes that strategy could give the Volt a leg up on the Toyota Prius hybrid. "Previously, when people looked it up online, the Volt and the Prius didn't end up in the same comparison set," Michelle Malcho of GM told Design News. "Now, they'll see it immediately."
To some extent, GM's announcement may have also been a reaction to BMW's rollout of the all-electric i3 last week. "The i3's price point is similar to the Chevy Volt's original price point," Koslowski told us. "So GM might feel the need to make a distinction.”
It's not known if the $5,000 price cut will cause GM to lose money on the Volt, but experts said that it's still too early for the giant automaker to worry about that. "These vehicles today, especially if they meet mandates (like those in California), can't be looked at purely in terms of the profits you get from sales," Koslowski said. "It's an investment -- the price they pay to continue doing business."
I agree with patb2009 in that costs for EV automobiles are on the decline. As lithium-ion batteries become more efficient (or replaced) production costs will indeed decline making the vehicles more affordable. It's the time frame in which that happens is the problem.
I see your point, GTOlover. I don't claim to know whether the cost of the parts exceeds the sale cost of the Volt, but if that is the case, GM would be digging themselves an awful hole. Regarding your comment about better technology ultimately competing with the Volt: I'd be curious to see how the Chevy Cruze Diesel would stand up against the Volt without the subsidies. At 42 mpg and $26K, I would expect it to do well.
:) Well, I love that expression, TJ, and someone used it in a conversation with me yesterday so I thought I would pass it on. It's a great one for any situation in which someone or something is trying to be dressed up to look better when it's a bit of a lost cause (which I'm sure you can discern from the expression itself ;)). I thought it was appropriate in this situation, in which GM is trying to make the Chevy Volt prettier with the price cut, even though it's not really changing the reality of the situation. Glad I could bring some chuckles!
Watch out for the professional writers; they know how to use the language to lethal effect. "Lipstick on a pig", Elizabeth? My coworkers are looking at me strangely for the strangled laugh that escaped upon reading that.
Points well taken, TJ, and you guys are right. There are some serious issues that need to be addressed on the viability issue. But it seems like the industry is working on it, even if this price cut is just like putting lipstick on a pig.
I do not think Leto is argueing the point of develoment costs. You are correct Charles in the amortization of development costs.
The point is, the actual cost of every nut and bolt put on the Volt is more than the car is being sold for. The impression is that the costs will not come down enough on these items before Chevy runs out of money (again). Even if they did drive the cost down to profitability, the other fear is a better technology will come out and the Volt is old news. At this point, only Chevy knows and given their history, we are not confident in that prospect.
On a pleasant note, at this price ($23K) I am looking to possibly purchase one. Simply for the gas mileage and the amount of driving I need to do each year! If I believe my fears, I better hurry. If Chevy does make money, good to go. Either way it is win/win.
I'll respectfully try this one more time and then I promise I'll stop. What I'm saying is that it's too early to look at the Volt and decide whether it's profitable based on current sales. Most new vehicle development platforms call for up-front capital costs for product development, engineering, tooling, equipment and parts. Often, those upfront costs amount to between $1 and $2 billion. The Volt's costs still need to be spread across the program's life, not its first couple of years.
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