How GM loses up to $49K each time it sells a Chevy Volt
More than five years ago, at the North American International Auto Show in Jan., 2007, Chevrolet introduced the Volt, which was to be, in no uncertain terms, the car of the future.
And still today, the Volt is the name in electric cars. Ford, Honda and Mitsubishi have plug-in vehicles on the way, but Chevy owns the market.
Though how lucrative that market is appears to be another story. A new report detailing just how much Chevrolet loses on the Volt suggests we’re still quite a ways from a sustainable electric car business.
According to Reuters, which popped the hood on the Volt’s finances recently, Chevy loses as much as US$49,000 for each unit it sells.
That’s an estimate, it should be noted, from industry analysts commissioned by Reuters. General Motors, which produces the Chevy brand, has conceded it takes a loss on each Volt sold, but said such a high projection is “grossly wrong.”
Reuters’ report guesses it costs GM nearly $90,000 to manufacture the Volt, including research and development costs, which is a far cry from the $40,000 price tag it sells for in the U.S. (in Canada, Volts start at $41,545).
In the interest of fairness, it might not be unusual for a car maker to take a loss on the first generation of a vehicle, and for a car as technologically advanced as the Volt, it’s par for the course.
But a near $50,000 loss per car is serious. GM, for its part, says it will break even on the Volt when its second generation model is released in a few years, but others aren’t so sure.
“I don’t see how General Motors will ever get its money back on that vehicle,” an auto industry source told Reuters.
Of course, at the heart of the Volt’s financial crisis isn’t high development costs, though those don’t help. It all comes down to sales.
Chevy hoped to sell 60,000 Volts this year across the world, including 45,000 in the U.S. Through July – that’s more than half the year, remember – less than 11,000 Volts were sold in America.
The future may come for the Volt, and indeed manufacturing costs will narrow with each new unit of the plug-in hybrid.
But with high losses for GM, coupled with an adoption rate so bad the company is rumoured to be shuttering production of the car for four weeks later this month, the Volt is not the car of the future. It isn’t even the car of today.
By Jason Buckland, MSN Money