GM Responds to Negative Reuters Report on Chevy Volt Costs
Though the Chevy Volt is already entering its third year on the market, the extended-range electric vehicle remains the target of controversial media reports, including a new Reuters report. The piece, titled “GM’s Volt: The Ugly Math of Low Sales, High Costs,” focuses on the Volt’s high development and production costs and General Motors’ inability to meet sales goals. GM rarely responds to specific media reports, but found the Reuters piece warranted a rebuttal, which it released in a statement reprinted in full at the bottom of this post.
GM’s main issue with the article is a claim that the automaker loses as much as $49,000 on every Volt produced. After performing its own analysis and interviewing a number of automotive consultancies, Reuters added estimated development costs of at least $1.2 billion. Finally, the reporters factored in the Volt’s production costs (estimated in the article to be $20,000 to $32,000 per vehicle), its $39,995 base price, and the 21,500 units GM has sold thus far before completing its “ugly math.” In August, GM reported the Chevrolet Volt had its best-ever monthly sales, at 2831 units sold.
“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,” GM says in its statement. “The Reuters’ numbers become more wrong with each Volt sold.”
It’s still unknown when GM will start to make a profit on the Volt, but the automaker points out its long-term plan includes new products like a second-generation Volt as well as the upcoming 2014 Cadillac ELR coupe. The new products “will help spread costs over a much higher volume, thereby reducing manufacturing and purchasing costs,” GM says in its statement.
Reuters does point out that the Toyota Prius, which could now be considered a sales success, took a similar path when it arrived over a decade ago. On the all-electric Leaf, Nissan has spent over $5 billion in development costs (the Prius family has cost Toyota twice that amount over the past decade). Though Volt year-to-date sales of 13,500 units are almost three times more than those of the Leaf (4228), Reuters notes GM has recently employed profit-eating incentives and lease specials to boost sales.
“Engineering the Volt required considerable investment by GM in vehicle systems integration that would normally be handed off to outside suppliers and contractors,” we wrote in our 2011 Car of the Year article about the Chevrolet Volt. “But the cost of the Volt’s powertrain and associated systems will come down as GM perfects lower cost components and is able to amortize the development across a larger number of vehicles.”
Source: Reuters, GM
GM’s full statement:
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.