They’ll Make It Up On Volume

Apparently, GM is losing money on each and every Volt it sells:

Sept 10 (Reuters) – General Motors Co sold a record number of Chevrolet Volt sedans in August – but that probably isn’t a good thing for the automaker’s bottom line.

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.

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.

The detailed analysis of the Volt’s costs is something like this. Each Volt costs GM between $20,000 and $32,000 to build. A comparable conventional GM car has production costs of about half that. Add to that the amortization of the huge development costs, at this point estimated as something like $50,000 per car.

Will that go down as more are sold? Maybe, maybe not. There are financing charges, opportunity costs, and the costs of producing the next generation Volt, something that will become increasingly urgent as competition from Ford, Honda, and, of course, the niche leader, Toyota, increases.

3 comments… add one
  • Thank God that Obama saved GM.

  • Drew Link

    Your commentary, Dave, reads like what any competent businessman would conclude and write. And God forbid natural gas prices rise to historical norms and make a mockery of what people don’t seen to understand: electricity may not be gasoline, but it’s not free.

    The Volt is the poster child for government driven diseconomic products.

    When would we like to discuss Solyndra and “are you with me Dr Wu, er, Chu?”

  • Don’t know where to put this, but I was wondering if you had any thoughts on this:

    IPhone 5 Sales Could Offer Big Boost to GDP

    For me it drives home the point that GDP isn’t necessarily that good an indicator of economic growth. The new iPhone could move the GDP numbers without generating any new employment at all. Which is also one of the reasons I just don’t give a damn about whether or not the NBER claims we are currently in a recovery or not. To those of us on the outside looking in, things are no better now than they were in June 2009. And it’s not like it’s just me and a few friends in this situation either.

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