Report: GM Loses Nearly $50,000 on Every Volt

Volt

A report from Reuters on Monday alleges that GM loses as much as $49,000 on every Chevrolet Volt it sells as the automaker looks to spread development costs over just 21,494 Volt sales in the 21 months since the plug-in hybrid car hit dealerships.

GM acknowledged it likely won't make money on the $39,145 Volt until the second generation shows up sometime mid-decade, but the automaker called Reuters’ figures "grossly wrong."

How does the math work out? Citing estimates from consultants who worked with GM, Reuters said it cost some $1.2 billion to develop the Volt, including research and development and the requisite factory tooling but not marketing and sales costs. Each Volt then costs around $20,000 to $32,000 to build, including materials, labor and factory operations. Compare that with the $12,000 to $15,000 it costs GM to build a Chevrolet Cruze, whose platform the Volt shares.

The cost per vehicle will go down as GM spreads development costs over more sales. Reuters, however, pointed to the wider problem of market acceptance for plug-in cars. Indeed, last month the Nissan Leaf, Mitsubishi i-MiEV, Ford Focus Electric and Honda Fit EV combined for just 900 sales. By contrast, GM sold 2,831 Volts, but a lot of that came through discounted leasing, Reuters said. With monthly payments as low as $199, the automaker pushed its losses even higher.

GM countered that the Volt represents a "big dip in the technology pool," and the automaker will spread development costs to future models like the Cadillac ELR. Last year GM said the Volt spurs Cruze sales. It also continues to improve GM's environmental image, despite being politicized. After all, Toyota spent a reported $10 billion to develop the Prius and its variants through the years; the investment has paid off many times over. The Prius is now profitable, with a green image that overshadows Toyota's 15-mpg Sequoia SUVs and Tundra pickups.

For GM, the final tally will depend on just how many Volts — and the rebadged Opel Amperas overseas — the automaker sells in the current generation, as well as how much of today's development costs can carry over to the next-gen Volt. Through August, GM has built some 20,815 Volts and Amperas, according to Automotive News, with roughly two Volts coming off the assembly line for every Ampera. Scale that out to annual production for five years — provided GM can sell all those cars — and the automaker could sell more than 150,000 over a five-year span. That cuts the production spread to a manageable $8,000 per car.

But can GM sell that many? Chevy dealers told CNBC that the biggest hurdle to buying a Volt — no surprise — is its price, which tops $30,000 even after a $7,500 federal tax credit. The Volt has fallen well short of the automaker's initial projection of 40,000 U.S. sales in 2012, prompting GM to scale back production last spring and again this fall. But if the automaker can finally match the pace to its downsized schedule, the Volt may not become such a money pit after all.

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Comments 

Rick

Our tax dollars hard at work.... NEVER buy GM products again!

Charlie

I recently bought my wife and daughter new cars and we wouldn't even consider a vehicle from General Motors because of the bail-out. My daughter has a Hyundai Elantra and my wife a Ford Escape.

sheth

How much is Nissan losing on the Leaf?

sheth

BTW, doesn't the calculation of the loss change big time if the actual cost to build is $20k vs $32k? Thats a pretty large range there.

vince

Do you have proof that Nissan is losing money on the Leaf? Even if Nissan was it does not excuse GM for doing the same with the Volt. Pointing to a poor decision at one company does not excuse a poor decision at another. Besides the Leaf is 1000x better car.

JR

I can't figure out why Mays would mention Tundra and Sequioa MPGs yet leave out the Chevy behemoths that sucks gas as bad or worse as Toyota's. Do take note Mays that with the Volt, Chevy is also trying to put on the green look. It shows bias when you specifically mention one side and not another.

JR

GM is banking on the plug in vehicle hype takes off. It is typical of new technologies to have an initial loss. As buyers get accustomed to the plug ins and start buying them in boatloads, the loss will level off and eventually turn into profit. Of the current plug ins, I still believe that Chevy has the upperhand because of the Volt's lack of range anxiety. The consumers just need to get used to the idea that it is a good thing to consume less petroleum.

ST

Thank You Barack Obama for wasting our tax dollars on nothing. You are by far the worst business owner we have ever seen.

Matt C.

@ JR

Big Toyotas get worse gas mileage than the US behemoths by a couple of MPGs. Suburban 18 mpg vs 16 Sequoia vs 17 mpg Expedition.

t

to the Conservatrolls, do you not realize that the bail out worked and was bi-partisan or is that just another fact conveniently ignored. Not to mention BUSH is the one who enacted the bail out in September of 2008, before even the election much less an Obama presidency.

sfbuddy

I wonder how much the oil industry paid for this "press release".

Don't you mean to include the British Vauxhall Ampera along with the German Opel Ampera when comparing the Volt to its overseas equivalent?

Matt

That is a ridiculous argument. It is a new technology, it is not supposed to be profitable this year or the next. More like five years out. If profits next year were the driving focus of everything, we would have nothing build that was not disposable. The Volt is a cutting edge research and develpment project that resulted in an actual product. Five years from now, all of you people talking about GM's bad decision will be eating your words. So, let me get this straight, do nothing and be blamed for sitting on your bottom, or do something and be blamed for not making a profit the next day. Toyota lost money on the Prius for years! BTW Prius went on sale in Japan in 1997. The Volt is doing just fine, better than the Prius did that's for sure.

WTF

The irresponsibility of the media continues unabated as they continue to tar and feather for political purposes.

Peter H. Coffin

R&D costs are amortizable tax deductions, that get spread over whatever period GM likes. They offset the taxes on the profit on every vehicle made for years to come. "What profit?" the people that flunked out of MBA programs may ask. Why, the same profit that GM PAYS taxes on with regard to the Cruze. Please note that the difference between parts and labor for the vehicles and the MSRPs is about $10,000 for the Cruze and about $10,000 for the Volt, which puts the pre-tax profit into exactly the same range, and GM has years or R&D expenses to apply against that. Hell, they can apply it to the profits from the Cruze too. They'll see every dime of that expense back in a couple of years of paying no corporate income tax at all, if they like.

Brian

GM sucks for taking tax payer money and not paying it back AND on top of that the Volt sucks. You'd think they'd at least reward the public with an awesome car instead we get this sad wheat grass mobile.

Ziv

The way I read the article was that the $1.2Bn development and tooling expense was billed on the 21,000 Volts that sold by the end of August. It didn't count the 5,000 Amperas or cost the development expense over the life cycle of the car, it seemed to think that a Volt built in the first couple years should pay for the entire cost of developing the EREV concept.
That is not how cars are built in the real world.

The Volt is a great car, and its main problem, MSRP, is getting better.

J

The loan is paid. Government still owns the stock only.
GM continues to be a political pinata during election year even though Chrysler was on the same boat or worse.

BTW, if it needs to be so specific about each brand, then don't forget about the Aussie Holden Volt.

Darren

So if I spend a $1000 on a chicken coop. Then I spend 300 on chickens and feed. I get my first dozen eggs and sell it for $3.00. Does that mean I'm losing $1297 on every dozen eggs I sell?

DeBinder Dundett

No matter how you slice it, dice it, chop it or filet it, the Volt is not selling as well as had been hoped for. A Prius it's not.

In fact, some would argue that the Volt has been rejected out of hand by the buying public.

GM is not recouping any money spent on the R&D of the Volt because the number of Volt vehicles sold will never bring GM to break-even, no matter how long a period they want to amortize those costs over.

Even if amortized over another 100 years, the "cost" of the money, i.e interest, devaluation, and lost opportunity, will never be recouped, so there will never be any profit. It will be all loss, all of the time.

It's all a question of semantics how you define the losses, but a loss is still a loss is still a loss.

And the Volt is the biggest loser GM currently has.

sheth

The math on this is all wrong and Im surprised cars.com is posting this conjecture. The analysis is flawed and none of the figures used in the article can be verified. The cost of development has to be spread out over the entire lifecycle of the car and it has to take into account that other cars like the ELR will use Volt technology. In addition, GM never said this car would be profitable in the first generation.

The Volt isnt a Prius? WOW, what a revelation! It costs about $16k more than a base Prius so its not a shock that its volumes arent as high. Its priced closer to the Leaf and Focus electric. The Volt has been killing the Leaf in sales recently. The Volt wasnt even available in all markets until early 2012 and its sales have been slowly climbing. They sold almost 3k last month. If they can average 3k next year they will have a good year. The posts on this thread have devolved into a forum where people who are mad about the bailout can sound off. Said people don't know squat about the Volt or how much it costs to produce or how profitability is calculated.

sheth

@ST:

Volt was in development for a year or two prior to the bailout. OBama has no control over GM's product program. Bob Lutz was the guy who pushed for Volt and he is an admitted conservative. In fact, he left GM partially because he feared that the bailout would lead to the government interfering with GM's plans. Later on he acknowledged that never happened. BTW, the argument that the Volt can make or break GM financially is laughable when you consider its paltry volume vs GM as a whole.

Tom

Sheth is right and the title is wrong - the more they sell the more R&D they recover since they are selling above variable cost (and above full manufacturing cost).
But for the consumer - look what a great deal you're getting!

Alfred

The GM sheth troll has posted. Again. And again. And yet again. This is what happens when you have no friends, no social life, and work at a municipal job.

Ike G.

"look what a great deal you're getting!"

I don't think the Volt is a great deal at all.

It's not even a good deal for a Plugin Hybrid!

It's not even a fair deal for anything in that price range and it is a bad deal for anything in that size of vehicles.

You know what is a decent deal? The Cruze! That's is a decent deal all around, in any trim.

At least with the Cruze you're getting what you paid for.

What do you get with a Volt? An overpriced Cruze; that's what you get with a Volt.

ST

@sheth
It may have been in development but it is the Obama administration who is supplementing this crap. Don't feed us that liberal line of bull that it was a conservatives idea. It a liberal administration right now.

Anel

I don't understand how product development has been so politicized. Whether you think the bailout was a bad idea or not, GM chose to use this money to continue developing the Volt in order to remain competitive in the future automobile market. Volt or no Volt, GM still received your tax dollars and had to invest them somewhere that would likely pay off in the future. The Volt was already a project that the company invested in and they know the technology will be a necessity in the future. Why are we angry at them for being technological front runners? Be proud that the Americans are finally being innovative again

Carma

I read somewhere that the US government got a good return on the money it loaned to GM.

Carma

Nevermind, it turns out that the government owns stock in GM and the stock needs to be a higher price for the taxpayers to be made whole.

Ike G.

Electric cars do not have to be expensive. Just look at the Prius line of vehicles, including the plug-in which starts around $20K.

Besides, the electrical power grid can't even supply us with reliable power for the way we live now, without plug-in cars.

Imagine the power failures and blackouts if we all bought a plug-in electric car, and plugged them in at the same time.

Solyndra anyone?

Card13

The article clarifies that GM doesn't actually lose $50,000 each car. Either way, I wouldn't say they're "happy" about it. Developing an entirely new propulsion system requires INVESTMENT. The drivetrain and information gathered from research will eventually make GM money in the long run. I hope you guys realize that every time there is a new model or redesign, the automakers have invested money that they have to wait to recoup. The difference here is that they couldn't just tweak their existing technology, so it cost more and will take longer to make back.

sheth

@ST:

I dont consider facts "crap". Apparently you do. Lutz is a conservative and he pushed GM to build the Volt partially due to his disdain for Toyota and the free pass it gets from the media in terms of the fuel efficiency of its fleet. He is not a liberal. The Volt was under development before Spring 2009 when the bailout was finalized. In addition, the tax credit (which Leaf qualifies for) was passed when Bush was president. In addition, Bush was the one who initially extended funds to GM and Chrysler. That's not "crap", thats reality. Get a clue.

Its funny that cars.com wont comment on future models or speculation about them until they are confirmed by the manufacturers but they dont have an issue posting info like this which is totally flawed and unverified. One thing is for sure, posts like this bring the bailout/liberal haters out of the woodwork. Who knew so many followed this site?

J

These political trolls just need to stay the freakin' heck out of a car news website.

These clowns are making this site a battle ground.

Tzu

After spending a weekend at a truck and modified tractor pull, I was happy to pass a "single" Volt on the way home. Just knowing that the Volt was so eco-friendly made me forget all about the black smoke and soot that came from those nasty diesels for those many hours. Seriously, GM had to do something to counter the Prius and Leaf, but for most people this is not the car for them. The Cruze Eco is probally the best bang for the dollar in terms of a traditional car getting great MPG. Who will want to buy a 6yr old Volt with 75,000 miles on it when practically everything on it has to be worked on by the dealership. ($$$$) I doubt shadetree mechanics will change battery packs or autopart stores will stock rebuilt electric motors? This car screams a 3 year LEASE to and then trade it off, if one was interested. On paper it sounds good, but in real life though for me, no way. Too much to go wrong living in the salt belt with electric hybrid vehicle.

Michael

Hmmm Obama publicly takes credit for the GM bailout yet little sheth the GM shill says the Republicans forced GM to build the Volt and the Republicans made GM take bail-out money. LOL. Who am I going to believe the President of the United States or some low-wage earning municipal worker from Filth-a-delphia? Yeah I'll side with Obama.

GM IS BUSTED.
GM misrepresented their annual sales numbers. As it turns out VW sold more vehicles, followed by Toyota then GM. GM was caught artificially inflating their global sales figures by counting 100% of the sales from Shanghai GM and SAIC-GM-Wuling in China. This is illegal as GM only owns 50% stake in each venture.

Mark

To Rick, Charlie: refusing to buy GM products may only exacerbate the problem. Understand that the bailouts/loans and subsequent 'managed bankruptcies' were financed with your money (i.e., taxes). If the Federal government is unable to sell it's stake in GM (yes, the Treasury Dept still owns hundreds of millions of shares of GM stock!), we taxpayer (that includes you, Rick & Chuck) will be stuck with worthless shares of GM stock. Then what? You dunderheads really ought to read more and post less. There's far more complexity to this issue than you're able to comprehend.

Mark

I'd like to make three comments. (1) The Reuters' math assumes GM will sell no more than the 21,500 Volts sold thus far. Not a particularly sound assumption when assessing the program's overall (current and future) profitability. (2) l'd like to come to GM's defense here momentarily. Great companies (successful companies) must be willing to take risks (Who remembers Apple's Lisa? And Ford's Edsel?). In the case of the Volt, GM demonstrated it's willingness to take risks with new technology in an unpredictable market. Sure, the Volt is not a Prius. But kudos to GM executives for having the balls to try! (3) GM can't seem to catch a break here. They're criticized for producing unprofitable (yet environmentally friendly) electric vehicles AND for producing highly profitable (yet environmentally damaging) SUVs. I'd argue GM is simply trying to produce vehicles attractive to buyers across a very broad automotive spectrum. If Rick and Chuck were automotive executives, they'd most likely try to do the very same thing.

In the case of the Volt, GM demonstrated it's willingness to take risks with new technology in an unpredictable market.

ST

@sheth
There is no sense in arguing with you. You are stating things that are factually untrue trying to push your agenda whatever it may be. Don't be a mindless sheep and listen to this radical propaganda from Ed Shultz and MSNBC. Facts are facts. GM is out of control and Obama controls them. Don't be spit out lies just because you think you are correct. Bottom line is we are getting hosed by GM.

Rick

Mark, don't be a loser. If you don't protest GM you are rewarding bad behavior. We are never going to see a dime of that money back and you know it. GM is considering filing for bankruptcy again. Do you want us to throw good money after bad? Yeah great investment Mark. Don't be stupid!

Ike G.

What is this "Developing an entirely new propulsion system requires INVESTMENT" crap?

What is new about electric motor propulsion powered by a gasoline AC-generator that feeds a battery?

For many decades, Golf carts had all the propulsion components of the Volt except for the on-board AC-generator.

You wanna know what a new propulsion system was? It was the original Prius Hybrid system that came out more than a decade ago. That was new and innovative!

The Volt is not a good deal and most people won't buy one, at any price.

Just how many people offering comments actually own a Volt?

I bet none, and the ones who claim they do are lying through their teeth.

I bet Sheth doesn't own one either, yet he is a self-proclaimed expert on all things Volt and GM.

Card13

Ike G,

Yes, it was most definitely a NEW propulsion system. GM couldn't just find a random golf cart and steal its motor. It had to develop their own system from scratch, fitting the necessary specifications. I don't really have the time to teach an engineering course right now.

Ike G.

Card13, I am a retired Aeronautical Engineer with a BSAE from ERAU (1979) and a MSAE from Wright-Pat AU (1982).

You sir, are FOS! You are trying to bluff these people who make comments on this thread into thinking that the Volt has a revolutionary method of propulsion.

It doesn't. Diesel locomotives have been doing it since 1939, albeit without a battery.

The Volt is a fraud perpetrated on the tax-paying people of the US.

Even the Liberal Washington media have turned on the Volt because they also were fooled into believing the Volt was something unique.

It's not. It is a fancy Golf cart with a generator on board.

Card13

Thanks for the resume, I respect your accomplishments. Personally, I am a new automobile engineer with a degree from Stanford. You can continue to talk about how similar technology is used in other applications, but that is completely irrelevant. This powertrain was not used in any other mass market cars and GM did not have much existing technology to work with (other than maybe some leftovers from the EV1 program). Like I said, this "automotive" system had to be developed from scratch. Trains and golf carts have different requirements and you can't simply copy their systems.

WTF

If he were really an engineer then he would respect the accomplishments made bringing a vehicle like the Volt to market instead of using it as a tool to voice displeasure about the political climate in this country.

Card13

WTF,

I completely agree. I don't particularly like GM and would probably never buy a Volt (give me a Tesla Model S), but I realize that the Volt required substantial intellectual and monetary investment to conceive. We'll see if it pays off for GM in the end. They have the potential to earn more by licensing the technology or making numerous variants (look how many hybrids Toyota made with lessons from Prius). development)

sheth

IkeG:

Im sold, you sound like a genius. You are correct, the Volt isnt anything new which is why there are so many similar cars on the market. For reference, the Prius plug in and the upcoming Accord plug in do not have the capabilities of the Volt and the Volt has been out since 2010. You make perfect sense.

ST:

I hope you arent being serious. Nothing I said is made up, its all fact. The $7500 electric car credit was passed under Bush and the Leaf qualifies for the same credit as does the Tesla and a handful of other cars. Its based on battery capacity. Also, if you bothered to Google Lutz you would learn that he is quite clear about his political leanings (he got in trouble for denouncing global warming) and he has said on the record that he was wrong about the bailout. The president has zero control over GM and the company is publicly owned. It takes about 4-5 years to develop an all new model and the Volt went on sale in 2010. You do the math.

sheth

@card:

Thanks for being reasonable. If it was easy to place the powertrain from a locomotive in a car everyone would be doing it. BTW, locomotives dont run without diesel fuel while the Volt can run up to 40 miles on battery power alone. Just a minor difference that an engineer would note. Trains do recapture lost energy with regenerative braking, but they do not run without actual fossil fuel in the tank- speaking of freight trains obviously.

Ike G.

Guys, I really am who I say I am, and that includes the credentials, an FAA ticket, A&P license and more.

If you ever come to OKC, look me up. I raise horses and buffalo now. You can't miss me. Been here forever.

And as to the Volt, the bottom line remains, in spite of all the arguments for and against it.

People either buy it, or they don't buy it.

At the rate GM is selling the Volt, it indicates to me that people are not buying it.

So we must disagree. I'll believe in the Volt when there is one in every drive way but that won't happen in my lifetime.

And if you defenders of the Volt are so gung-ho about it, why aren't you driving one?

Talk is cheap. Actions are what matter. The rest is just BS, and we have an overabundance of it here.

G'day!

RS6

I know one thing both the Volt and the board troll sheth are failures. Next.

sheth

IKG:

Volt had best month so far in August 2012. Not sure that "no one is buying it". As for comparisons to Prius, the Prius currently has 3 models that share the same name and the cheapest one is around $20k vs a $37k base price for the Volt. In addition, Prius is an established brand name that has been around for 10+ years. Also, claiming that the only way to gauge success is to see one in "every" driveway is one of the stupidest things Ive heard in a while. And that's saying something. There isn't even a camry in "every" American driveway and its the top selling car in the US.

@RS6:

Great piece of commentary there. You sound pretty smart.

mskz06

The Volt is selling better than the Prius did when it initially went on sale in the US. The Prius didn't become popular overnight and yes it had financial incentives from Japan to make it successful because of the high investment cost.
@Ike, I guess engineers can be blinded by politics too- mechanical engineer myself.

Highdesertcat

MBA here, and I don't see the Volt as a success either.

And whether politics is a factor or not in the equation, the Volt is not selling well.

And Ike is right. How many of these staunch defenders of the Volt actually own or lease one?

For better comments look at the WSJ article on the Volt and read what actual owners have to say.

Those who own them, love them. Then again, they are the few, the proud, the wealthy, the believers, the early adopters.

Julien

The Volt is a disaster. My neighbor owned his Volt for about five months and then had GM buy it back during the battery fire issues. If my uber Liberal neighbor dumped his Volt I can't see how it has a future.

sheth

HDC:

A statement like "Volt is not selling well" is totally subjective. I means nothing. Selling well compared to what? Its most direct competitor is the Leaf and its crushing the Nissan in sales. The Volt has no direct competitor so its illogical to say it's selling poorly when its essentially the first car of its kind. For reference, its actually starting to outsell the Regal which cars.com recent posted about.

As for customer satisfaction, I believe CR reported that Volt was amongst top in that category in their car survey.

Bruce

What a link bait article!
So they get to this number by applying ALL of the development costs to the first 21 months of sales??? Really this is ridiculously bad math! Boy someone has an Axe to grind and don't mind using wonky math to do it.

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