The Chevrolet Volt and the Price of Success
By Charles Krome
On the odd chance Techshake readers haven’t yet heard, GM will be launching a new, extended-range electric vehicle in a few months, with that product slated to offer both a 40-mile all-electric range and the ability to go a further 300 miles by leveraging an on-board, gas-powered generator.
Now, the Chevrolet Volt is far from perfect, but it surely doesn’t deserve the vitriol being spewed in its direction by certain members of the media. I mean, some of these people seem to think the Volt rollout will be the worst thing to happen to this country since the BP oil disaster.
Take the Volt’s sticker price. Sure, $41,000 looks kind of steep, and for some of the GM haters, the federal tax credit of $7,500 only makes things worse. For these people, the car is priced artificially low, preventing the free market from determining the Volt’s fate. On the other hand, other analysts claim the Volt is priced too high and that GM should be following the strategy used by Toyota when it introduced the Prius. When that car first went on sale, the automaker sold it at a $15,000-per-vehicle loss to ensure it would be popular, giving up short-term profits for long-term success.
Finally, there’s another group of Volt price watchers who are holding off on taking sides until they see the car’s EPA ratings. For these individuals, the price will be right only if the Volt makes up for its MSRP by saving them a comparable amount at the gas pump.
Here’s my take: The viewpoint of the first group of critics comes from one side of an ongoing philosophical debate about the country in general, having to do with how free the free market should be. You could say that the free market of voters has decided that the U.S. will continue to use economic incentives to reach its policy goals, as it has since its inception, or not, but you can’t say the Volt is getting special treatment from the government above and beyond what a similar vehicle from the competition would get (hello, Nissan LEAF).
Next, because the government essentially owns General Motors, selling the Volt at a loss is effectively the same as a federal tax credit, but it sounds even worse because of the semantics involved. Plus, since U.S. automakers used to routinely complain that the Japanese automakers were engaged in price dumping in the U.S., the idea of selling at a loss probably still rubs some auto execs the wrong way.
But it’s the last batch of people who are really the most important for the success of the Volt, as their decision-making process is probably the one that best represents that of your basic everyday auto buyer.
If GM really wants the Volt to do well, the company has to make a huge effort to reach these individuals by disconnecting the exact number of miles per gallon a fuel-sipper saves from its actual MSRP. Traditionally, a review of a hybrid or EV isn’t complete without the writer tallying up the amount of money a driver will save on gas, and then comparing that to the vehicle’s premium over the price of a “regular” model. That’s the part where you read “the Kromemobile hybrid costs $1,000 more than a standard Kromemobile, requiring a driver to travel 300,000 more miles in the former to get back the extra money paid out up front.”
But if the country’s goal is reducing its dependence on oil, the focus should be on the oil saved, not the money—at least to a large extent. After all, it’s not like drivers try to quantify how many extra horsepower per dollar they spend in moving from a Cadillac CTS to a Cadillac CTS-V.