Q&A: Will the Chevy Volt make money for GM?
For a car that won't be available for more than a year, the Chevy Volt has got a huge following. Over 50,000 people have signed up for a waiting list run by a non-GM Web site. It's a compelling design idea: a car that moves from a peppy electric motor but has a gas tank to run a generator for longer trips.
But scratch the surface a bit and you'll find doubters. As competitor Toyota moves into plug-ins, it advocates sticking with the blended mode of today's hybrids, where the gas engine and battery move the car, because it believes that technology is more affordable.
Tony Posawatz, vehicle line director for the Chevy Volt, at GM's OnStar EV Lab last Monday.
(Credit: General Motors)A Carnegie Mellon study last year (click for PDF) concluded that hybrids with large batteries, such as the Volt, are not the most cost-effective choice among plug-in options. That's a view shared by the federal government's auto industry task force, which last year said that big reductions in battery costs would be required to make the Volt cost-competitive. (Click for PDF.)
GM executives have said all along that the Volt will be expensive because it's the first generation of the technology and there isn't yet a high-volume supply chain to keep costs down. In an interview earlier this week, General Motors CEO Fritz Henderson said the price of the Volt will be about $40,000.
To get an idea of what GM's expectations were for the financial impact from the Volt, I spoke with Tony Posawatz, the vehicle line director for the Chevy Volt, during the Business of Plugging In conference in Detroit last week.
In terms of volume, GM expects to sell thousands of Chevy Volts in the first year, he said, which means the company's fortunes in the near future hinge on other models.
Down the road, the question is whether GM can ramp up sales by lowering costs and by adapting the powertrain technology to other vehicles.
Q: I've been writing about the Volt for a couple of years now. It's cool technology but do you think it will be a commercial success?
Posawatz: All bets are off if gas prices are under two bucks a gallon. This could be a challenging environment, no question about it. Now we don't anticipate that in the long term. And because the launch volume in the first few months is relatively modest, I think we can do OK. I think the real question will be in the 2012 time frame. Where will the economy be then and can we reach beyond the early adopters?
Well, do you think you can reach a broader audience?
Posawatz: We think we can. The intent is that in year two we will be making tens of thousands of vehicles. The exact number will depend on the economic climate, the demand from new customers, etc. We have a pretty good feeling given the uniqueness of this product. I just finished up a pretty lengthy drive and we had (tested) some competitive vehicles which shall remain nameless, and there was a significant difference in the driving experience of this car. That's the hidden pleasure that people can't see and feel until they drive the car.
You have a low center of gravity and you have instantaneous torque--you can burn rubber on the car--and no transmission shifts... It will have a high "fun to drive" quotient.
So is this going to be a high-end car aimed at affluent customers?
Posawatz: A lot of the first folks will be the early adopters. To a certain degree, we'll seek them out because those are the guys that will effectively help tell the story. You know, the person who is always the first to use technology and he tells you it's OK, he's proved it out. We're going to look for those guys.
I think you hit on the key question: what happens after that? We're hoping that the aficionados, the folks who really understand technology, they say, "Wow, this is the car." I think it will always be more (expensive) than a conventional car because of the nature of the battery, the nature of the high technology. And there will be some very cool features in there. Very akin to consumer electronics. You'll see less hardware updates and more software updates and maybe even apps that come along with the car (through OnStar).
The 2011 Chevy Volt.
(Credit: General Motors)
How can you bring down the cost?
Posawatz: The other interesting piece of the puzzle is the benefits that people will get which will soften the blow of the price tag on the car. There's a $7,500 tax credit that will be available for a long time so take that off the price. There's a charging fueling rebate (for fueling with electricity)--up to $1,000.
We anticipate that some localities (could) give you preferred parking, HOV access, free electricity at place of work--all which will end up being positive. So there will be a different kind of calculation for customers. And there are some interesting business models as it relates to spreading the cost of the battery over time (such as leasing). We're investigating a lot of this stuff.
The projections for all-electric vehicles (also called battery-electrics) and extended-ranged electric vehicles (like the Volt) are that they will only be about 1 percent of sales in five years. Given the investment and attention you're getting for the Volt, is that OK?
Posawatz: Like a lot of stuff, the gen one version is probably not the most important play. It's ultimately what we do after that. By building it on an existing platform, different body styles can go on it. We have a pretty good understanding on how we can reduce the cost in the next generation of technology, with a little bit more competition in the supply base, etc. So this is a much more of a longer-term game (with an eye toward markets outside the U.S. as well)...We'll see. The good place to be is on the first mover side. The first movers also learn the fast.
I'm bullish on battery electrics, the question is when. Because the Volt is an electrically driven vehicle, we have the different components set up for that. Ultimately, at some point somebody will say they've come up with a battery with twice the energy and power density and half the cost.
So you think that Toyota's more conservative approach is not the way to go?
Posawatz: Every company has to find what they think is their formula for winning. And we think the regular hybrid architecture is still an internal combustion engine. We now have the possibility of different variants for engine generators. It could be a whole different gas tank size and fuels. The Volt will come with a gas version and an E85 (ethanol) version. Oh, and you can take the engine generator set out and it could be a battery-only vehicle. You could use fuel cell stack. You can't do that with a conventional hybrid.... (though) we have hybrids, too.
Martin LaMonica is a senior writer for CNET's Green Tech blog. He started at CNET News in 2002, covering IT and Web development. Before that, he was executive editor at IT publication InfoWorld. E-mail Martin. 
All they would have to do is put a beefier suspension in, maybe increase the number of batteries at the expense of the trunk space, shorten the chassis to remove the rear seating and top it up with a sexier body. Viola, one performance plugin/gas vehicle.
The electric motor is what propels the car, so to make the car beefier, the motor/electronics/software would need to be altered. Except when braking (when the motor acts as a generator) it is consuming electricity, not generating it.
Agree that first gen won't be profitable, but since the investment is already a sunk cost, they can probably refine the technology for peanuts compared to what other companies will face in 3~5 years. Just sucks that they have a huge bill to pay when they're struggling to come out of the red.
Just one little incident in the middle east an those gas prices will be sky rocket again.
I bet he probably one of a few people who would not mind a shooting war between Iran an Israel. Which would solve his gas price problem.
Plus the cost that gas will rise to will share the ***** out of congress who will probably send more money his way to help ease the US of oil.
But may be I am just think like a James Bond villain.
The Prius is nothing more than a hybrid with a smaller battery. The Volt can do the same but give the customer the option to get more battiers for more efficienty if they need it and can afford it. Or they can wait. This would take a bit of battery standardization because If I get a Volt and a year later my commute gets longer I would want to go to my local Energizer Dealer and add in enough batteries to go the extra that I need.
The Prius drives by both electric & gasoline. When you start it, the gas engine runs until it is warmed up. Then it goes on and off automatically, depending on the performance demand. Stomp on the gas pedal and both kick in right away. Go a bit easier, and the cars starts off in electric-only and the gas engine start later as you continue to accelerate. This is independent of the battery level. The gas engine will kick in to charge if the battery gets too low to protect it.
Unfortunately, I can wait to watch electric prices skyrocket.
As the article says, the cost of the Volt is being driven by the cost of the batteries. Until that comes down, I don't see GM making a profit. Toyota ended up sticking with NiMH in the new Prius even though they're still researching Lithium Ion.
In the end Toyota will crush them because they can operate as a, heaven for bid, for profit company, versus Government Motors now.
Should it make a profit ==== No. With the exception of a few interested folks, why blow $50,000 on a non-sport compact.
This is likely going to be the last major project that GM takes on before going under . Actually, they should have gone under this summer but the almighty goverment bailed them out with our hard earned taxe$. How long do we have to pay for GM to produce failures ?? But for the record, I think bringing the camara back was a good idea. Kind of miss not seeing a GM sportscar on the road.
All these people whining about the $50 grand price tag should take a few lessons in mass production. The price will plummet as more and more are produced. Having a waiting list of 50,000 people more than a year before the car is even available is pretty damn good.
In 5 years when GM is making money from these types of vehicles, and more people are purchasing them because the price has gone down, we will see the other auto manufacturers struggling to make up ground.
The thing is, GM has to stick to their guns. They have to keep producing the vehicle, subsidizing it if necessary with profits from other vehicles until they can get the price sweet spot so the average Joe can afford one.
Of course, since I don't make any long trips, I would rather purchase an all electric vehicle. I believe GM better get off their duff and get a pure electric in the works as well considering they have much lower maintenance costs than even the Volt type hybrid/plugin. I might be willing to pay a little more for a pure electric since I would save money on oil changes, gas, engine repairs, exhaust repairs etc.
I pay approximately $40 a week now for my fuel needs. That's $2080/yr. (ouch). With this, I would end up paying- well, nothing for gas as my commute would be handled by the electric motor only, and my job location has charging spaces for this. My cost would be charging overnight at home and that's affordable.
Essentially I would probably end up saving $1800 /yr. Over five years of an average car loan, that's $9K. I can buy a $20K new car of comparable size and capacity that gets good gas mileage and pay for the gas out of pocket. I would end up *saving* money by buying and using the gas powered car instead.
I love the Volt. I think it's a great idea, but unless you can get the price down to the low to mid $20K's , it's just not financially viable for me.
It is understandable that it will retain 80% of the energy within 2 years of time, but having that car for 4 years the battery will reach below 67% of it's starting capacity.
The 40miles then become ~25 miles per charge. Changing such a battery is probably the most expensive part of such a car.
You will never recuperate money with the Chevy Volt, unless prices of gas are above $7/gallon, and the price of the Chevy Volt will drop below the $35.000 (For 30.000 you have a Mercedes, and an additional $5000 on gas and maintenance added to that).
It'd take about 4 years before it would start paying off buying a Volt!
Not to mention Toyota has some nice cars for sale for less than $20.000 It would take you at least 7 years before a Volt start to become more beneficial than a Toyota!
Not even mentioning what would happen with an accident!
I think the Volt is a great failure!
The best thing is a small 30HP engine connected to an alternator/dynamo that generates electricity to charge a small battery and large condenser, to feed 2 electric motors.
Good enough to have regenerative breaking, a boost in acceleration, and a cost effective hybrid!
I agree that the price is fairly high given the current competition and gas prices..but so it goes with all 1st gen technology. Calling it a "failure" is premature at best. It is a product aimed at early adopters in order to spur further development of products aimed at the mainstream. As such, it is in a very good position.
As for your suggestion of a 30hp engine and a small battery..good luck with that if you live in mountainous areas. The size of the engine and the battery pack in the Volt were chosen to be practical in the largest percentage of the roadways in the U.S. as possible..your suggestion basically restricts you to flat-and-level. I'm glad you weren't one of the lead engineers on the project.
Nearly ALL the US is FLAT! Second, a 30HP engine does not mean 30HP of torq on the wheels!
It merely means 30HP of charging battery. Even if you're driving uphill, and need at least a 60HP engine to drive uphill,and have half a battery worth of charge, you can still drive more than 25miles uphill!
Too sad I wasn't there to help, or they sold much more cars for much cheaper!
You suck, and so does your comment!
Color me pink, i'm shocked that Toyota advocates sticking with its current technology that they have invested so much money in and might be shown up by GM with a different technology. Toyota was poo pooing the Volt's technology from the beginning and then after they realized GM was actually suceeding with the technology they became a me too me too company so they didn't look bad.
Like any new technology the early adopters pay more as you need to work towards mass production/volume sales. GM is fully aware thet the 1st gen volt will not be cheap (though govt. rebates will do a lot) but as the technology matures, the batteries get smaller and/or can extend the range further we will move more towards a legitimate electric car.
Cars like the Volt will be the stepping stones from full gas to full electric cars, you get 40 miles on electric only power but can then continue as normal with the gasoline ICE powering the generator. Until electric cars are offering 300 odd mile ranges with full recharges in the 30 minute range they will never truely replace the gasoline powered vehicle.
Until they invent the Flux Capacitor, they shouldn't have invented the DeLorean :)..
You have to have some level of production to bring the costs down before you can have mass production at an economical level... sort of like what comes first.. the chicken or the egg?
- by dennisl59 October 30, 2009 12:23 PM PDT
- No, but the Taxpayers will be forced to buy them for the Federal Government CarPool.
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