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By CER News Desk on Sep 11, 2012 with 8 responses

GM Losing Nearly $50,000 on Each Chevy Volt

While General Motors (GM) may be breaking sales records with its Chevrolet Volt, it has been revealed that the company is losing nearly $50,000 on each of the electric models it manufacturers, making each sale a fairly significant hit on its profit margin.

Figures obtained by Reuters through industry analysts and manufacturing insiders show that each Volt costs GM up to $89,000 to produce; with pricing ranging from $31,000 to $39,000, this represents a major loss on the more than 21,000 Volt units sold in the United States since its launch in 2010. Adding to GM’s margin woes is the fact that some of the company’s generous Volt lease offers see Americans pay as little as $5,050 over the first two years of ownership.

The thinking behind producing a car that is destined to be sold at such a loss is GM’s attempt to infiltrate what it obviously sees as a lucrative future market as the world transitions to the use of alternative fuel sources, according to analysts, but many doubt the automaker’s ability to ever make money with the Volt.

“It’s true, we’re not making money yet,” says GM’s vice president of global product programs and former Volt development chief Doug Parks. “(The Volt) eventually will make money. As the volume comes up and we get into the Gen 2 car, we’re going to turn (the losses) around.”

Held back by limited adoption of new technology and facing stiff competition from Toyota, Ford and Honda, the Volt’s future success is sure to depend on GM’s ability to keep research and development costs down while coming up with a second generation of the vehicle that has the ability to win customers over; with billions of dollars invested in the theory, GM’s future in the electric vehicle industry may depend on it.

  1. By Boondocks1935@hotmail.com on September 12, 2012 at 3:05 pm

    At $50,000 loss with each Volt sold, this means GM can sell 50,000 units before it reaches the same amount as Solyndra (sp) cost the tax payors. “Lose a little on each sale and make it up on volume?” The oil companies supposedly make 10 cents a gallon. For that 10 cents they have to lease or buy the area, drill and hope they find oil, pump it, haul it, refine it and they make $ billions. Govts. don’t do anything for it but tax it at about 50 cents per gallon and they lose $ trillions. Let’s fire the Congress and replace them with oil company CEOs!!

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    • By Tom G. on September 12, 2012 at 5:20 pm

      You know sometimes people make comments that really seem to make a lot of sense.  It is unfortunate that we can’t implement some of those comments, LOL

       

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    • By Ralph on November 1, 2012 at 1:18 pm

      From the Reuter’s article that started that falsehood:  

      Paragraph 22:  “The actual cost to build the Volt is estimated to be an additional $20,000 to $32,000 per vehicle, according to Munro and the other industry consultants.”. I say $20k, you say $32k so let’s both be wrong & say $26k.

      So how can a $26,000 car lose $49,000 per unit?  And what does “additional” mean?

      They go on to say:  “Spread out over the 21,500 Volts that GM has sold since the car’s introduction in December 2010, the development and tooling costs average just under $56,000 per car. They base the $56k figure on $1.2 billion in R&D & tooling cost plus other set up costs.  But then they state:  ”that figure will, of course, come down as more Volts are sold”.

      So Reuters contradicts themselves by posting an article that states each Volt costs $86k to build, then says actual cost to build is $26k, then states the R&D cost will come down over time, but they freeze a figure for losses based on a figure that can’t be frozen, even by their own admission.

      Problem 1:  Every single new product in the world has R&D costs attached to it and is not profitable at unit 1 sold.  They, too are losers at 21,000 units sold.  BIG DUH there.

      Problem 2:  actual R&D costs can not be calculated until the last car ever is sold.  

      Problem 3:  there are already 26,500 Volts sold.  That brings “losing” cost down to $38,000.  At the rate the Volt is selling now, not allowing for better sales, it will take 3 years for the Volt to become profitable.  It took the Prius 5 years to become profitable.

      Problem 4:  a big portion of th R & D costs are for the technology.  The technology is already being shared by at least 3 other cars in development and the Via Motors pickup truck.  So those costs would have to be split 4 ways.  Instead, Reuters places all th R&D costs on the Volt.  This makes the total units needed to be sold to make the car profitable even lower.

      These are facts taken from the article you quote.  You should read and inform yourself.

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  2. By Russ Finley on September 12, 2012 at 9:23 pm

    The Prius lost money at first as well. Only time will tell if the Volt will sell enough to pay development costs which is also true for the Leaf.

    The automaker said the news agency incorrectly “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.”

    Source: http://www.latimes.com/business/money/la-fi-mo-auto-chevrolet-volt-losses-20120910,0,3613718.story

     

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  3. By Danual Kaluek on September 19, 2012 at 11:11 am

    I know they have been having some quality issues with their paint as well.

    My brother has one and the distortion in the rear glass is pretty bad too.

    He loves it though, but they need to work on their fit and finish as well as getting the cost down.

    Dan

     

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  4. By mac on November 24, 2012 at 12:41 pm

    Thanks to Ralph for his comments. 

    As Ralph has convincingly stated,  business expenses related to R&D are amortized over the life of the product.

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  5. By mac on November 24, 2012 at 9:02 pm

    The R&D capital outlay for the Voltec power train developed for the Volt will be recouped with future  vehicle sales using the same/similar power train.

    The same is true for Nissan who are planning an electric car specifically built for and sold in the Chinese market.  And the Nissan NV 200 electric cargo van will also use electric tech developed by Nissan. 

    Will Nissan recoup their nearly 6 Billion in EV research and investment ?  Well, maybe not, if you just look at short term (U.S. only) Leaf sales.

    ————————————————————————————————————

    Toyota has sold 4.6 million hybrids and Honda over 1 million. Ford has finally come out with a worthy hybrid that can actually compete with the Prius — the Ford C-max hybrid.

    Hybrids have arrived. There is no going back. The standard Prius hatchback is the 3rd best selling single car model in the world.

    The first years of Prius were unprofitable, but now 14% of Toyota world-wide sales are various hybrid models using Toyota’s synergy drive train. 

    The Voltec drive train from Chevy/GM will most likely suffer a similar successful fate.

     

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