General Motors Company Bets Big on the Chevy Volt -- Again

Sales of the Chevy Volt have been disappointing, but GM has decided to invest in an all-new version. Source: General Motors

Has the Chevrolet Volt done well enough to deserve another big bet from General Motors (NYSE: GM  ) ?

GM seems to think so. This past week, the company announced a $449 million investment in what it called "next generation electrification."

The money will fund upgrades in two factories in order to make an all-new Chevy Volt, as well as other hybrid and battery-electric vehicles.

Reuters also reported this week that the all-new Volt will come in two versions, one of which will have a smaller battery pack, a shorter range -- and a lower price.

Given the Volt's lackluster sales, is this money well spent?

A big investment in a slow-selling model
GM's Detroit-Hamtramck Assembly Plant is a large facility. Much of it is devoted to the production of the Chevy Malibu and Impala sedans. These are core GM products that together account for over 30,000 U.S. sales every month.

But it also builds the Chevy Volt, which racked up 3,606 U.S. sales in the first quarter of 2014, and its two mechanical siblings, the European-market Opel Ampera and the Cadillac ELR luxury coupe.

GM said this week that it would spend $384 million to upgrade facilities and tooling at Detroit-Hamtramck in order to build "the next generation Chevy Volt and two future products."

It's also spending another $65 million to upgrade the separate factory that builds the battery packs for the Volt, Ampera, and ELR.

The Cadillac ELR coupe is built on the technological bones of the Chevy Volt -- and on the same assembly line. Source: General Motors

In a statement accompanying the announcement, GM North America manufacturing chief Gerald Johnson said, "These investments will help the next-generation Chevrolet Volt build on its position as the leader in electrified propulsion."

I'm sure that last phrase caused some chortles at Tesla Motors (NASDAQ: TSLA  ) and probably a few grimaces at Nissan (NASDAQOTH: NSANY  ) , maker of the so far best-selling electric car (that would be the Nissan Leaf).  

But that actually raises a larger point: Given the advancements that Tesla -- not to mention Nissan, and several of GM's other large global rivals -- have made in electric cars and hybrids since the Volt's debut, and given the underwhelming sales of the current Volt, is GM doing the right thing by pressing on?

GM doesn't really have a choice
The Volt has been on sale for a little over three years, and in that time, it has sold a little over 58,000 units through the end of March -- despite several price cuts and a variety of incentives. 

Depending on who you believe and how you do the math, it cost GM anywhere from $700 million to $2 billion or more to develop the Volt. By most automakers' standards -- by the standards GM likely applies to most of its other models -- that's a poor return on investment. 

But here's the thing: GM doesn't really have a choice. It has to press forward with the Volt, and with its other hybrid and electric-car programs. 

Tesla's success notwithstanding, it's not yet clear that electric cars are the future of the automobile. But they are a possible future, and they're increasingly important in the present. In order to stay competitive, GM has to keep pace with giant global rivals like Toyota and Volkswagen (NASDAQOTH: VLKAY  ) and Ford (NYSE: F  ) , all of whom have committed massive sums to the development of various kinds of electrified vehicles and related technologies. 

And it should be said that the Volt is a very good product that has produced a lot of delighted customers for GM. The Volt's owner-satisfaction ratings are consistently among the best in the entire industry. In that sense, the Volt has been a very successful product, one that fully delivered on GM's bold promises for it.

And it seems like GM has a solid strategy for the next Volt: A lower-priced version should broaden its appeal and improve the profitability of the overall program. Meanwhile, the longer-range version of the next-generation Volt will (we hope) improve on the current car's technology while carrying forward the things current Volt owners love about their cars.

But where is GM's bold move?
The thing is, to be taken seriously as a green-car leader, GM needs more than an improved Chevy Volt. 

That doesn't mean GM shouldn't improve the Volt. But former CEO Dan Akerson hinted that something more dramatic was in the works: an electric car (presumably a Cadillac) that would challenge Tesla head on.

These investments don't mean a bolder move like that isn't in the works. It's possible the technologies being developed for the next Volt will prove to be a stepping stone toward a Tesla-fighting Cadillac -- or a $30,000 Tesla-fighting Chevy, for that matter. 

But right now, at least in public, GM appears to be -- at best -- treading water in this space, while others are moving aggressively forward. 

I have no doubt there's much more going on behind the scenes at GM. Here's hoping that work bears bigger fruit, and sooner rather than later.

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Read/Post Comments (17) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 12, 2014, at 1:53 PM, Georgedavis wrote:

    I own a 2014 Chevy Volt and it is the best vehicle I have ever owned. I also own a generation 3 Prius and there is no comparison. The Volt rides better, handles better, accelerates faster and gets MUCH better mileage than the Prius. We are averaging over 100 mpg after 3000 miles. The price after $7.5K federal tax credit is under $28K. I cannot recommend this vehicle highly enough...I do not work for GM, nor do I own GM stock. You will love this car. I am looking forward to the generation 2 Volt with the larger battery and more efficient three cylinder "range extender" engine.

  • Report this Comment On April 12, 2014, at 2:31 PM, fouraces55337 wrote:

    Just more overprIced GM Junk!

  • Report this Comment On April 12, 2014, at 3:21 PM, bobbleheadguru wrote:

    Wow! Lots of Anti-Chevy Volt Propaganda Here.

    Some facts to counterpoise your talking points.

    I would appreciate a direct response. Very frustrating to see "twisted like pretzel" arguments skewing positive news into negative news.

    1. Chevy Volt outsold Telsa so far. It outsold Telsa in 2011 AND 2012 AND 2013. It also ALL other models of plug in in 2011 AND 2012 AND 2013.

    2. Chevy Volt has the #1 ranking in customer satisfaction according to Consumer Reports in 2011 AND 2012 AND 2013 for ALL cars (not just plug ins or small cars... ALL cars) under $50,000.

    3. Chevy Volt year 1-3 sales are GREATER than Prius year 1-3 sales. Prius is now the #3 nameplate world wide. Why can't they follow this template?

    4. Chevy Volt technology already had been successfully deployed in eAssist which has increased year-over-year MPG by 25% in large, high volume Chevys and Buicks. If you include these sales, GMs return is $4-5,000,000,000 in revenue per year.

  • Report this Comment On April 12, 2014, at 4:22 PM, jeffhre wrote:

    "That doesn't mean GM shouldn't improve the Volt. But former CEO Dan Akerson hinted that something more dramatic was in the works: an electric car (presumably a Cadillac) that would challenge Tesla head on." Hi John, IMO before GM can make a successful EV, it needs to build an EV sales channel with the potyential to become successful.

  • Report this Comment On April 13, 2014, at 1:24 AM, btc909 wrote:

    The Volt needs to dump the Delta II platform. I can deal with 4 seats, the T shaped battery, the crappy styling, but getting in and out of a Volt is a joke.

  • Report this Comment On April 13, 2014, at 1:51 AM, gdwolf wrote:

    The Volt, in site of the medias best efforts to undermine it has sold more cars than Tesla or Nissan. I think they hate it the most because it has the potential to replace conventional vehicles, not just augment them.

    There is a lot that could be done with this power train and when consumers get past corporate medias propaganda and see for themselves, things may change rapidly. Over 200 mpg, long range and good performance to boot; only a fool would pass on that.

  • Report this Comment On April 13, 2014, at 1:54 AM, deeageaux wrote:

    Bob,

    1) In 2011 a $40k Volt sold more units than a $110k Tesla Roadster. Big win for GM In 2012 GM sold more Volts in a year than Tesla was able to sell Model S in 6 months since it was release in June 2012.Using standard industry sales mix at half the price the Volt should sell 4X the volume of Model S. Volt has not. So far in 2014 Nissan LEAF has sold more units than Volt and preliminary registration data shows Model S outselling Volt too.

    2) Tesla has the Consumer Reports #1 ranking for customer satisfaction for all cars in 2013. Also CR ranked Model S #1 car overall it received 99/100 the highest rating ever given (a few years ago a Lexus LS also got 99/100 score.)

    3) Because Tesla has leap frogged Volt technology and when the Model E is introduced Volt is relegated to the bargain bin section.

    4) If my aunt had testicles she would be my uncle. Other companies developed mild hybrid systems, stop-start engine tech, and regenerative braking systems without ~$1.4B Volt program.

  • Report this Comment On April 13, 2014, at 2:05 AM, deeageaux wrote:

    LOL GD,

    The Volt is government rated at 93 MPGe in electric mode and 37 MPG in gasoline mode.

    200 MPG is pure nonsense.

    Hybrids, even extreme plugin hybrids, are just a short pit stop to full electrification of the automobile.

  • Report this Comment On April 13, 2014, at 8:08 AM, Jason87467 wrote:

    The skateboard design the Tesla is using comes from GM. Put a search on it. The batteries the Tesla uses comes from laptop batteries......over 7,000 of them. Now, I can not understand why the media thinks Tesla is so far ahead of GM or any other company?

    It's all hype and the media keeps feeding it so the stock can keep going up.

    The Tesla stock will crash when competition comes in...and it will !

  • Report this Comment On April 13, 2014, at 8:47 AM, genefly wrote:

    My Volt has gotten me 380 miles per gallon with over 12,000 miles. Fact and not pure nonsense. The G in MPG means gallons of gasoline. Electricity cannot be a G. So practically speaking I've filled up with gas exactly three times since I got the car. Some say electricity has worse costs, burning coal, etc. However electricity can be acquired from a variety of ways, increasingly more renewable, yet there is still really only one way of acquiring gas, making leaders of Russia,Iran, Saudi, Venezuela and Kochs richer in the process. Good for the Volt, Leaf AND Tesla.

  • Report this Comment On April 13, 2014, at 9:31 AM, jimatmad wrote:

    The first generation Volts were sold largely to 'early adopters' - the same sort of folks who buy the 'firsts' of all sorts of new technologies.

    Having put a VERY successful product into the hands of consumers, and worked out whatever technological 'bugs' go along with having real people thrashing the hardware out in the real world, Chevy is in a great position to bring out the next generation car.

    General Motors' investment in this technology and platform will prove to be money well spent.

    As the writer suggests, plug-in hybrids are not THE answer for everybody.

    If I was putting 250 highway miles on a car every day, I'd opt for an efficient diesel or gas unit. The Volt would not be the best choice. For myself, I put on barely 8,000 miles a year, so the payback on any higher priced technology is never really there.

  • Report this Comment On April 13, 2014, at 10:29 AM, hunter3203 wrote:

    Bobbleheadguru - Some of your "facts" are incorrect.

    3. The Prius is not the #3 nameplate in the world by a long shot. The Ford Focus is #1(over 1 Million in sales). The Prius isn't even in the top 10.

    4. Mild hybrid systems predate the Volt and don't return 25% increases in fuel economy, more like 5-10% depending on how you drive.

  • Report this Comment On April 13, 2014, at 8:42 PM, speculawyer wrote:

    This is money VERY WELL SPENT. Gas prices are only going to get higher once the Red Queen syndrome hits the shale fields. And GM is going to have a solution that leap-frogs the Toyota hybrids that are so popular today (The Prius is the #1 selling car in California).

    I know . . . many of you don't see it yet. This is a LONG TERM play. The Prius was mocked and lost money for years too.

  • Report this Comment On April 13, 2014, at 8:45 PM, speculawyer wrote:

    btc909 . . . GM is using a new chassis for the new Volts so there will be more than just the Delta II.

    I hope they come out with SUV, CUV, mini-van, and pick-up body styles with the Voltec platform. I think we'll get one of those relatively soon with more to come over time.

  • Report this Comment On April 13, 2014, at 8:50 PM, speculawyer wrote:

    @ bobbleheadguru

    I agree with points 1 to 3 (well they are just facts). But I don't think the eAssist stuff is from the Volt. And besides, eAssist it garbage. The Volt outsells the entire eAssist line of vehicles every month.

    GM had to choose between building a new real hybrid line or pushing ahead with plug-in hybrids. They chose to go with the Voltec plug-in hybrids . . . it is a bold risky choice but I believe it will ultimately pay off . . . but it will take a few years (and a rise in gas prices). But when you drive on cheap electricity that is emission-free, no gas needed, low maintenance, quiet, clean, and you can 'grow your own' on your roof with Solar PV . . . you never want to go back to gasoline.

  • Report this Comment On April 14, 2014, at 12:04 PM, BigJerm wrote:

    I'm a perfect candidate for the Chevy Volt. I work from home and do a lot of short range, local commutes. My wife has an SUV for long family trips. The reason I don't buy one and why I think it's been unsuccessful is, it's ugly. No matter how great a car is, how good the mileage is, no one wants to drive a car they think is ugly.

  • Report this Comment On April 14, 2014, at 4:24 PM, speculawyer wrote:

    Imitation is the sincerest form of flattery . . . since GM launched the Volt, everyone else is joining in with their own plug-in hybrids . . . the Ford CMAX Energi, the Honda Accord PHEV, the Mitsubishi Outlander, the BMW X5, the Toyota plug-in Prius, the Ford Fusion Energi, etc.

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