How Can GM Justify an All-New Chevrolet Volt?

GM released this "teaser" photo of the all-new 2016 Chevrolet Volt. The all-new Volt will be unveiled in January, GM said this week. Source: General Motors Co.

Yes, there will be another one: General Motors (NYSE: GM  ) said this past week that an all-new version of the Chevrolet Volt will be revealed at the North American International Auto Show in January.

Sales of the current Volt have fallen far short of the expectations set by GM executives when the car was first launched. They've never once come close to the 45,000 Volts a year that former GM CEO Dan Akerson famously predicted.

But GM apparently thinks that the Volt has done well enough to deserve an encore.

Loved by its owners -- but hated by bailout foes
Few cars have proven to be more polarizing than the Chevy Volt. On the one hand, the innovative plug-in hybrid delivered on GM's then-aggressive promises for it, and the Volt consistently posts some of the highest owner-satisfaction scores in the industry.

But to many people, the Volt has been a symbol of GM's wildly unpopular U.S. government bailout. Some have wondered if the Obama administration might have pressured GM to make the huge investments that brought the Volt to market.

It didn't help that the Volt fell short of sales expectations right from the start, partly because of the high price (almost $40,000) that GM felt it needed to charge to recoup the costs of the car's development. Or that a wrecked Volt spontaneously combusted three weeks after being crash-tested.

Volt owners are a devoted bunch: The current Chevrolet Volt has some of the highest owner-satisfaction ratings in the industry. Source: General Motors Co.

But GM has managed to trim the Volt's price several times since its 2011 launch. Reviewers have been kind: The car is comfortable, nicely finished, pleasant to drive, and delivers on fuel economy as advertised. And then there's those sky-high customer satisfaction scores: As a group, Volt owners really love their cars.

Of course, the technology that seemed so whiz-bang when GM talked about it back in 2009 seems almost old-hat now. Sure, the Volt uses a unique configuration of drivetrain components. 

But what the average buyer cares about is this: The Volt is a plug-in hybrid with an electric-only range of 38 miles. 

That's not bad -- it's better than the 21-mile electric-only range offered by the plug-in Ford (NYSE: F  ) C-Max Energi, and the 11 miles from the plug-in Toyota (NYSE: TM  ) Prius. 

And with prices now starting at just over $34,000 -- before a Federal tax credit that can add up to as much as $7,500 -- the 2014 Volt isn't much more expensive than those two key competitors. For what you get, it's arguably a pretty good deal.

But in 2014, with plug-ins becoming more common and Tesla Motors  (NASDAQ: TSLA  ) selling thousands of copies of its sexy all-electric Model S every quarter, it's not as special as it was when it was first proposed.

Volt sales still look pretty good -- in context
Through July, GM has sold 10,635 Volts in the U.S. this year, down 8.7% from a year ago. That's disappointing when viewed from the perspective of GM's original sales targets for the car, which called for 45,000 sales a year. 

But it's not bad when compared to the Volt's plug-in rivals.

Sources: General Motors, Toyota, Ford

The plug-in version of Toyota's Prius outsold the Volt by just 36 units through the first seven months of 2014. Even Ford's two plug-ins combined only outsold the Volt by 1,585 vehicles over the same period. 

So it's reasonable to argue that the Volt is competitive enough, even if it has fallen far short of its original targets. 

In GM's eyes, that makes it worth an overhaul.

What the all-new 2016 Chevrolet Volt will be like
We don't actually know very much about the all-new 2016 Volt at this point. Aside from the teaser photo shown above and a general statement that the new Volt will build on the original's "strong foundation of technology innovation and customer satisfaction," GM hasn't tipped its hand.

It's probably reasonable to expect that the new Volt will have updated styling inside and out, along with improved electric-only range and fuel economy when running in hybrid mode. 

But it's unlikely to be a radically new product like the original -- and it's unlikely to cost anywhere near as much to develop. Rather, the 2016 Volt is more likely to be improved and enhanced, but built along the same basic lines as the current car. 

Will that be enough? Given that the current Volt is still quite competitive with its small circle of rivals -- and given that there have been no major breakthroughs in electric-car-battery technology since the original Volt debuted -- it's probably all that's really needed.

Warren Buffett's worst automotive nightmare (Hint: It's not Tesla Motors!)
A major technological shift is happening in the automotive industry. Most people are skeptical about its impact. Warren Buffett isn't one of them. He recently called it a "real threat" to one of his favorite businesses. An executive at Ford called the technology "fantastic." The beauty for investors is that there is an easy way to ride this megatrend. Click here to access our exclusive report on this stock.


Read/Post Comments (19) | Recommend This Article (5)

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 August 17, 2014, at 6:27 PM, ManoftheRepublic wrote:

    Loved by the people that bought a car that GM lost money on selling for $40,000 and that the owners got $7,500 tax rebate for buying AND if they don't need gas, they get to drive the HIGHWAYS without paying for ANY of the maintenance of those roads,,,

    Talk about not paying your fair share, they got PAID to NOT pay their fair share, And all of them well wealthy enough to afford a $40,000 car..

    Liberals love wealthy liberals and hate everyone else,.

  • Report this Comment On August 17, 2014, at 7:00 PM, bobbleheadguru wrote:

    Chevy Volt is a great car with poor marketing.

    I am on my second Chevy Volt lease. It costs me $316/month for 15,000 miles per year.

    My daily roundtrip usage is about 50 miles, well over its "rated 38 miles" for its battery. I use gas every day. However, I am getting 225MPG with the car.

    I save about $175/month in fuel costs even including the $43/month I have to pay in electricity.

    The math is not hard. $316/month - $175/month = $141/month effective price. What top safety, top satisfaction car can you get for $141/month?

    Of course GM just cannot seem to drive this simple message home: The Chevy Volt is a money saving machine that cost well LESS than an average new car, when you factor in its cost to drive.

  • Report this Comment On August 17, 2014, at 7:06 PM, bobbleheadguru wrote:

    Man of the Republic,

    1. The effective price of a Chevy Volt is $26,670... or about $5000 LESS THAN the average car. Your made up number of $40K is 50% higher than reality.

    2. "The George W Bush EV Tax Credit of 2008" (Obama took office in 2009, look it up) is not much different than a mortgage interest deduction. Do you take zero deductions/ tax credits on your taxes? If not, then why can't EV drivers take a tax credit?

    3. Big Oil Corporate Welfare is $30,000,000,000/per year (10 zeros, no typo). That is the equivalent of 3 GM bailouts per year, every year.

    Remove handouts to big oil and the George W Bush EV Tax Credit, and the Chevy Volt will come way ahead. Seems fair to me. Does it to you?

  • Report this Comment On August 17, 2014, at 7:08 PM, chefp wrote:

    Manoftherepub "Talk about not paying your fair share, they got PAID to NOT pay their fair share, And all of them well wealthy enough to afford a $40,000 car..

    Liberals love wealthy liberals and hate everyone else,."

    Geez you must be fun at parties. What's your grand plan to stop sending $Billlions overseas buying oil, securing the shipping lanes for said oil, and all the military costs to stabilize the mideast? You're the worst kind of faux-patriot who would rather line the pockets of terrorists for your personal comfort.

    Hybrids? They use gas and only gas. Increase MPG? Still gas. Drill baby drill? That's proven to be a farce. The truth is you have no plan, you can only criticize and politicize. If I didn't know better, I'd suspect you're a shill. But you sound too clueless to be one.

  • Report this Comment On August 17, 2014, at 8:00 PM, islander87 wrote:

    From what I've read the 2016 will have a full back seat (5 psgr), a more efficient 3 cylinder Gasoline engine, slightly more electric range, and newer styling.....all for a lower cost. I can't wait. It's quieter and has more torque than a BMW or Mercedes. Most people get 200 mpg. As for the rebate....I don't get the criticism. No one complained when Toyota, Nissan, VW, Honda, and Mazda all got incentives and tax breaks to build their manufacturing plants over here. And no one complains about the subsidies to big oil companies. And one reason the Volt has not sold as well is that they have NO ADVERTISING and GM for some reason doesn't push the car. At the Detroit Auto show they were tucked back into a corner where no one could see them.

  • Report this Comment On August 17, 2014, at 8:01 PM, yuckfu wrote:

    some people just love to complain about anything general motors does,

  • Report this Comment On August 17, 2014, at 8:27 PM, KramerLiberty wrote:

    I LOVE my Volt. It's like an ultra luxurious golf cart. It really delivers all it claims. If they can get it up to 50 miles per charge, I think it would be perfect.

  • Report this Comment On August 17, 2014, at 8:56 PM, CooJoo wrote:

    Decrease the 0-60 time to 5 or 6 seconds and I'll buy one.

  • Report this Comment On August 17, 2014, at 11:24 PM, bcweir wrote:

    Coojoo, let me introduce you to a couple of Chevy's other products. Ever heard of the Camaro and the Corvette?

    You're obviously looking at the wrong car. Perhaps the salespeople can give you a MAP of the dealership - or a BROCHURE of Chevy's other product offerings.

    The Volt is a PLUG-IN HYBRID, not a sports car or a muscle car.

  • Report this Comment On August 18, 2014, at 1:01 AM, peteroo wrote:

    I read, according to GM’s accounting, they lost $49K per Volt when they first came out. I like EVs a lot and I found the styling reasonably attractive although very cramped in the interior. Further, I feel GM’s hybrid system is the best but I dislike them calling it an EV. If it burns gasoline it is an amphibian.

    If GM can raise the bar on the battery to give it at least 100 EPA mile range they will have a winner, If they can raise the bar to 150 mile battery range for $40K they could rule.

  • Report this Comment On August 18, 2014, at 1:26 AM, btc909 wrote:

    The biggest F'Up was the clown car Delta II platform. If you are extremely skinny you can get into those door frames. Once you are it it's fine. Also being so low to the ground doesn't help either. The foot wells for the 2nd row are laughable.

    I can ignore the wussed out styling.

    I can ignore only 4 seats due to the T shaped battery.

    I could have even ignored the ORIGINAL price.

    I can't ignore the ingress / egress and the useless 2nd row.

  • Report this Comment On August 18, 2014, at 6:58 AM, Jason87467 wrote:

    Didn't Toyota lose money when they came out with the Prius? For your defense you may say it's different in this case, because this is Obama's car and we tax payers paid for it? The Volt was design before Obama became President.

    Why don't you writers get real and try to do good instead of trying to hurt USA owned companies.

  • Report this Comment On August 18, 2014, at 7:11 AM, bobbleheadguru wrote:

    Peteroo: "I read, according to GM’s accounting, they lost $49K per Volt when they first came out."

    Actually, that should read, "according to talking points which skewed the amortization for political gain, they lost $49K per Volt".

    It costs about $25K to make one. It sells at about $34K (not including tax credit). The amortization on the Tooling and R&D is $1.5B and can be leveraged for up to a full decade.

    Propaganda math has taken that $1.5B (or in some cases, a made up higher number) and divided it by some minimal number of sales for the car in year 1.

    It would be like Peteroo building a bridge for $100MM. I could stop by one day and watch only 100 cars pass and declare "Peteroo's boondoggle costs an astounding $1,000,000 per car!" In what universe is that fair?

  • Report this Comment On August 18, 2014, at 7:59 AM, mcmentus wrote:

    GM made a car 20 years ago that got 120 miles per charge..fact...GM is a fail company that has used and abused the people of america for to long..the world [not just america] will become a better place once GM closes its doors forever...and before joy GM loyal fans start in on me i will make it easy on you and play a game.. a game of ,for everything you can say good about GM I can says at least 2 bad things.. just to show how easy it is i will start all the way back to 1936 when the UAW had to be started because the work conditions were so awful they had to ban together to MAKE GM treat them right..thats just how they treated the people that worked for them..imagine how little they care for the people who buy there POS..GM is no longer the #1 seller in the world..its not because they make such wonderful vehicles..its because they are fail and should be allowed it fail

  • Report this Comment On August 18, 2014, at 11:00 AM, speculawyer wrote:

    So it is the best-selling plug-in hybrid in the world. It leap-frogged the Prius. It is selling faster than the Prius at the same point of the history of the Prius (and the Prius went on to become the #1 selling car in California). It provides a way for people to reduce their gasoline usage by 60% to 85% without any inconvenience.

    And there are actually people who think they should drop this car? LOL.

    What they should do is release MORE Voltec models. They need a Voltec based SUV, mini-van, and or light truck. I think they are just dragging their feet because they make more profits on the ICE versions. But if GM doesn't do it, then someone else will. Mitsubishi's Plug-in Hybrid Outlander SUV is already selling like crazy in Europe.

  • Report this Comment On August 18, 2014, at 11:18 AM, PatCampbell wrote:

    Some states like Washington have a registration surcharge to make up for the lack of gas tax collection on EV's. Also, keep in mind that much of the US has air shed pollution advisories that make business expansion problematic. EV's are one way of lowering pollution levels clearing the way for more economic activity.

  • Report this Comment On August 18, 2014, at 12:41 PM, illini wrote:

    The future is electric cars. All investors should realize this. Oil is yesterday's fuel, and it's so obvious if you look around you. Wind farms, solar arrays, electric cars....gasoline is dying slowly. To make gasoline now, we have to do crazy things: drill 1 mile down (and spill) in the Gulf, rip up huge swaths of tar sands, etc.

    GM is very far in front on this, ahead of Tesla and Toyota. They have a car that is great, and are now making the next generation of it. My Volt gets 330 MPG. Only electrics can talk those kind of numbers. Gas cards are comically old....and GM realizes this, to their credit. That actually shows significant vision. Note that Tesla is still having some teeth cutting issues, like cars that ride too low and catch road debris, and enormous cost.

    Don't you think the creation of Tesla shows the trend to electric? Any car company that isn't doing it is in trouble. Investors should realize that oil companies are going to be the horse farmers of 1900. Any car company that isn't "justifying" an electric car is relegating themselves to be a 'has been'.

    Please try not to present incorrect and unresearched statements as facts:

    "some have wondered if the Obama administration might have pressured GM to make the huge investments that brought the Volt to market."

    See the Volt article on Wikipedia, the Volt went to production steps while Bush was in office.

  • Report this Comment On August 18, 2014, at 5:47 PM, danwat1234 wrote:

    CooJoo, with a software hack, the Volt can go 0-60 in 7 seconds reliably (no issues). You can overdrive the values and do it in 5.5 seconds youtube /watch?v=hA4fLSuvkk8 about 3.5 minutes into the video.

    Everyone who is complaining it is a crappy car because of the way tax money goes into it, that doesn't mean it's a bad car. It is very very well designed. Get in and test drive / rent one.

  • Report this Comment On August 18, 2014, at 7:01 PM, danwat1234 wrote:

    -Performance hack is done by 'Bad News Racing'

    BTW, if you are put off by the high price, but it used. When the 2016 Volt comes out, the 1st gens will go down in price even more. Right now it's easy to get one at $20K or less

    My thoughts on what the ideal 2016 Volt would be;

    I hope the 2nd gen Volts can use both the engine and the electric motors to increase acceleration in Hold mode! 1st gen Volts can do 0-60 in about 7 seconds when hacked to do this.

    Remove the 'soft start', limiting the torque at lower speeds. Some people upgrade the tires on their vehicles and would like full performance out of the drivetrain.

    A 3 cylinder engine that is not regular OTTO cycle, but is Atkinson cycle for more thermal efficiency than a regular engine. Belt-less.

    Remove the oversized gear shifter with something small. No need for any mechanical linkages, even for the parking pawl.

    Ability to disable horn honk when you plug in the car to charge.

    More customization with ERDTT, down to 0 Fahrenheit please.

    Minimum of 6.6KW charging. DC quick charging would be nice. Ability to default to 12Amp 120V charging instead of 8Amp.

    Heatpump electric heat for less range degradation

    Physical knobs for HVAC controls and radio. Touch is not safe while driving. Or, have comprehensive voice recognition to control HVAC and radio functions.

    Sunroof option.

    360 outside cameras option similar to Hyundai Eqqus to alleviate the blind spot issues

    Adaptive cruise control, auto braking to lessen impact of a crash (active collision avoidance).

    HDMI port to plug device in to extend screen to screen in dashboard.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3071752, ~/Articles/ArticleHandler.aspx, 10/1/2014 6:27:52 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement