How Can GM Justify an All-New Chevrolet Volt?

Sales never came close to GM's original goals. But there's an all-new Volt coming anyway. Here's why.

Aug 17, 2014 at 3:36PM

Images

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.

Images

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.

Volt Sales Vs Plug Ins

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.

John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford, General Motors, and Tesla Motors. The Motley Fool owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers