For a while, it looked like General Motors couldn't catch a break.
Despite pioneering the concept of a mass-market electric car with its EV-1, the company pulled the plug on the project in 2005, supposedly for lack of commercial viability. It's been condemned as anti-green ever since. But after a combination of high gas prices and a super-successful Toyota (NYSE: TM) Prius changed its mind, GM was also first in line to revive the electric car concept with the new Chevy Volt.
GM seems to have learned from the lessons of the EV-1's failure. When building the Volt, it decided to marry its electric know-how to a tiny internal combustion engine, octupling the car's range. And knowing that it had end the EV-1 project in part because the car "lost money," GM CEO Ed Whitacre publicly vowed to price the Volt at a level ensuring the car makes money this time around.
Yet no sooner had GM promised to revive the electric car than its rivals swooped in, trying to sweep GM's wheels out from under it. First came Nissan (Nasdaq: NSANY) with a promise to build an all-electric "Leaf," stealing from GM the title of "greenest car company running." Adding injury to insult, Nissan promised to undercut the Volt's rumored $40,000-plus price tag, selling its electric buggy for as low as $33,000 (before tax rebates.)
Next came Ford (NYSE: F). It's playing coy on the precise decimal places, but it has promised that its new electric Focus will be price-competitive with the Leaf. (Read: cheaper than the Volt.) And I won't even mention Tesla Motors (Nasdaq: TSLA), former purveyor of six-figure price-tagged electric toys, which now promises a day when it will offer electric cars for as little as $25,000.
When it seemed nothing else could go wrong, GM suddenly felt a stabbing pain in its shoulder, with Warren Buffett's hand on the knife. His Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) holding BYD Motors was using cheap Chinese labor, plus fancy German engineering from Daimler (NYSE: DAI), to develop an even cheaper electric rival to the Volt.
When the going gets tough...
Well, give GM some credit, folks. The company's finally battling back with its own clever marketing. This week, GM confirmed the Volt's $41,000 price tag. But while "The Number" is grabbing all the headlines, the real news is how GM has broken the number down -- and stolen a march on its rivals.
According to GM, Volt buyers will be presented two options in showrooms in November. They can pay top dollar for an electric car. Or, if they prefer to try before they buy, GM will gladly let them lease a Volt for just $349 a month.
What a bargain!
Now that's more like it. While these kinds of numbers are obviously more "marketing tools" than actual prices, and vary with everything from state taxes to how much "money down" a lessor pays, $349 at least sounds competitive. Gas-electric "hybrid" sedans, for example, can run from as little as $349 a month (for a Civic) to $409 (Camry) to $499 (Altima) -- your mileage may vary.
More importantly, by pricing its lease at $349, GM waved a magic wand and eliminated the price differential between its $41,000-sticker price Volt, and the $33,000-ish prices on Ford's and Nissan's offerings. As it turns out, Nissan is also offering electric car shoppers a $349 lease on the Leaf (with $2,000 down) as a means of (1) sidestepping the waiting period for Uncle Sam to ante up his $7500 tax credit, and (2) allaying buyers' concerns about the whole "Am I really sure I want to commit to an electric car?" issue.
Foolish final thought
Conspiracy theorists will doubtlessly point out the EV-1was offered only for lease. Once GM decided the experiment wasn't working out, even the happiest lessors had no legal right to hang onto their cars, giving GM a free hand to turn its EV-1 fleet into scrap metal. Cynics will argue that in pushing Volt customers toward the lease option, GM is keeping its own options open, should it decide to "exit, stage left" a second time.
Perhaps that is the ulterior motive here. But maybe, just maybe, making the Volt appear price-competitive with the competition will ensure the car's viability. Maybe GM will never see a need to unplug the Volt at all. Maybe this time, the experiment will succeed.
