It's true: Punchy start-up Tesla Motors (NASDAQ:TSLA) is already outselling the much-hyped Chevy Volt.
Earlier this month, Tesla said it had exceeded its own first-quarter sales target, delivering "at least 4,750" examples of its all-electric Model S luxury sedan to customers.
Contrast that with General Motors (NYSE:GM), which sold 4,421 of its plug-in hybrid Volts in North America during the first quarter, according to a Bloomberg report. Nissan's (NASDAQOTH:NSANY) electric Leaf took third place in the plug-in rankings with 3,695 sales.
That's a great story for Tesla, which is succeeding with its sleek and powerful (and expensive) electric coupe against considerable odds. But what does it say about GM? Is it time for the Volt to be grounded?
A green-car darling that hasn't found a big market
The Volt was supposed to be the new face of post-bailout GM. One of the few major product-development programs that GM kept funding through its own financial crisis in 2008 and 2009, the Volt was the high-tech green darling that, in some minds, was supposed to justify the Obama administration's decision to bail out Detroit's largest automaker.
The Volt's sluggish sales have led to a lot of politically charged hot air since. But beyond the squabbling, the Volt -- which is essentially an electric car with an onboard gas-powered generator to keep it charged -- is a pretty nice product that works as advertised. Every Volt owner I've ever talked to says he or she loves the car, without hesitation. It's well built and lives up to GM's claims.
But it has never sold in the numbers that GM hoped for when it launched the innovative plug-in hybrid late in 2010. GM hoped to sell 10,000 Volts in 2011, its first full year on sale -- but managed to move only 7,671.
At the time, GM officials said they weren't disappointed, that they were still building "awareness" of the Volt's virtues -- and announced a plan to make 45,000 Volts for the U.S. in 2012.
That didn't happen, either. Not even close. In fact, it only took until March for GM to halt the Volt's production line, saying that it was "matching supply to demand." Last year's U.S. Volt sales totaled 23,461 -- a great increase over 2011, but not anywhere near enough to live up to CEO Dan Akerson's hopes for the model.
Volt sales so far are running a bit ahead of last year's pace in the U.S., up 8.4%. That's a decent increase, a little ahead of the overall U.S. market's 6.4% gain through March, but it's not setting the world on fire.
Is it time for GM to pull the Volt's plug?
GM is about to double down on the Volt idea
GM certainly doesn't seem to think so. While rivals such as Ford and Toyota are doubling down on conventional hybrids with added "plug-in" capability, GM is pushing ahead with its electric-car-with-a-generator idea -- and with pure electric cars as well.
For starters, the Volt is about to get a sleek upscale sibling, the Cadillac ELR luxury coupe, shown above. The ELR is based on the Volt's technology, but with more power and luxury, as you'd expect from a Cadillac. It's due at dealers early next year.
Meanwhile, the Volt itself got some modest upgrades for 2013 -- better batteries that give it slightly improved range, and a few other new features. And there are rumors that more significant upgrades are on the way for next year, though GM hasn't yet announced anything.
The Volt's built-in disadvantage won't change
But none of these changes overcome the Volt's biggest handicap: its cost, or, specifically, its cost relative to comparable gas-powered models. The Volt's current base price is $31,645 -- and that's after a $7,500 federal tax credit. The price is just a function of the Volt's advanced technology (and its expensive batteries). It's not likely to come down by a whole lot anytime soon.
Contrast with the similarly sized Chevy Cruze (also a pretty nice car), which starts at just $17,130. You'll get better mileage with the Volt, but the Cruze's mileage isn't bad. Dealers have to explain why the Volt is worth the big premium. With many shoppers, that's a hard argument to make.
That's a problem Tesla doesn't have. Its dealers can rightly point out that the Model S is a big, powerful luxury sedan that just happens to be electric -- and is priced right in line with similar gas-powered sedans from BMW and Mercedes-Benz.
But until GM can find a way to bring the Volt's price down further -- or give it a spectacular upgrade -- slow sales may just be a fact of life for the General's green ride.
Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool recommends BMW, Ford, General Motors, and Tesla Motors and owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.