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GM Loses Money On Every Volt Built
thecarchik writes "Doug Parks, vehicle line executive for the 2011 Chevrolet Volt, GM's range-extended electric vehicle, confirmed Tuesday that the company loses money on every Volt it sells. The expensive 16-kilowatt-hour battery pack, which likely costs GM somewhere between $8,000 and $12,000, is clearly too expensive to let the company build hundreds of thousands of Volts right away. Just 10,000 Volts will be built in 2011, though GM is working to increase that number. GM plans to chip away incrementally to lower the costs of the specialized components in the Volt, especially the power electronics. The price of consumer lithium-ion cells has fallen 6 to 8 percent annually since their 1989 launch; the large-format cells in automotive packs seem likely to follow the same curve and as costs are lowered the Volt may stop being a loss for the company."
This is only an issue in lower volume production runs.
Although they can never overcome the cost penalty associated with each vehicle, they can make it up in volume.
You lose money on every product until you've sold enough to pay off the retooling process, the design process and to force the price of new materials/parts to drop. If you spend $1,000,000,000 developing a product that you sell for $50k then you will make a loss to start with - no matter what.
So why is this news? (Slashvertisement anyone?)
dnuof eruc rof aixelsid
If gasoline were to suddenly become significantly more expensive, the asking price could be adjusted accordingly.
It stinks that GM is losing money on these, but they're putting the effort into it, and I have to applaud them for it. Then again, didn't the PS3 and Xbox 360 cost more to make at launch time than they were selling for? Maybe GM is on to something...
(emphasis mine)
Oh, they're on to something, alright. GM is "too big to fail". This makes it easy for them to start risky, costly ventures, because they'll either succeed and make GM rich, or the gov't will bail GM out with more loans until GM is profitable again.
After you "borrow" billions of dollars from taxpayers you kind of have a responsibility to use your second chance wisely.
They have a proven track record of running a business which cannot support itself.
Nothing new in manufacturing really, but it might be the first time it's been seen in production cars I suspect. You make a bunch at a loss initially, tweak the technology, the manufacturing process, streamline the design and eventually you start making a profit on them.
In some situations, those early losses will be spun back into R&D costs on the budget and targeted as profit that has to be made on future units.
Hopefully they'll stick with it and start driving costs down so that the technology can be made cheaper and is more efficient, rather than pulling the plug (no pun intended) and giving up on it.
It's a well known fact that all hybrids lose money at first. Toyota lost something like $5000 on each early model Prius. This will all work out.
Howard Roark, Architect
I believe in a Man's right to exist for his own sake.
Yes, and no. While most production have economies of scale, without more information we can't be certain if this one does. This requires technology specific information, and business specific information, as to whether they're setup to have economies of scale.
Given this is a new process, it is entirely possible that they are not setup for this.
Without more information, we won't know. However, given they are a desired car, this car has benefits for the rest of the company, and GM has competent management, then we can assume they know all this, and would scale up production if possible.
So, in all likelihood they're telling the truth, or they are really stupid.
This is my footer. There are many like it, but this one is mine.
The electricity has to come from somewhere, and the same tree huggers who like to see these 'friendly' vehicles are also the same tree huggers demanding that the filthy smoke belching evil coal burning plants be closed - with no real viable alternative methods of producing electricity for their electric cars.
Um, yes, because coal plants are nasty too. The awesome thing about electric cars is that you can have them powered by coal today for a modest improvement in environmental damage, and then if the coal plant is replaced with something better, then your car automagically becomes "greener". Without having to replace the entire vehicle fleet again.
And sure some tree huggers are against them, but this tree hugger thinks fission is a very viable method of producing electricity.
But even in the meantime, electric cars are better. And the tree huggers do not have the power to shut down coal plants if there is nothing to replace them. So I'm not sure why you're worried.
The enemies of Democracy are
Buying batteries for 10,000 cars seems very likely to have no issues with "too small of a scale".
We may recall that when the PS3 first came out Sony was losing money on each unit sold. That didn't exactly bring down Sony in the process; nor did it cause people to scream out that it was the result of some great conspiracy.
Damn_registrars has no butt-hole. Damn_registrars has no use for a butt-hole.
You're misreading the difference between constant costs (overhead) and variable costs (production costs). Volume only works if you can get the variable costs (the costs of producing each item) below the profit of selling each item.
Economies of scale (making each item cheaper to produce by producing more) doesn't work for the Volt: the batteries have a constant cost and making more only makes them MORE expensive if anything. This is because the resources to make them are limited and increasing demand causes prices to increase.
Therefore they can't overcome the cost penalty by making it up in volume. This move only makes sense for GM if the practice and market establishment of selling now will later be useful for them when making the cars is profitable. There's another explanation: the owners of GM are pushing this for political reasons. Considering the rhetoric about making them make cleaner cars when the bailout occurred, it would be a conspiracy theory to NOT believe that the government had a hand in this.
Then again.... I'm an idiot.....
...... and idiots rule the world....
Let's face it. The Volt is about Obama's vanity, the UAW's greed, and the green lobby's delusions. GM will be ruined again in 5 years. I should say the shareholders. The slugos who work there have the full backing of the US government. If you own the new GM stock you are a fool.
an ill wind that blows no good
Slashdot liberals will come to tell us how the conservatives will blame Obama even if they haven't in 3 ... 2 ... 1 ...
And anyone who can't identify which of the politicians are enabling this situation is deaf, dumb and blind.
Listen to yesterday's interview with Vermont's Senator Bernie Sanders. He's not part of the problem. Now go listen to the statement yesterday by Kentucky's Senator Mitch McConnell about how they're going to hold everyone hostage until they can get tax breaks for people who don't need them, don't deserve them, and in many cases don't want them. Now check their voting records. Now tell me all politicians are the same.
You are welcome on my lawn.
80% of that energy is lost by burning. So you have to reduce the power available in a gallon of petrol by 80%.
Then you have to realise that one reason for 150bhp engines is so that when your engine is at idle and you want to start off, you have enough torque without revving the engine massively to actually start the car. 50bhp is plenty to get to any legal speed in the US or most of Europe. The remaining 100bhp is so the car can actually move from standing still. An electric engine doesn't need that 100bhp because it can have maximum torque from 0rpm.
Which means you don't need as big an engine, nor all that complex and heavy gearing and transmission.
Also, when you brake, your engine doesn't create petrol to put in your tank. So you have to reduce the power in that gallon of gas again unless you never brake until you get to your destination...
When will people realise this?
Never, because they have a hard-on over hating anything ecological because they're trained to think it communistic.
Listen to yesterday's interview with Vermont's Senator Bernie Sanders. He's not part of the problem. Now go listen to the statement yesterday by Kentucky's Senator Mitch McConnell about how they're going to hold everyone hostage until they can get tax breaks for people who don't need them, don't deserve them, and in many cases don't want them. Now check their voting records. Now tell me all politicians are the same.
Both parties want tax cuts that Americans don't need or deserve. Claiming that Americans need the Bush Tax Cuts can be disproved by looking at the fact that Americans were able to live prior to the Bush Tax Cuts.
Do most Americans want tax cuts? Sure. Just like most children want to stuff their faces with candy and ice cream. Sometimes you need a parent to say "No, you can't have that, you've had too much of that already and more would be bad for you."
In a democracy, where do you find the parents? While the Republicans are the more irrational and irresponsible party today, the Democrats aren't exactly full of mature and wise statesmen who are making responsible fiscal policy for the best long term interests of the country. The Bush Tax Cuts were passed when the CBO did a 10 year projection of massive surpluses, and so the Republicans said the government should cut taxes because times were so good. Now the Dems and Repubs are saying that the tax cuts are needed because times are so bad.
Taxes go up next year, it will hurt. Living with a 32 inch TV instead of a branch new 50 inch, or driving a $15k car instead of a $30k car, or renting an apartment instead of buying a house is not life-ending. Take the pain, such that your children's children don't have to suffer (as much) for your excessive consumption.