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."

Comments

And computers used to cost millions of dollars

[Enry]

This whole 'new technology is pricey and scary' has to stop. It's new, it's expensive, we get it.

Someone (GE in this case) will step up and start buying. As production increases, volume drives the cost down. Technology improvements drive the cost down even further.

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...

Re:And computers used to cost millions of dollars

[jmorris42]

> 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...

It made economic sense for Microsoft and Sony to sell at a loss because there was other revenue streams available to make up the initial loss. They get about $10 per game sold even if it isn't one of their own. Lose $100 on the console, sell ten games over the life of it and you are good. Factor in that they KNOW the production cost will drop quickly and it makes more sense. Finally add in the battle for market share angle and it makes enough economic sense that the shareholders aren't going to want blood and souls at the next stockholders' meeting.

None of those arguments are available to GM pissing away tax dollars subsidizing yuppies who want bragging rights for being greener than thou. Selling a Volt today at a loss doesn't open up any future revenue streams. The biggest cost is batteries and they are going to slowly drop in cost whether GM build the Volt now or when they are economically viable. And unless you count the market share of unprofitable green cars (ALL hybrids are currently selling at a loss with the possible recent exception of the Prius) as something valuable there isn't a market share building angle to justify it. It is pure politics.

Re:If we care about GM, we'd stop buying them

[clarkkent09]

You don't have to make a profit when you are too big to fail and your controlling shareholder is the US government.

You know who else lost money on every car?

[Man On Pink Corner]

Japanese manufacturers such as Toyota/Lexus and Honda. They've been selling hybrids worldwide for around ten years now, and you can bet that they, too, lost money on every sale for at least the first few years. In doing so, they bought themselves ten years to refine their processes, tooling, and supply chains, iron out bugs, and discover (and patent) non-obvious efficiencies and improvements.

Meanwhile, the American auto manufacturers chose to stick with the same old profit-heavy SUVs, elderly sedans, and rental-grade compacts they'd been selling for the past twenty years.

The history of alternate-fuel technology is yet another demonstration of US companies' skill at trading the next decade's earnings for the next quarter's. I have zero sympathy for Chevrolet and whatever learning curve they (and their customers) are about to climb with the Volt, because with any competent management in place they would already have several years' experience manufacturing these cars by now.

Good thing they're "too big to fail," I guess.