What's Pushing Chevrolet Volt Sales? Incentives, Cheap Leases, And Cold, Hard Cash

By Blake Z. Rong | September 24, 2012
Anybody who tried to buy a computer in 1988 knows that one of the biggest deterrents to new technology, especially green technology, is its initial cost. Just as we laugh at the absurdity of a $3,000 hard drive, so we balk at a $40,000 Chevrolet Volt. Americans are nothing if not pragmatic: only the starry-eyed technology cheerleaders will see fit to pay for a car that's no bigger than a Cruze and won't recoup its cost for years, no matter what GM says. And God bless 'em for it: it's this sort of driving enthusiasm that justifies the cost of future technology, spurs innovation, and eventually helps bring costs down. Because the odds have always been stacked against GM and the Volt: ever since its production announcement the Volt has been dogged with controversy, errant numbers-crunching, and jaded criticism as GM tries desperately to right the ship. GM should be happy that the Volt set a monthly sales record for the first time since it entered production two years ago: 2,831 examples sold in August, its highest since March and a steady climb since April. It's a success, but not by GM's standards. Not only does GM lose money on every Volt sold, but it's also selling the Volt heavily through incentives and short-term leases—for as low as $249 a month in some places.
Sometimes, the incentives are as high as $10,000, three or four times higher than anyone else in the industry. This incentive comprises cash discounts, low-interest financing, subsidized leases, and a $7,500 federal tax credit applied to Volt buyers. GM acknowledges that it is losing money on the Volt, but didn't disclose exactly how much. One source from analysts Munro & Associates says that GM is losing anywhere from $60-75,000 per Volt, while Reuters famously declared that GM was losing up to $50,000 per Volt—a sum GM vehemently denied. "We're trying to create a market for a brand-new technology," said Jim Cain, GM spokesman. So far, it's working: from a total sales figure of 7,671 in 2011, GM is on track to beating its annual sales goal of 10,000 this year. In the past 8 months, it's sold 13,497 Volts—on top of these attractive leases, so is the benefit of rolling in California's HOV lane, a luxury the previous Volt never had, before it underwent a minor redesign this February. Comparisons to the Toyota Prius come easily, but inaccurately: over 15 years, the price of the Prius's initial development has already paid off. The Prius, too, was initially subsidized by the government. It took 4 years for the Prius to break even for Toyota, who lost money on it for its initial life. That the Volt, which has only been in production for 2 years, is undergoing the same teething problems is nothing new. That GM is still partially owned by the American government, and therefore a veritable magnet for scorn and vitriol from both political leanings, is reason why the Volt has been scrutinized so much. The Volt is currently beating GM's sales targets for this year, and GM is subsidizing the cost of Volt sales with development of other new products. But if the rumors of GM's money losses are as accurate as the company says they're not, how much more can GM take? Source: Associated Press