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Chevy Volt’s Stunning Price

10 Aug

General Motor’s (GM) Chevy Volt’s stunning price tag has stirred up numerous conversations this week. Everyone is wondering if the $41,000 starting retail price and low-volume sales tactics will doom the car before it even has a chance to prove its worthiness. Even with the $7,500 tax credit added in, the price is still higher than most other cars, including other eco-friendly cars like the Nissan Leaf and Toyota Prius.

Everyone is comparing the Volt to the Leaf since both are plug-in electric vehicles that are being introduced into limited areas of the U.S. market in December, 2010. They are also comparing the Volt and Leaf to the Toyota Prius because it is currently the most popular hybrid car on the market. Although GM claims to be unfazed by the comparison, one GM spokesman says the comparison isn’t really fair.

According to GM spokesman Dave Darovitz, the Volt and Leaf are actually in two separate categories. Mr. Darovitz claims the Leaf is limited to a short range while the Volt isn’t. Because of the range limit, the Leaf is more likely to only be utilized as a secondary commuter car while the Volt will likely be used as a primary vehicle. Also, they are technologically in two different categories. The Leaf is a pure electric vehicle while the Volt is an electric with gasoline generator hybrid. There are also several other technological differences between the Volt, Leaf, and Prius.

Consumer Reports’ director of automobile testing, David Champion, also agrees it’s not a fair comparison. He stated that the Volt and Leaf are two different vehicles which will be competing in two different markets. The Toyota Prius also isn’t really in the same market category, even though it’s a hybrid just like the Volt. However, the main difference in markets is the launching locations for Volt and Leaf.

The Leaf will start off being sold in Arizona, California, Oregon, Tennessee, and Washington in December, and then add Texas and other states in January. The Volt is starting off in California, Connecticut, Michigan, and New York in December. The Volt will also start off in Austin, Texas and Washington, D.C. in December, and will spread to the rest of Texas and other areas in January. Both cars are expected to be sold on a nationwide level within the next two to three years. However, GM only plans on making 10,000 Volts through the end of 2011, with only an additional 30,000 by the end of 2012.

GM Chairman and Chief Executive Edward Whitacre, Jr. vowed to make the Volt into a moneymaker. So GM has chosen to start out by selling fewer Volts at a higher price range in order to recoup some of the development cost. Then, after the Volt’s development costs are lowered, the volume will go up and the price will go down. On the other hand, Toyota Motor Corporation chose to start off by taking a money-loss on the Prius in order to sell a higher volume of cars. GM cannot afford to take a money-loss like Toyota did. GM is now majority-owned by the U.S. government, and it’s spending is under close scrutiny by the public and politicians. If GM started losing money again, everyone would be outraged.

However, the Volt will be facing stiff competition when it is introduced to the U.S. market in December, and again once the Leaf and Volt are being sold nationwide. Despite some differences in the starting markets, the Volt and Leaf will share some common markets. For instance, they will both be launching low-volume sales in California and Austin, Texas in December and to other areas of Texas in early 2011.

The Nissan Leaf will have two extra advantages over the Chevy Volt in the California market. One of the advantages will lower the price of the Leaf by another $5,000, bringing it into the $20,000 price range. Apparently, California regulators have decided that the Leaf is eligible for a $5,000 tax credit and usage of the carpool lanes even when there’s only a single occupant. They decided the Volt isn’t eligible for either benefit because it isn’t strictly electric. The Leaf already had the advantage of having a retail starting price of $32,500, and it also qualifies for the $7,500 federal tax credit.

However, GM is setting up an attractive three-year (36-month) leasing option to offset the high selling price. The lease will cost the consumer a $2,500 down payment, and $350 per month afterwards. GM claims the low lease payment includes the $7,500 tax credit, whose value will be transferred from the lessee to the lessor.
So is the Chevy Volt worth $41,000? In GM.,s opinion, it’s worth more than that amount. However, only time and consumer testing will prove the car’s worthiness to consumers and potential buyers.

References:

ABC News
Chevrolet Volt official web site
Newsweek
The New York Times
San Francisco Chronicle
The Wall Street Journal