GM Loses Money On Every Volt Built 471
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."
And computers used to cost millions of dollars (Score:5, Interesting)
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...
GM loses money? (Score:1, Interesting)
GM Loses Money On Every Volt Built
Technically, sure. In reality, because the government owns GM, the tax payers lose money on every Volt. Labor unions made off like bandits at the recent IPO, so I guess someone wins.
Here is my other problem: where do the tree huggers think the electricity to power these "zero-emissions" vehicles comes from? Magic unicorns? No, usually fossil fuel burning power plants, along with all the associated loss of energy down the transmission lines etc along the way. Oh right, and we can't build clean(er) power plants like nuclear because the same environmentalists, w/ their friends 'OMG teh nukeclear!' alarmists, tie up everything in so much red tape it isn't worth it. Like the Prius, this isn't about the environment. It is about status, and acting like you're so much better than your filthy neighbors driving that BIG OIL powered global-warming causing piece of crap.
Re:If we care about GM, we'd stop buying them (Score:5, Interesting)
You don't have to make a profit when you are too big to fail and your controlling shareholder is the US government.
Re:And computers used to cost millions of dollars (Score:5, Interesting)
> 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.
Ahh, union labor ... (Score:3, Interesting)
... is there anything you can't screw up?
Re:And computers used to cost millions of dollars (Score:4, Interesting)
I doubt the Prius made money when it was first released, at least in Japan. At a certain point, GM will have to learn to design and build electric cars. It may make sense for GM to get this learning experience going, so that they won't be far behind Nissan and will be ahead of some of the other manufactures because they'll be on generation 2 or 3 when Honda is on generation 1. This will also get their name out there. For a long time, Toyota was hybrid car. Honda had one, but it didn't sell as well and didn't get the mind share. Heck, despite the fact many people sell them, Toyota is still the hybrid car thanks to the Prius, just to a lesser degree.
If GM hadn't needed a bailout, I think people would be applauding the move. It's risk taking, trying to move forward past what they've been doing for 50+ years. The problem is it's not their money anymore so people are unhappy with them risking it.
I wasn't a fan of the GM bailout. I would have liked to see them split up and sold out to other car makers or something else. I'm just not sure GM needed to keep being GM.
That said, I think this is a good move. While they are risking money, they are taking risks. The Volt is interesting, and if they just spent the next 10 years waiting for other manufacturers to make electric cars common, they'd just be wasting a big opportunity. Getting ahead of this market could be quite a bit easier than taking back a big chunk of the normal ICE car market. Plus they are only selling/making 10,000. It's not like they are starting with 200,000. It's a good toe-dip start.
You know who else lost money on every car? (Score:5, Interesting)
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.
Comment removed (Score:4, Interesting)