General Motors has issued a rare response to an article critiquing its highly controversial Chevy Volt. The article, titled “GM’s Volt: The Ugly Math of Low Sales, High Costs,” analyzes the true costs of developing, producing, and selling the Volt.
GM’s main issue with the article is a claim that the automaker loses as much as $49,000 on every Volt produced. After performing its own analysis and interviewing a number of automotive consultancies, Reuters added estimated development costs of at least $1.2 billion. Finally, the reporters factored in the Volt’s production costs (estimated in the article to be $20,000 to $32,000 per vehicle), its $39,995 base price, and the 21,500 units GM has sold thus far before completing its “ugly math.” In August, GM reported the Chevrolet Volt had its best-ever monthly sales, at 2831 units sold.
“Reuters’ estimate of the current loss per unit for each Volt sold is grossly wrong, in part because the reporters allocated product development costs across the number of Volts sold instead of allocating across the lifetime volume of the program, which is how business operates,” GM states in its statement. “The Reuters’ numbers become more wrong with each Volt sold.”
It’s still unknown when GM will start to make a profit on the Volt, but the automaker points out its long-term plan includes new products like a second-generation Volt as well as the upcoming 2014 Cadillac ELR coupe. The new products “will help spread costs over a much higher volume, thereby reducing manufacturing and purchasing costs,” GM says in its statement.
Reuters does point out that the Toyota Prius, which could now be considered a sales success, took a similar path when it arrived over a decade ago. Same goes for the all-electric Leaf, on which Nissan has spent over $5 billion in development costs (the Prius family has cost Toyota twice that amount over the past decade). Furthermore, the Volt year-to-date sales of 13,500 units is almost three times more than those of the Leaf (4228), though Reuters does point out GM has recently employed profit-eating incentives and lease specials to boost sales. We've included GM's full statement below.
Source: Reuters, GM
GM’s full statement:
DETROIT – Reuters’ estimate of the current loss per unit for each Volt sold is grossly wrong, in part because the reporters allocated product development costs across the number of Volts sold instead of allocating across the lifetime volume of the program, which is how business operates. The Reuters’ numbers become more wrong with each Volt sold.
In addition, our core research into battery cells, battery packs, controls, electric motors, regenerative braking and other technologies has applications across multiple current and future products, which will help spread costs over a much higher volume, thereby reducing manufacturing and purchasing costs. This will eventually lead to profitability for the Volt and future electrified vehicles.
Every investment in technology that GM makes is designed to have a payoff for our customers, to meet future regulatory requirements and add to the bottom line. The Volt is no different, even if it takes longer to become profitable.
GM is at the forefront of the electrification of the automobile because we are developing innovative technologies and building an enthusiastic – and growing – customer base for vehicles like the Volt.