General Motors Company (GM) Cuts the Chevy Volt’s Price. Will It Help?

Don’t look now, but a price war is breaking out in the electric-car market.

The latest move comes from General Motors Company (NYSE:GM), which is boosting incentives on its Chevy Volt amid rising inventories of the innovative plug-in hybrid sedan.

General Motors Company (NYSE:GM) last week began offering big discounts of $4,000 or more on Volts, hoping to clear out an inventory that has swelled to 140 selling days’ worth; 60 days’ worth of inventory is considered healthy. Volt sales have been down in each of the last three months.

While political controversies have followed the car since its launch, there’s nothing wrong with the Volt itself: It’s a very nice sedan with some of the highest owner-satisfaction ratings in the auto business. If you want a comfortable commuter car that is exceptionally easy on gas, you could do a lot worse.

So why isn’t it selling better?

Will price cuts be enough to boost sales?
The Volt is just the latest in a round of electric-car discounts that started when Nissan Motor Co., Ltd. (ADR) (OTCBB:NSANY) slashed the price of its battery-electric Leaf by 18% at the beginning of the year. Honda Motor Co Ltd (NYSE:HMC) and Ford Motor Company (NYSE:F) both followed suit, cutting lease prices on the Fit EV and Focus Electric.

The discounts have done wonders for the Leaf’s sales here in the U.S., which had slowed considerably. Leaf sales in May were up more than 300% over year-ago totals – enough to put the Leaf just ahead of the homegrown Volt in sales for the year so far.

Unlike the Leaf (and the Fit EV and Focus Electric), of course, the Volt isn’t a pure battery-electric car. It has a gas-powered “range extender”, essentially an on-board generator that runs on gasoline and gives the Volt range comparable to a regular gas-powered car.

Many owners rarely use the gas engine, preferring to charge the Volt’s batteries and drive it like a pure electric car – an ideal situation if the car’s electric-only range (EPA-rated at 38 miles) works for your commute. But the gas engine is intended to ease the “range anxiety” caused by pure EVs like the Leaf.

That would seem to make the Volt an easier sell than a pure battery-electric. But sales have never come close to General Motors Company (NYSE:GM)’s original targets, though it has done better than many EVs.

Will this price cut help get things going, as it did for the Leaf?