That’s how the car business works.
So the real question isn’t “How much is GM losing on every Volt?” The real question is whether GM will sell enough Volts over time to pay back GM’s upfront investment in the Volt’s technology with a profit. (It almost certainly hasn’t so far.)
That makes the suggestion that GM should kill the Volt right now kind of a dumb one. General Motors Company (NYSE:GM) absolutely shouldn’t kill the Volt.
At least not yet.
Every Volt sold probably reduces GM’s loss
Even if Volt sales don’t pick up, the program’s numbers will look better and better as more GM models incorporate the technology that was developed for the Volt. GM already sells a Volt sibling in Europe, the Opel Ampera. And the Cadillac ELR, a luxury coupe that uses the Volt’s technology, is set to make its debut early next year.
Any sales of those models represent additional payback on GM’s initial investment in developing the Volt’s technology. And as Lutz argues, the knowledge (and green cred) GM gains from the Volt program has a value in and of itself.
So whether the Volt program ultimately turns a profit or not, it’s really not a financial boondoggle for GM (or for taxpayers). There’s no good argument for killing the program now: Most of the money has been spent, and every additional sale narrows the loss.
But should there be another Volt?
Here’s the thing: The Volt’s technology is unique. To oversimplify a bit, it’s an electric car with an onboard gas-powered generator — an arrangement no other automaker uses. It’s innovative and works well in practice, but it was expensive to develop.
But functionally, the Volt is a plug-in hybrid: You charge it up at home, and then you can drive a moderate distance (38 miles on the latest Volt, says GM) on the battery before the gas engine kicks in.
If you have a short commute, you might only buy gas a few times a year. But for longer drives, you’ll need to fill up more often — just as you would with the plug-in versions of Toyota Motor Corporation (ADR) (NYSE:TM)‘s Prius or Ford Motor Company (NYSE:F)‘s Fusion hybrids.
And that raises this question: Should GM push forward with this unconventional technology?
The truth is, General Motors Company (NYSE:GM) is already pushing forward. GM CEO Dan Akerson said this week that he expects the next Volt to be significantly less expensive (and to be profitable), which suggests that its development is already well under way.
But in terms of technology, is this really the right direction for GM to be going in? Does it really offer advantages over conventional plug-in hybrids that are worth its cost?
I don’t know the answer to that question, at least not yet. But I’d like to hear GM address it.
The article Should GM Kill the Chevy Volt? originally appeared on Fool.com is written by John Rosevear.
Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool recommends Ford, General Motors, and Tesla Motors and owns shares of Ford and Tesla Motors.
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