Opinion Brief

The Chevy Volt's $89,000 production cost: A waste of money?

Reuters reports that GM is losing $49,000 for every Volt it builds, renewing criticism that the eco-friendly hybrid will never be profitable

"General Motors sold a record number of Chevrolet Volt sedans in August," say Bernie Woodall, Paul Lienert, and Ben Klayman at Reuters. "But that probably isn't a good thing for the automaker's bottom line." Even though the environmentally friendly Volt's base price is about $40,000, says Reuters, production costs per vehicle run a stratospheric $89,000 — given the car's pricey lithium-polymer batteries, hybrid gas-electric engine, and next-age electronics. That means GM is losing $49,000 for each Volt it sells. Worse: GM has been offering two-year leases for a mere $5,000 to get customers hooked, which is eating deeply into its profits. GM officials call the Reuters report "grossly wrong... [and] more wrong with each Volt sold," since increased sales over the course of years will bring down the cost-per-vehicle. However, GM, which the government still partly owns, admits that the Volt isn't making any money yet. Is Chevy's eco-car a waste of money?

Yes. The Volt will never be profitable: The Volt's high production costs "prove that the innovative plug-in hybrid is impractical and will probably never be more than a niche product," says Jonathan Berr at MSN Money. Even if GM could bring down its production costs, at $40,000 it is still "asking people to pay BMW or Mercedes prices for a Chevy." And "as long as gas remains relatively cheap — below $5 a gallon — most consumers will take a pass on hybrids," which "will surely be collector's items in the coming decades." "GM loses big bucks on each Chevy Volt"

No. The investment in the Volt will pay off: The Volt represents "a long-term investment" that is helping GM become a car company of the future, says Benjamin Reeves at International Business Times. The Volt demonstrates to consumers that the "reinvented company is capable of producing a high-tech, fuel-efficient car," and the Volt's technology "will almost certainly find its way into" other cars in GM's lineup. When the market eventually "turns to more fuel-efficient and electric cars," GM will be "ideally positioned to rapidly expand" its fleet of green cars to meet demand. "Why GM actually is getting its money's worth from the Chevy Volt"

But GM can't wait forever: "What matters isn't how much GM might have lost on the Volt so far, but when it will be profitable," says Justin Hyde at Yahoo Autos. Sure, the Volt is a good "marketing tool" for GM's reinvented brand, but plans for spreading the Volt's technology currently extends to a "low-volume coupe edition for Cadillac launching next year." Without maximizing the investment in the Volt, "the financial break-even point won't arrive for several years, if ever." And GM can't wait that long if it "wants to escape its political smog," and show taxpayers that their bailout money was put to good use. "GM denies report of Chevy Volts rolling away with $49,000 loss on each"

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