Chevy Volt Update for 07-18-11 (Reprised)
Among the predications I’ve made regarding Chevy’s Volt is that its costs, in general, render it ridiculously uneconomical. Not only does its sky-high MSRP of $41,000 ($33,500 with the federal tax credit) place it outside the consideration of most the population which must buy the car in large numbers in order for it to make the slightest profit, the replacement cost of its battery pack, the life of which no one knows, is at least $8000.00 and possibly more. It’s highly likely to be the most expensive part in any dealer’s parts inventory. By way of comparison, one could easily have an engine rebuilt three times over for the replacement cost of a single Volt battery.
For those interested in reading my scribblings on the Volt visit the SMM Electric Vehicles archive. Incidentally, I saw my first Volt a few days ago in its native habitat. It was actually being driven and was apparently owned by an actual person. This is significant in that I live in the Dallas/Ft. Worth Metroplex, an area–due to its high year-round temperatures–ideal for electric vehicles. It’s also an area with a very large and mobile population, a population whose work commute can easily exceed 100 miles a day. I’ve seen one Volt. Not a good sign for Chevy, particularly considering the likelihood that even at $41,000, Chevy is losing money on every Volt it builds.
[NOTE: Circa 01-01-12, I have seen a total of three Volts in the first year they’ve been on the street. My musical pursuits require me to make no fewer than six trips per week on the busiest highways in the Metroplex, so I’m probably more likely than Joe or Jane Average to spot a Volt, particularly since I’ve had my eye out for them.]
[NOTE-NOTE: As I’ll report in the near future, not only is Chevy losing money on every Volt it builds, it has—in cooperation with the Obama Administration—completely redefined the term “losing money,” in almost unimaginable ways.]
But now comes interesting news from Green Auto Blog about a Volt belonging to Cars.Com. It seems that Cars.Com’s long-term test Volt (sounds odd—“test Volt”–no?) was in an accident. And it cost $14,187 to repair. That’s right, nearly half its post-federal tax rebate cost.
Why would it cost so much? We all know that auto repair, and particularly body repair costs are very high, but even more so with the Volt. The Volt requires multiple heat exchangers, engine control electronics far more expensive that those in other vehicles, and a variety of other expensive differences that stuck the vehicle in the repair shop for nine weeks—more than two months. I’m sure that such things are far more expensive due to their rarity as well. It simply costs much more to manufacture 10 items than ten thousand. In addition, it’s highly doubtful that dealers stock Volt parts; most don’t even sell Volts. Virtually anything a Volt needs—apart from consumables shared by a variety of Chevy vehicles—would have to be specially ordered.
Those driving the vehicle at the time of the accident are indeed fortunate that the battery pack was not damaged (apparently it wasn’t; there is no mention of this in the article). Lithium-ion batteries contain substances that must be separated at all times. If they are allowed to combine through even a pinhole, fire and even explosion are the rapid and inevitable consequences. In addition, the battery contains a great deal of electrical power such that it is actually dangerous, even potentially deadly, to the occupants of a wounded Volt, or to unwary first responders. This is true even for mechanics without the proper tools, safety equipment and training.
Hmm. If I was an actuary for an insurance company, I suspect I’d be advising my company to greatly increase the price—and greatly increase the deductible–of any Volt policy. Wouldn’t you?
In addition, the Volt is a bizarre and costly cross between a hybrid and an EV. It has not only all of the hardware and software necessary to allow it to function as a hybrid, but all of the hardware and software to allow it to function as an EV and as a conventional, gasoline powered vehicle. That’s right: GM has designed a vehicle with three times the complexity and repair cost of a conventional vehicle costing only half as much. Who could possibly resist that siren song?
So to recap:
(1) The Volt sells for $41,000, and as much as $65,000, yet Chevy makes no profit at all on the vehicle. [Stay Tuned, Gentle Readers, but take your blood pressure meds in advance when I fill you in—in the near future—on the real costs of the Volt.]
(2) Some dealers are applying for the $7500 tax credit themselves and selling essentially brand new Volts as used vehicles, for as much as $65,000. What could they know that we don’t? Perhaps that the Volt cannot succeed and will be nothing but an albatross around the necks of any associated with it?
(3) The Volt’s weak gasoline engine requires premium fuel and achieves less fuel economy than a great many conventional vehicles with more flexible and powerful engines that burn regular fuel (Fun Fact: Federal regulations prevent the importation of small, clean burning diesel engines that get 50 MPG or more. Such engines are common in European cars).
(4) Now we learn that repair costs for the Volt greatly exceed conventional vehicles in the same general class.
(5) The Volt’s real world electric range in real world driving conditions is apparently about 25 miles. No one knows how long a Volt battery will last or precisely how much it will cost, but GM has never quoted a replacement cost less than $8000.00—about 20% of the Volt’s MSRP.
(6) As I reported in prior posts, because of the ridiculously high purchase price, even if the Volt managed 200 MPG in a combination of electric/gas-powered driving, it would be virtually impossible for anyone to break even in fuel savings when compared with the cost of even high-end conventionally powered high mileage vehicles. With more realistic mileage figures, it would take about two decades. When one considers that at least one battery replacement would be mandatory in that time frame, breaking even on operating costs is a fantasy. When one considers that very few people ever keep a car for its entire lifetime—and that life span is usually less than 10 years—breaking even is absolutely impossible.
But other than that, the Volt is a great car that will change the world, and everybody should buy one. Hey, if the Federal Government can make you buy a specific light bulb and health insurance, why not a specific car? And as long as the Federal Government actually owns a substantial chunk of GM—about 26% at last check–why not the Volt? As Joe Biden would likely say, it’s the patriotic thing to do!
Added Note: A commenter on my last post on the Volt noted that he has ordered one and expects to be very happy with it, considering it to be superior to the BMW he is currently driving.
I thanked him for his comments, and replied:
I care not what anyone else drives; they’re free to buy what pleases them. This is one of the great things about America. What I am concerned about is the choices made by a company in which I am–through no choice of my own–part owner. In that case, I expect that company to build cars that make a profit. The Volt does not and will not, unless the government so regulates and mandates the free enterprise system that it will no longer be free and none of us will have the choice to buy whichever vehicle pleases us. I suspect that the Volt is part of the vanguard of that Socialist revolution.
By all means, buy one if you please and I hope you enjoy it. But my point remains: The Volt makes no economic sense for virtually all of the American public. No car company can remain in business manufacturing a product like that. The question remains: Why is GM manufacturing a car that not only makes no profit, but probably costs it money, and does not have the infrastructure–which is also ridiculously expensive–to make it even remotely viable? It would seem to have nothing to do with free enterprise and individual choice, would it?
And this is the primary problem with the Volt. GM is far from sustainably profitable, having avoided a normal bankruptcy proceeding that would have allowed it to reorganize and renegotiate its union contracts so that it could once again be profitable. Preserving union power and cash, was of course, Mr. Obama’s main concern. Preserving the rights of shareholders and creditors and supporting the free enterprise system were not.
The result is that people who had legitimate financial stakes in the company were stiffed, wealth was not only not created but thrown away, and the American public will almost certainly take a bath to the tune of tens of billions that GM will never pay back. That and we, the taxpayers, still own $2.1 billion of preferred GM stock and 61% of its common equity. As an unwilling stockholder, I’m a bit concerned by a company building a car that makes not a dime of profit, and probably loses money. Shouldn’t every owner of GM–every American taxpayer–be concerned about that?
UPDATE: 082512 2210
Reader “Steve” has added a number of comments suggesting that I ignored a later article relating to the original cars.com article, via greenautoblog, from which I quoted in my original article. That later article may be found here. The implication is that I was somehow purposely deceiving readers and depriving them of complete information–of which I was unaware–until Steve kindly brought it to my attention, for which I extend my thanks. By all means, take the link and explore the article if the spirit moves you.
For those not in a clicking mood, another quote from that later article:
Tamblyn said it came down mainly to the additional cooling systems and reprogramming. A normal car with air conditioning can have as few as two or three such systems. The Volt uses additional ones to cool the battery and electronics, so no fewer than five heat exchangers, or radiators, and associated plumbing had to be replaced. The Volt is also highly computerized, and the car goes into a safe mode after a collision that requires the engine control module to be reprogrammed. ‘Other hybrids don’t do that,’ Tamblyn said.
I know that an additional $2181–the difference in cost to repair a Volt compared to a Malibu with similar damages–to repair any damaged vehicle is a significant sum to me, and I suspect the same is true for most readers.
Steve also added this quote from the article, which he obviously considers quite damning:
For what it’s worth, a Malibu owner might not have gotten past the estimate phase. With a sticker price north of $40,000, our Volt was worth repairing. At a base price below $22,000, a modest Malibu might have been totaled by the insurer.
All of this merely continues to prove that the Volt is more expensive to repair–in this case nearly $2200 more to repair–than a normally fueled car. In addition, the article Steve cites indicates that the Volt repair took an additional “week to a weak and a half” longer than normal. Suggesting that a Volt costing some $40,000 is worth repairing when a far less expensive but more flexible and useful vehicle might be totaled is hardly a stirring recommendation for buying a Volt.
The economics of the Volt are simply not improving. As I’ve demonstrated in other articles, each Volt receives as much as a quarter of a millions dollars in direct government subsidies. Volts are not making a cent of profit for GM, and while overall Volt sales appear to be up this year (I’m a bit suspicious that most of those are fleet sales to General Electric and the U.S. Government–no figures of which I’m aware are available), they remain far, far below the level necessary to make even a conventional vehicle even remotely profitable.
As I’ve said many times, if you want a Volt, being fully informed of it’s substantial downside, and if you can afford it, by all means, buy one for each day of the week if you like. I hope you enjoy it/them. However, for the average American car buyer, the Volt remains a car costing far too much and delivering far too little. For the American taxpayer, the Volt-and GM–are a disaster.
Oh, and Steve, any political commentary I’ve added to this series has to do with the fact that Mr. Obama has drug every American voter, and me, into the ownership of GM and the support of the United Auto Worker’s Union. Every indication is that we’ll never come close to getting our money back. Since he drug us all through that political doorway, it is more than fair to examine the related political motivations and issues, isn’t it?