Who Would BUY a Chevy Volt?

Who In Their Right Mind Would BUY a Chevy VOLT?

After all, it’s $40K – think about what else one can buy for $40K! There are very nice Lexus, Benz, Infiniti, BMW, and Cadillac models in that price range. AND even with a government subsidy it doesn't stand on its own at $40K. Even if gas hits $5, it doesn't work. Plus who knows what it will be worth in 39 months, or 36 or 48 for that matter. If new technology trumps it, it could be next to worthless. Why take the risk just to be known as an "early adopter?" That's why Bob Lutz, the Father of the VOLT, told us at a fleet conference a while back, "It won't SELL. That's why we're leasing them for $350/month for 39 months."

Lutz says, "We gotta start somewhere if we EVER plan on achieving economies of scale." In true Lutz fashion he compared the VOLT to hunting ducks. "If you shoot at the duck, you will miss it every time. One has to "lead" the duck to hit it. We need to lead the market to have a chance to hit it. If we wait too long, the train has left the station and we are standing on the platform saying, "What happened?"

"Lead, follow, or get out of the way, said Lee Iaccoca. Lutz concurs.

Toyota lost money on every PRIUS beginning in 1996, and did for quite a while. That vehicle is thought to be profitable these days, although they are typically "tight lipped "on such matters. Toyota is now bringing a plug in hybrid to market. (The VOLT was the world’s first plug in hybrid.) Toyota has lots of experience and satisfied hybrid customers now, along with economies of scale.

In the meantime, the VOLT has attracted detractors. The Right Wing in the person of Rush Limbaugh has embraced the VOLT as a car they can hang around the President's neck, despite the fact it had been in development long before he was elected. Actually, Lutz IS the actual "Father of the VOLT." For Lutz to get after the Right Wing takes some doing -- see his Forbe article.

The barrage of untruths continue. A friend from told me that it would take 3 weeks to drive across the country in a VOLT with all the stops to recharge. He said heard it on Right Wing talk radio. In fact, the electric range on VOLT is about 45 miles before the internal combustion engine takes over to propel one across the country as with a normal car. It IS true that the internal combustion engine recharges the batteries which drives the electric motors rather than being actually connected to the drive train in a conventional manner. But to the driver, the difference is not noticeable except the engine doesn’t change RPM based on throttle position.

Others claim they catch fire in a collision. The VOLTs that caught fire had been crash tested and stored improperly for weeks before they caught fire. A vehicle with a regular lead acid battery stands the same risk if stored improperly. As with normal vehicles, the battery should have been removed.

A driver with a less than 30 minute commute to work, and a place to plug in while there, could drive all month without the internal combustion engine using any fuel at all. Figuring 50 miles per day plus other driving, one saves two tanks of fuel per month or about $120. Subtract that from the $350 lease payment and the VOLT can be easily justified. BUT GM has NOT made that case. Worse yet, sales people in Chevy dealerships haven't either. And coupled with the Right Wing misinformation blitz, GM has shut down production for 5 weeks to balance inventories. In my mind, the story has been that GM has not done the math for consumers in their marketing efforts. The marketing story is "$350 minus $120 equals $230./month. That WORKS!!!!!

[Smitka: But obviously consumers don't do the math -- ditto with the Prius, as there's no strong case for buying it on the basis of fuel savings, which is why no other hybrid, including those made by Toyota, sell well. In other words, people buy a Prius to make a statement – hence you don't find "base" models on the lot, the main reason Toyota may make money on the vehicle, despite the cost of installing two powertrains plus a battery pack. GM needs to borrow a bit of that marketing. At the moment, of course, so does Toyota....]

David Ruggles, April 17, 2012

Fiat to the Rescue?

Chrysler, heavily dependent on light trucks (jeeps, minivans, pickups), was whipsawed by the spike in gasoline prices in summer 2008. Then came the credit crunch; when its access to lease financing disappeared, it lost 20% of sales overnight. As cash drained, it attempted to work out a deal with its many creditors, and failed. Assuming the firm emerges from Chapter 11 – rather than collapsing into liquidation as dealers and other creditors play "chicken" in hopes of a bigger slice of a rapidly shrinking pie – what will it need to survive?
First, Chrysler has neither the cash – nor after a mass of white-collar buyouts, the people – to develop new cars. It strikes me as unlikely that it will receive an infusion of cash and the stability to rebuild its famous design and engineering capabilities. Fiat doesn't have the money. Nor does it have the people, because it has no expertise in large cars, SUVs and light trucks to supplement whatever remains of Chrysler's historically famous but leanly staffed product development organization. Chrysler thus faces a long 2 years, until new product arrives via Fiat.
It will then face the challenge of selling Fiats. The new product will consist almost entirely of small cars, because as a company firmly rooted in southern Europe and strong in Brazil and other developing markets, that is Fiat's core strength. But neither Chrysler, nor any other company operating in the US, has been able to make a go of that on a consistent basis.
On paper we have policies to encourage a domestic market for small, fuel-efficient vehicles: CAFE, or Corporate Average Fuel Efficiency requirements, in place since 1977. Under CAFE, in order to sell a large car, firms must sell small cars, or they will exceed the average "mpg" standards that legislation imposes. The problem Americans have not bought into that policy: they want power. Given separate, less stringent standards for trucks, the entire market shifted towards light trucks (which for CAFE includes jeeps and minivans, and not just pickups). Small cars remain a small slice of the market, but in 2012 Chrysler's jeeps and minivans and pickups will be dated; small cars will be the only "new" product they will have on offer.
Absent a polar shift in American politics, to enable a stiff gas tax, Chrysler will not survive to 2015.
Now in the longer haul they need to not just survive, they need to gain back at least a modicum of market share. To stay in the auto business will require the cash to continue funding new product develop. That is in itself not an insuperable barrier. But in the background firms also need to be able to fund supporting research and development so that they can bring a range of new technologies to market, particularly electric vehicles (whether they run off of batteries, small "hybrid" engines or fuel cells). At present Chrysler is wholly incapable of doing that by itself. Fiat is probably too small as well. A beefy combination of the two might be another story, particularly as a smaller company has greater leeway to buy technology from independent suppliers. (Larger companies want to withhold core technologies from larger rivals, but Fiat-Chrysler may be viewed as a way to leverage their own investment, rather than as a threat.)
That too appears unlikely. Over the past 15 years vast improvements in engineering tools -- computer design and simulation, specifically -- have enabled car companies to spin off vehicles from their core platforms more quickly and at lower cost than ever before. And the U.S. market is so large that it supports a plethora of firms -- 14 at last count. From how many varieties does a consumer need to choose a minivan? Or mid-size car? Or whatever type of vehicle? Hundreds of models are on offer. There is no reason to assume Chrysler cars will improve so markedly that they will be able to pull away from the field and secure more sales than the company does today. Or that they will make money: given the competition, profits were falling across the industry even as sales boomed. There's no reason to think they'll recover.
And no sales pitch from President Obama will change that.

Thanks to JJ and DR for the back-and-forth behind this.