Why the Chevy Volt won’t sell

voltI consider myself a hardcore green energy fan. I truly believe that putting a precious resource like oil in our car’s fuel tanks and burning it just to get from point A to point B is ludicrous. We use oil to make so many things: plastics, medicine, paints, tires, the list goes on and on (http://www.ranken-energy.com/Products%20from%20Petroleum.htm) so to fill up our full size SUVs or Pickup trucks with gasoline solely to get us to and from our workplace is crazy. We needed to embrace clean energy 30 years ago; we are still addicted to cheap gasoline (see http://www.whokilledtheelectriccar.com/). Perhaps there is hope for mankind: The Chevy Volt. It’s not the only electric (well, mostly electric) car on the market, but, I believe, it’s the best one. Why? The short answer is that when the battery runs out, it has a built in generator that can continue to power the car so running out of juice doesn’t mean your stranded. The long answer is that it’s the practical next step in our quest to drive cars that are only electric powered and can go hundreds of miles on a single charge.

Recently we decided to lease a car for our company and given that one of our company goals is to create a sustainable world, we thought a Chevy Volt would be a great fit. But first, we decided to research similar vehicles available in the market. Here’s what we found:

voltVolt BMW 328i Scion tC Scion IQ KIA Optima Hyundai Accent 5door
 Down @signing  $1440  $6307  $2000  $2000  $1750  $1700
 Monthly (36 month) $349  $400  $293  $226  $244 $236
 Residual (payoff) $25098  $24505  $13115  $10380  $23294  $19034
 Total Cost  $39102  45212  $25663  $20516  $23294  $19034

*All models are base models priced in Baltimore, MD
When we looked at each one of these cars, we found the Volt most comparable (performance, features) to the Scion tC, KIA Optima, and the Hyundai Accent. However, the price of the Volt is closer to that of the BMW. The Volt is a nice small car, but sorry, it’s no BMW.  The issue is obvious: the Volt is simply not priced for the correct market segment. And slow sales have nothing to do with the technology used by the Volt, it’s simply a marketing failure.

What can Chevy do? 
First, lower the price to match the Scion tC.  Yes, GM will loose $$ on each unit sold, but at this stage the key is to get market share, not increase the bottom line. GM posted a profit of $7.6 Billion in 2011. GM hopes to sell 10,000 Volts in 2012. Lowering the price of each unit by $10000 will cost GM $100 Million. This would only be 1.3% of 2011′s profits. What GM would get in return is a place in the future of the automotive industry. Daniel Akerson, the current CEO of GM, said, “we started the Volt project because we were afraid that the guys in Silicon Valley (Tesla) would capture the future automotive market.” He’s exactly correct. And if GM let’s the Volt die, his prediction will certainly come true. Here, GM can take another lesson from Silicon Valley: traction. When you have a vision of what the future will be, traction is more important than profits. And, as Facebook and Youtube are proving, traffic will lead to profits, big, big profits.
Second: Design. The Volt is revolutionary under it’s skin. But, it looks very similar to it’s lower priced cousin, the Chevy Cruze:     Who wants to pay almost $40k for a car that looks like a car that costs $17k?
So there you go Mr. Akerson. You are almost there. Just implement fixes for these two issues, and we’ll buy a Volt….promise!  (but for now we’re planning to buy the KIA)

Update:
It looks like I was right:

http://www.usatoday.com/MONEY/usaedition/2012-08-31-Drive-On-Aug-31_ST_U.htm

We never did get the KIA, we’ll look for a lease deal on the Volt

2013: There’s a silver lining. Chevy is using technology from the Volt in there Malibu model. “Malibu Eco, stylish sophistication takes on intelligence with eAssist technology that allows you to conserve fuel when it’s not needed, making for a smarter fuel-efficient drive with 37 MPG on the highway. “

2013: Summer
It looks like the more Chevy lowers the price, the better the Volt sells. My readers are not surprised!

http://www.usatoday.com/story/money/cars/2013/08/06/gm-chevrolet-volt-price-cut/2621657/

 

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