Chevy Volt Pricing Strategy

Brian Hicks

Written By Brian Hicks

Posted May 2, 2013

Did you know that, so far, General Motors (NYSE: GM) actually takes a loss on every Volt it sells through Chevrolet? That’s probably the biggest reason behind the company’s latest decision to try and slash around $10,000 in production costs for the next generation of Volts.

If you recall, the Chevy Volt debuted back in 2010. Currently, it is priced at $39,145 and subject to a $7,500 federal tax rebate. GM has pledged to work toward putting 500,000 electric vehicles onto American roads by 2017.

Chevy VoltIf GM succeeds in lowering costs, the next generation of Volts will cost around $10,000 less to produce while still showcasing standard features and whatever new things GM is working on putting into the new models.

GM had a target of 45,000 unit sales for last year. Despite sales rising threefold, its latest report showed the total tally was just 23,461.

The biggest factor working against the Volt is its high price tag. Bringing the costs down by $10,000 would go a long way toward making the Volt much more attractive to would-be buyers, especially those debating between the Tesla (NASDAQ: TSLA) Model S and the Volt.

Just last month, Tesla’s Model S sedan beat the Volt for Q1 sales. Adding to Tesla’s good news, the company indicated that it would report a profit for the first quarter ever. While Volt sales numbered 4,421, the Model S sold 4,750 units across North America.

Tesla’s Good Run

It’s odd, considering the Model S is far more expensive than the Volt. The Model S begins at $70,000 for the base model. Want a more powerful battery and its accompanying longer range? Prices go up all the way past $100,000.

But Tesla has a history of being spectacularly generous with incentives and freebies. Elon Musk of Tesla recently declared that the company would follow a replacement program under which batteries would be replaced—no questions asked. It doesn’t matter if the customer failed to follow instructions or otherwise caused unintentional damage—Tesla would simply replace the battery.

Moreover, the company also announced a leasing program that attracted a lot of attention. And finally, should a customer’s current Tesla Model S require lengthy repairs, the company would provide another one on loan. If the customer comes to prefer the loan model, they can actually keep it and just pay the difference between the two.

Such moves have earned Tesla much love from the media.

Another factor why the Model S consistently seems to win out is that it commands a per-charge range of 300 miles. Now compare that to the Volt’s meager 38 miles (before gas takes over) and the Nissan (OTC: NSANY) Leaf’s 75 miles.

Fisker, probably the only viable competitor to Tesla, presented a worthy challenge with the Fisker Karma of 2013. But that company’s failing financially, so that’s that.

Chevy Volt Changes

The Chevy Volt may seek to capitalize on its dual-fuel offering. Run out of electric power? No problem, gas can take over.

The new Volt will also likely be much lighter, thanks to improvements to the battery. The current battery weighs 400 pounds.

It’s intriguing to consider the possibilities of a future Volt that runs on natural gas and electricity—particularly considering GM CEO Akerson’s recent statement regarding natural gas’s future for American automobiles. He told CNNMoney:

“We’ve been given a gift called shale.” “It’s clear to me — I’m not sure the oil industry would appreciate my point of view — but it has to be done.”

For the moment, though, the Volt definitely lacks the elan offered by the Tesla Model S. Despite a price that’s more than double, the Model S takes advantage of its physical looks, impressive range, and incentives to handily beat out the Volt.

It will be interesting to see what challenges, if any, the new generation of Volts can toss to the Model S.


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