In Defense Of The Chevrolet Volt

[Editor’s note: In the absence of an official rebuttal to Edward Niedermeyer’s NY Times Op-Ed on the Chevrolet Volt, TTAC’s own Ken Elias has volunteered to come to the Volt’s defense.]

The Chevy Volt should be a brilliant piece of engineering achievement if it works as advertised. That’s a big “if” and I wouldn’t bet my life that GM’s first iteration of the car will live up to the hype. And that’s only because of the long string of overhyped vehicles that came out of the former GM that simply never delivered. But that’s three decades of history talking – and GM’s a new company today with a different mindset and competitive spirit. Its newest products – the LaCrosse, SRX, Equinox, and Camaro for example – have been well received by the public and there’s no shame putting one of these rigs in your driveway. So let’s start out giving GM the benefit of the big doubt that the new Volt will work as advertised.

If that’s the case, then does the $41,000 price tag make sense? Sure it does since most of us aren’t going to buy one so the price tag is irrelevant. That sticker price is just for show – the real deal is the three year lease at $350/month and that’s a super competitive price. It’s about the same as one would pay for a low end Honda Accord lease and that’s a low $20k car. In all reality, the actual cost of amortizing the development costs of the technology plus the specialized parts likely far exceeds the sticker price of the Volt and will do so until unit volume achieves mass market demand – and that’s the real goal when the second and third generations come to market.

When Toyota first assembled and sold the Prius in 2000 in the States (1997 in Japan) you can bet that the price tag of the car was well below that real cost of the car. How much is a corporate secret – but Toyota was deathly afraid that Bill Clinton’s accelerated investment in advanced technology programs in the 1990’s would give the domestic OEMs a chance to gain a leg up on Toyota. (And while some think that the first Prius cost only $32k per copy – well that was just for the parts.) It was a huge bet by Toyota that its Hybrid Synergy Drive would eventually form the basis of a new generation of vehicles which would allow it to remain competitive with whatever came out of Detroit. Looking back, we didn’t get much from Clinton’s investment other than encouraging Toyota to make the leap and jumpstart the entire hybrid movement. (And again, we don’t know what kind of funding Toyota if any it may have gotten from its government. No point telling anyone now is there?)

The question of whether it made sense for GM to continue investing in the Volt before and after the bankruptcy is also irrelevant. For starters, the old GM was going to go broke whether or not it poured money into the Volt. So dropping the Volt then may have given GM a few more days of life although GM had countless holes where it was bleeding cash so it’s impossible to know. The bankruptcy outcome for GM was preordained by 2005 or thereabouts anyway (if you were an early TTAC reader). And throwing taxpayer money at the Volt during and after the bankruptcy – even if the PTFOA thought it was too expensive for commercial success – misses the point too. It’s a disruptive technology that over time could significantly alter gasoline usage in this country for a large segment of drivers. And that’s the real goal after all, isn’t it?

We have to look at the low volume production of the first gen Volt as merely an “on the road” experiment to perfect the technology. As with any new technology (e.g., the Prius), the second and third generations of the Volt will be the real winners as component prices fall, volumes increase, and sales start to generate real profits. Of course, the price tag will have to drop as well since it’s a better economic decision to buy a new Cruze for $17k and put gas into it until the wheels fall off rather than invest $34,000 (net of tax credits) in a new Volt today.

Comparing the Nissan Leaf to the Chevy Volt makes no sense whatsoever. For starters, the Leaf has potential only for those folks that have no fear of range anxiety – that is those that have a defined commute each day (and maybe 60 miles tops round trip) and have no extra-curricular needs for their car. One can count on both hands the likely number of Americans that fit that description. Oh yea, you had better to remember to plug it in each night or else it’s a no-go the following morning. The Volt overcomes that objection easily – forget to plug it in, no problem. Need to drive more than the allotted battery power – no problem. No charging station nearby – no problem. Want to take a weekend trip – no problem. It just makes sense to get a Volt rather than a Leaf if the lease prices are the same.

So let’s not worry if a couple of billion dollars of taxpayer money went into the Volt. For starters, there’s a chance we’ll get back the bulk of the money anyways. And taxpayer credits? Heck, lots of industries have benefited from such programs before. Why single out the Volt? Even the Leaf will qualify for credits. We just have to hope that GM can lead the way in technology – and that will make us all better off.