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Losing $49,000 Per Unit

GM and its Chevy Volt.

Unlearn the Propaganda!

  • John B Campise

    Interesting sob story…. so, if all these excuses for why the Volt is not profitable are true, then why is Tesla making a nice profit selling electric cars?

    These same excuses came out when GM pulled the plug on the EV1 in the 1990s. But they can’t be the real reasons since Tesla is doing just fine.

  • Anonymous

    Telsa makes a $100k sports car for a niche market.

  • edward

    How was the “loss” calculated? By dividing the total cost to produce the car (development and investment) by the number of cards produced thus far? This doesn’t seem like an appropriate method of cost accounting. (But what do I know, I’m not a financial analyst.) Isn’t Chevy planning on making more Volts in the future? Won’t that affect the “loss”?

  • http://www.TomWoods.com Tom Woods

    Read the article. The article says that yes, more Volts will likely sell in the future and the per-unit cost will come down, but this process does not seem to be occurring fast enough for the Volt to seem like a super idea.

  • John B Campise

    Tesla is releasing this fall a $50k sedan seating up to 7, their “model S.”

    I predict they will release better cars for cheaper, while making a profit, until their customer base moves into the mainstream, just like cell phones did.

    I am guessing that if looked into deeply, we would find that GM’s failure to be profitably competitive and innovative in the electric car market, is rooted in their governmental entanglements.

  • The Village Idiot

    Well let me tell everyone from personal experience (college solar-hybrid vehicle team I was on)… it’s all in the batteries. Lithium Ion and Lithium Polymer batteries are still incredibly expensive per Amp Hour. The car we designed in college had a low Cd of ~0.2 was less than 1 ton and our $15,000 Lithium Ion battery pack of 8 x 65 Ahr at 19 kg each only gave us ~120 miles on a charge. You save a ton of weight with Lithium vs Nickel Metal Hydride and conventional lead acid batteries but you pay for it! Now if people are willing to have a car that can only drive say 50 miles on a charge then the electric car could be a viable alternative for the ICE at the moment. But the batteries are expensive and only last for approximately 1000 – 1500 cycles (number of charge and discharges). This is the other drawback, as you will likely be replacing the battery pack within 3-6 years.

    It’s simple… you want a really aerodynamic car, okay cool. You want a light car made of carbon fiber, Kevlar, Aluminum, and Magnesium, you’re gonna pay an arm for it. You want a car with a battery pack that will give you the range you’re use to, you’re gonna pay a leg for it.

  • The Village Idiot

    Yeah, and not too many people have $50k to spend for a family car! Over 50% of the cost of all of Tesla’s cars are the A123 systems NanoPhosphate Lithium batteries that they use.

  • The Village Idiot

    Oh, one more thing… those battery packs have to be replaced every 1000-1200 cycles. So they’re gonna last for 3-6 years max before you have to replace them!

  • John B Campise

    The price came down 50% in just a few years, from 100k to 50k. Give it a few more years and it will be 25k.

  • John B Campise

    There are lithium based batteries now that go 3-4k cycles, meaning they last 10-12 yrs. Go to e-volks.com, they are selling lithium batteries, that will take your eletric converted VW bug 100 miles per charge, for $7000. Just 5 yrs ago similar batteries would have cost $25,000.

  • vox

    Imagine if we had a near-complete laissez-faire economy. Who knows what could be developed? A car that gets 100+ mpg with 300+ horsepower? I don’t think we’ll see that potential any time soon. It’s not what our masters want. I heard there is a 75 mpg Volkswagen diesel car. But it is only available for purchase in Europe…thanks to our government. If this is true, then they clearly have an agenda that has little to do with increasing efficiency and protecting the environment.
    I think it’s simply the same old story: grabbing power, enriching select groups, and ripping us off. Not to mention that whole dream of perfecting slavery through advancing technology. But I’m pretty sure things will decentralize in the long-term.

  • Ugly Truth

    Tesla is a recipient of a $465 million “low interest” loan from federal gov. (the Dept. of Energy) (see
    http://en.wikipedia.org/wiki/Tesla_Motors ) and it has never made a profit. In 2011, it lost $254,000,000 (see
    http://money.cnn.com/quote/quote.html?symb=TSLA ). It’s 2012-Q2 loss was $105,000,000 and revenue was also down 54% from the same time last year. Tesla is NOT doing just fine. It’s very Solyndra-like and I expect it to fail as well when the money runs out. In the meantime, the insiders cashed out with an IPO and subsequent stock sales and they continue to receive generous salaries and other benefits. This is capital cronyism at its worst!

  • Dr John B Campise

    Tesla had one month in 2009 with an official profit, just to be acurate. But they have large investors and customers like Toyota whom they are building EV parts for. And the main reason they are showing losses is because they are re-investing everything into new equipment for the production of the model S. If they sell as many as they hope to in 2013, they will make their first quarterly profits.
    I agree with you that if they hadn’t taken the government loans, they would likely be doing even better because they would have been forced to be leaner, more efficient, and more innovative.

  • John B Campise

    The 75 mpg is misleading because it’s based on the British gallon which is larger than the US gallon.

  • Ugly Truth

    Hmmm. Me thinks one doth invests too much in TSLA. You’re smokin’ hopium, brother. Let’s be perfectly clear here, my argument was NOT that had it not taken the loan it would be doing better. Rather, had Tesla not received a loan for $465 million from the government (which got this money either through coercive tax collection or debasement of the currency through the Fed) it would not exist right now, as its losses to date would have been unsustainable. In other words, it’s business model simply does not work without government subsidies. For that matter, it apparently doesn’t even work with subsidies. It’s a giant boondoggle.

  • Dan

    If 75 gallons in Europe is more than 75 gallons in the US, how is that misleading? Unless you meant to say 75 gallons in Europe is less than 75 gallons in the US.

  • chris

    I think the title should have been: “Bolt from the Volt”

  • edward

    I did read the article and am in no way suggesting that the Volt’s production was a “super idea.” What I am suggesting, however, is that it doesn’t seem fair to claim that the Volt is losing $49,000 when the method of cost accounting used to determine the loss is inconsistent with what we would normally consider to be a method of indicating a profit/loss in an automobile. The claim seems ignorant at best and disingenuous at worst.

  • joe

    So… what about heating, air conditioning and headlights? I dont hear much about the draw those have on battery packs. Windshield wipers, stereo power brakes, steering, etc. Anyone???

  • Pastor Ko-Rect

    Breakthrough thinking. Reduce the lease cost to $199 per month for a product that costs $79,000 to build. If the customer pays the lease for 37 years, it will be a real time breakeven with no profit. But, if the customer keeps paying for another ten years after that, the company will begin to see a small profit. The company will have to finance 37 years of production before they see a profit. It is a brilliant idea that comes right out of the Stalin school of business.

  • John B Campise

    The 75 miles per gallon is misleading, no one was talking about 75 gallons. So if a car gets 75 miles per British gallon, that is the equivalent of getting 62.4 miles per US gallon.
    This is why the VW Jetta TDI diesel gets 51.6 mpg in Europe, but it only gets 43 mpg in the US.

  • John B Campise

    But that’s the same argument used by the mainstream about the roads and schools… That if the government didn’t fund them, they wouldn’t exist. In fact they would exist with much higher quality for less cost.

  • John B Campise

    All those things do decrease the miles per charge, just like they decrease the miles per gallon in a combustion car.

  • Gary Price

    Regardless of if you agreed with the bailout or not, at this point the evidence says the GM Auto (Not GM Financial) bailout worked and will probably make the US tax payer money.

    US Auto sales are now back to an all time high and GM is leading the way. That’s good news and contrary to what many believe, or are being told. Below is a quote from GM’s CEO, dated August 2, 2012.

    “You can see that we increased our global deliveries year-over-year by roughly 70,000 units, thanks to Chevrolet, which is on a roll. The brand has now delivered 7 consecutive quarters of record sales. While our net revenue was down $1.8 billion to $37.6 billion, virtually, the entire decline reflects the strengthening of the dollar against the euro and other major currencies.”

    What Chevrolet, their North American brand on a roll, really hows that possible? If that’s not enough evidence how about this. GM sold more cars in the Pacific Rim and Russia than they did in North America.

    Reconciliation of GM’s Automotive Free Cash Flow for the 2nd quarter of 2012 is 3.9 Billion.

  • Gary Price

    Tom, please don’t remove my post. Thanks Gary

  • Gary Price

    The idea that GM is losing $49,000 on every Volt is crazy. This is clearly propaganda by special interest money. Do simple math on a home rental
    House Price $100,000
    Ancillary Cost $5,000
    Assuming your rent is $1000 a month using this math you could say your losing $93,000 dollars for every home you rent. If your that naive go back to school.

  • The Village Idiot

    Look, I want the price of electric cars to come down as quick as the next guy, I mean for crying out loud I built a solar car in college, but lets not forget that Tesla received a $465 Million dollar government loan in 2009. Also, the cost hasn’t come down %50. The Model S is a completely different car than the Roadster is. The Roadster still cost roughly the same it has always cost. The batters are still the bulk of the cost and the price of the car isn’t gonna come down until the battery technology improves. It is improving, but slowly.

  • msl

    The question isn’t about whether GM is now profiting or if they are now number one in the world. The question is, “why should they get special privilege?” What about all the other entrepreneurs out there? What about the people who might have entered into the auto market and been successful by capitalizing on GM’s poor decision making? So the message is that specific entities with the right connections can screw up over and over and the taxpayer will bail them out. If they finally end up successful due to these special favors the intervention is justified.

  • Gary Price

    Our laws allow for an orderly sale and dismantling of businesses that fall, this is true. The circumstances that existed during this bailout (Not previous bailouts) I feel were justified, in that an orderly sale and dismantling could not occur. This was due to failure of our financial systems and the actions that lead to it.

    I personally own, drive and buy Fords, why? They are an American made vehicle, I personally like the quality and they did not need a bailout.

  • Gary Price

    When you ask “What about other entries into the market”, it makes me think of history. How many auto manufactures was there after World War II, and where did they exist? How many entries has there been into the global and American market since WWII? Special privilege comes in many forms and from many directions.

  • The Village Idiot

    I couldn’t find information about the batteries you are talking about on that site. Could you please send me a direct link?

    Thanks

  • The Village Idiot

    Yeah, what John B said is exactly right. Diesel engines are more efficient than gasoline enginese because they have more complete combustion. And you are exactly right about the gov keeping diesel cars off the US market. The biggest reasons that we get such terrible gas mileage is that cars are not very aerodynamic and they weigh a ton… well 2 tons or more in many cases and it takes a lot of energy to get these loads we’re driving around. We like our creature comports too. Our a/c is a power drain and all of these extras add weight. Anywho… all that said, you’re so right about getting gov out of the auto industry and letting the Free Market work to improve quality, efficiency, and reduce cost.

  • msl

    I don’t believe that you can pick an arbitrary point of failure and blame financial institutions that themselves hold special privilege. You may be right that the bailout had to occur. It could be that if all those businesses failed that the economy would have fared very poorly for a short period of time and then recovered. We can’t know. And now we simply have never ending bailouts. In addition to the potential entrepreneurs that never got their opportunity in the automotive business we can consider those in the banking business. We can consider those would be homeowners waiting for prices to fall and denied an affordable house. It seems to me that we either continually bail out everyone which we know is unsustainable or cut them off and allow the risk of failure to enter into the capitalistic equation. maybe then the economy can truly heal.

  • John B Campise

    Click on the left tab “highway kit” on the home page. Then click on the left tab “lithium batteries.”it has all the data but price, which you have to call for, I did and depending on the EV motor size they are $6500-$7500 for about 100mile range for small car like old VW bug.

  • Ugly Truth

    John: I think you’re conflating your economic concepts. Clearly cars would exist without government intervention or subsidies. However, I don’t think that electric cars in this form would be built under free market conditions. These dogs just don’t hunt. They are akin to bridges to nowhere or ethanol production. They’re just not economically viable without subsidies and mandates by the gov.

  • Gary Price

    MSL, I will get to all your points shortly, but please indulge me a little. I promise I am willing to cover every point and then some!

    Why do you think such scrupulous accounting practices (Bad Math) was used in producing this story, the story of GM losing $49,000 per Volt? If McDonalds, Boeing or any other capital intense business used these practices nothing would ever be built. So why single out the Volt story in such a manner, especially given the acceleration of electric/hybrids and the GM brand. I am asking you to step back and look at the whole forest momentarily, if you would.

    Thanks,
    Gary Price

  • John B Campise

    EVs are being built, they are being built by individuals who convert gas cars into electric. One reason there aren’t large numbers of new EVs being built is because it’s nearly impossible to start a new car manufacturing company due to all the regulations.
    It is the subsidies together with the regulations that make them not economicallyviable. It’s the same with solar panels; they would be less expensive and more efficient if there were NO rebates. Just like schools, subsidies make colleges MORE expensive. Just because everyone buys it with borrowed or printed money doesn’t mean it’s viable.
    Because solar rebates do not include solar tracking hardware, people only buy panels without trackers. Even though buying less panels with trackers would have a higher ROI than more panels without trackers but a larger rebate.