GM Unplugs from Business Realities with Chevy Volt Re-Launch

General Motors just announced that it is going to relaunch its Chevrolet Volt. To paraphrase a down south saying, you can put a dress and lipstick on a dog, but it’s still a dog. The Volt, like the EV-1 before it, is a car that is not ready for prime time and is a monument to willing technology before its time.

The Volt is a $40,000 version of the Chevy Cruze which costs roughly $20,000. Aside from owning something trendy, why would the average consumer pay $20,000 for an electric booster to a gasoline powered car? The Volt, according to recent test by a TV host, goes 20 miles before the battery is depleted and the gasoline engine kicks in. Not much of a gasoline savings! The Cruze gets a combined MPG of about 33 while we can assume that the Volt gets 40. And, even if it is 50+, the economics don’t make sense.

The average U.S. driver travels about 12,000 miles annually. The difference in gasoline saved between the Volt and Cruze is about 64 to 100 gallons annually or a savings of $224 to $350. These numbers don’t have to be exact to make the point. Even if the savings was $500 annually, it would take 40 years to recoup the price difference. Know anyone who keeps a car that long? The average life of a car is about 13 years.

To make the economics even less appealing, Volt batteries last about 5 years before having to be replaced at a cost of $18,000. Guess what? When the Volt owner gets close to replacement time, he or she will probably have serious second thoughts about sinking that kind of money into a 5 year old car instead of buying a new one.

In January, GM sold less than 700 Volts and for the year about 6,000. The goal was 10,000 with larger numbers going forward. The solution to this problem is not to admit a big blunder; it is to double down with a relaunch.

GM is planning a major advertising campaign to convince car buyers that the Volt is something really special and a 100% price premium is a small price to pay. That’s what happens when a company is awash with taxpayer money. The relaunch probably won’t work, and GM wizards who think that it will must be working on the W.C Fields philosophy that a sucker is born every minute.

In addition to the battery and range challenges, the bigger challenge is that GM is competing with itself.  The Volt is the Cruze which The Wall Street Journal described as “the new breed of conventional compact and midsized sedans.” Buy the Cruze and pay down debt or take a couple of nice vacations with the difference!

The outlook is not completely bleak. The federal government—the major investor in GM—is planning to have the General Services Administration be a major buyer. And the fiscally dysfunctional state of California last month issued regulations requiring that one out of every seven cars sold in 2025 be zero-emission or plug-in hybrid, which creates a large mandated market for the Volt. Instead of spending millions of dollars on trying to convince buyers to act against self interest, GM should move the Volt’s manufacturing facilities to California and enjoy life in the state of make believe.