United States: the continuing saga of the Chevy Volt

Reprinted from EVUpdate.com

28 March 2012

As a unit of electromotive force, a volt is the difference of potential that would drive one ampere of current against one ohm resistance. As a measure of GM’s ability to transition to electric power, the Chevy Volt is a much less exact metric.

By Mary Catherine O’Connor

Last week, GM suspended production of the Volt at its Detroit-Hamtramck plant, where 1,300 employees who work on the Volt are temporarily laid off. The suspension comes as a result of slower-than-expected sales. The carmaker insists that it is just a temporary measure. Production is due to be back online on 23 April.

“In the bad old days,” says Michael Omotoso, an analyst with LMC Automotive, domestic carmakers would keep producing even if sales were poor: “Then they’d give financing – or, put money on the hood — to stoke sales.”

The tactic is precisely what led many of them to lose millions of dollars and led to a raft of recent government bail-outs, he adds: “They no longer keep producing and selling at discount, now they do these production hiatuses.”

Backstory
In this respect, the Volt’s current production suspension is not very big news. Except, it is. The Volt has been dominating headlines and has become a hot-button issue on the Republican campaign trail. The production delay is not the sole reason for this, but it is serving to punctuate a long, bumpy and generally uphill battle GM has been plying with this car.

Late last year, things were looking pretty fair for the Volt. Sales were up starting in August. But then news hit that the batteries in a number of Volts ignited following crash tests. And even though Chevy has since modified the car’s design to the satisfaction of the National Highway Traffic Safety Administration, the news left the Volt tarnished and sales slowed.

From here, the story starts to sound downright paradoxical. On 6 March, days after the current production suspension plan was announced, the Volt (or rather, the Ampera, its European version) was named the Car of the Year at the Geneva Auto Show.

It is a great car that automotive pundits and journalists generally consider very impressive. Owners seem to agree. GM’s CEO Daniel Ackerson recently told Forbes Magazine: “93% of our customers that have bought Volts today rated it at the very high end. That’s unheard of.”

Still, the black eye that GM has taken on this car has not healed. That is partly because its shortcomings have been turned into a kind of poster child for the hiccups that the whole auto industry has felt in the transition to EVs.

Even though the Volt programme was started under the George W. Bush administration, Republicans presidential candidates have been bashing the Volt, alluding to its crash test fires and President Obama’s enthusiasm for the car. The conservative group American Tradition Partnership called Volts “exploding Obamamobiles”.

Performing Triage
So what now? The Volt has won accolades and addresses anxiety range through its gas-powered half. What do its travails mean for the rest of the EV playing field?

“Neither the Volt nor the Nissan Leaf are selling in volumes anticipated, and that has an overall chilling effect”, says John Gartner, senior analyst with Pike Research. “If these two vehicles, that have had so much money put into them, don’t sell, then there is less momentum for other carmakers to invest in EVs.”

On the other hand, investments have already been made, and many companies might see riding out the storm a better option than to pull out now. “There are 40 EVs expected over the next two to three years” from carmakers, across the board, says GM spokesperson Rob Peterson. “If a manufacturer can spell EV, it’s putting an EV into its portfolio.”

That is fine for companies that rely on sales of conventional cars to compensate for the high costs and slow sales of EVs, until they are self-sustaining. Recent history offers a lesson in this with the Prius. “The Prius sold in lower numbers when it came out but there wasn’t the same amount of scrutiny”, says Gartner.

Yet one thing is very different this time around: GM, Ford, and many of the small start-ups are funded partly by federal dollars, dollars that are under close scrutiny since the government-backed Solyndra failed fantastically this past summer. That means the stakes are higher.

The fact the sales have been initially slow for EVs, as they were for hybrids, means that EV start-ups like CODA (which rolled its inaugural sedan off the assembly line this month) will really need sales volume to survive. It should be said that high-end EV startups Tesla and Fisker have also had significant recent stumbles, technology-wise. They will need to overcome these, maybe even overcompensate for them, in order to regain credibility.

“If GM, the biggest carmaker in the world, has problems, it’s going to be hard to trust a small carmaker”, says Omotoso.

Volt’s prognosis
GM has put $40 million toward the energy efficiency improvements in its Chevy Cruze, which gets 42 miles per gallon on the highway and costs around $17,000. By contrast, Chevy put around $1 billion in the Volt programme.

Yet consumers appear concerned about one issue alone: the Volt’s  $39,995 sticker price (before the up to $7500 federal tax credit). They are asking whether it is worth the bump in efficiency (60 mpg equivalent when gas is used, zero fuel within the electric motor’s 40-mile range). To date, the answer in the most part seems to be ‘no’. The Cruze was the best-selling compact car in the United States last year. More than 200,000 drove off the lot. Around 7,600 Volts were sold.

But Peterson says this comparison between the Cruze and the Volt, which he hears often, is wrong-headed. While the two cars have a common architecture and look, that’s where the similarities end.

The Volt offers a “much different” performance dynamic, he says. It also has “emotional attributes” that Cruze does not offer. “The displacement of petroleum, the cool factor, and a performance different – it’s quieter, with instance torque, versus the more traditional Cruze”, he states.

Peterson notes that a fifth of the trade-ins for the Volt are compact luxury cars, like the Audi A4, the Mercedes C Class. These cars cost “about the same” as the Volt, he points out

However, GM is taking the technology it developed for the Volt and expanding it into other vehicle lines, such as the Spark EV and the Malibu Eco. At this point, comparisons with the Cruze and other fuel-efficient cars will be more apt.

As for the Volt and its chances of gaining better traction, Peterson advises on taking the long view. “We believe our investment in EVs is a competitive advantage and one that will play out over time. Especially as fuel efficiency standards become more stringent. This is a long game that will be played over many innings”.

Meanwhile, Volt sales have been looking up, with February sales beating January, and with March tracking to be the best of the year.

Mary Catherine O’Connor (www.mcoconnor.com) is an independent journalist, covering transportation and other energy-related topics.

To comment on this article, please contact the editor at: oliver.balch@evupdate.com