DETROIT (WWJ/AP) – General Motors is offering big discounts to boost sales of the Chevrolet Volt, an electric car that struggled to attract buyers until its price began dropping early this year.
Discounts run as high as $10,000 per Volt, according to figures from TrueCar.com, an auto pricing website. They include low-interest financing and subsidized leases. Sales of the $40,000 car have quadrupled this year, and set a monthly record in August.
They show that Americans, who have been slow to embrace electric cars, are willing to buy them if prices are low enough.
Reports show that discounts on the Volt are three-four times the industry average.
GM executives have conceded from the start that they were losing money on the Volt, and that was before the big discounts.
Now the losses could be even higher. It costs $60,000 to $75,000 to build a Volt, including development, manufacturing and raw materials, estimates Sandy Munro, president of Munro & Associates, a Troy, Mich., a company that analyzes vehicle production expenses for automakers. Much of the cost comes from an expensive combination of two power systems – electric and gasoline.
With a sticker price of $40,000, minus the $10,000 the company pays in incentives, GM gets roughly $30,000 for every Volt. So it could be losing at least $30,000 per car.
“It certainly wasn’t a rousing success,” says Carter Driscoll, senior analyst for CapStone Investments who follows electric cars, discussing the Volt.
GM confirmed there are incentives on the Volt and that the company loses money on the car. But the automaker declined to give figures for the discounts or the losses. The figures exclude a federal tax credit that goes to buyers.
The automaker says Munro’s estimate is high because it doesn’t spread the Volt’s costs far enough into the future, when more Volts will be sold. Automakers typically spend $1 billion or more to develop a car, and sometimes don’t recoup the investment and start making money until late in its life. Also, Volt technology will be used in future cars and trucks, eventually leading to profits, the company says.
GM spokesman Jim Cain says most of the Volt discounts come in the form of lease deals, which account for about two-thirds of sales. In some markets, Volts can be leased for $249 per month with $2,400 down.
“We’re trying to create a market for a brand-new technology,” Cain says.
The Volt, a four-seat compact, was rolled out in a few states in December 2010 with a starting price of $41,000.
GM had high hopes. The car’s features stacked up well against the Nissan Leaf, a pure electric car that debuted about the same time and is the Volt’s closest competitor. The Volt goes about 35 miles on battery power, then a gasoline-powered generator can take over, giving it the same range as a car with a gasoline engine. And the battery can be recharged in 10 hours from a standard home electrical outlet for about $1.50.
But the timing of the launch was poor. The pricey car hit showrooms when many buyers were reeling from the bad economy and turned off by the government’s $50 billion bailout of GM.
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