Re: Sales of Chevy Volts triple in one year.
posted at 1/4/2013 4:46 PM EST
In response to ComingLiberalCrackup's comment:
"you would think the GOP would be happy to embrace an innovative, American-made technology that helps reduce our dependence high priced gas and foreign oil." The moral of the Volt: Liberal lunkheads could care less if it cost taxpayers S10 million per vehicle...it is a 'feelgood story', dammit! There is no such thing as a failure; your God of Government never fails, it just subsidizes more and more down the rathole .... No one in their right mind would pay 50K for this turkey, even with the massive $7500 rebate subsidy... The actual cost to GM is estimated at 90K per vehicle!
Another example of the business ignorance of the wingnuts.
They'll spout any such nonsense a long as it appears to agree with their partisan politics, regardless of it's veracity.
Bob Lutz on the real cost to make the Chevy Volt, Reuters article "preposterous"
The Reuters report cited "independent analysts" who claim the R&D cost GM spent to develop the Volt added up to the $1-1.2 billion range. Dividing that amount by the 21,500 Volt's sold so far means $56,000 per Volt was spent in R&D costs. Further, other analysts have estimated the cost of materials to build the Volt is in the $20-32,000 range making for a total cost of $89,000. Because the Volt's MSRP is just shy of $40,000, this line of reasoning says GM is eating at least $49,000 of loss for each Volt that is sold.
This line of reasoning must appear logical to some, considering the number of articles and blog posts repeating these numbers verbatim. However a moments of thought and one realizes this line of reasoning is, as Bob Lutz wrote, preposterous. It is the sort of flawed reasoning that led to the "report" last winter claiming the Government had subsidized GM to the tune of $250,000 per Volt. Both claims contain the same kind of flaw.
Namely, it is incorrect to amortize a fixed cost like R&D or building a factory over the first year of production. As Bob Lutz put it in his Forbes blog posting "That's like saying that a real estate company that puts up a $10 million building and has rental income of one million the first year is "losing" 9 million dollars, or several hundred thousand per renter."
Lutz then went on to explain the calculation a car company uses to determine the profitability of a given car program. To calculate the "gross margin" one subtracts from the "selling price" the "materials cost" and "labor cost". In other words the gross margin subtracts the actual cost of parts and labor out as the first order approximation of the profit. Additionally there are fixed costs such as advertising, general administration, research & development, and building factories. Fixed costs are amortized over the whole lifetime of the car program, and are not amortized over the first year of production.
The R&D dollars spent by GM to develop the Volt will obviously apply across all model years in which the Volt is sold. Additionally the technology developed for the Volt is going into other GM vehicles such as the Cadillac ELR and the Gen 2 Volt.
DETROIT - Reuters' estimate of the current loss per unit for each Volt sold is grossly wrong, in part because the reporters allocated product development costs across the number of Volts sold instead of allocating across the lifetime volume of the program, which is how business operates. The Reuters' numbers become more wrong with each Volt sold.
In addition, our core research into battery cells, battery packs, controls, electric motors, regenerative braking and other technologies has applications across multiple current and future products, which will help spread costs over a much higher volume, thereby reducing manufacturing and purchasing costs. This will eventually lead to profitability for the Volt and future electrified vehicles.