Reuters Uses Fuzzy Math to Report on Chevy Volt Profitability

By · September 10, 2012

Einstein's Volt Calculation

Reuters reported today that General Motors loses “as much as $49,000” for every Chevy Volt that it builds. According to four industry experts contacted by Reuters, the range of per-unit costs falls between $76,000 to $88,000—with another analyst saying that it costs GM “at least” $75,000, if you include development expenses. Fuzzy green car math hasn’t been employed with this level of obfuscation since 2006, when CNW Marketing said that a Hummer was greener than a Toyota Prius.

Let’s rewind to 2007. Moments before GM unveiled the concept version of the Chevy Volt at the 2007 Detroit auto show, I asked GM product chief Bob Lutz how long it would take before the Volt would be profitable. “About as long as it took Toyota to make money with the Prius,” he told me. It took Toyota about a decade to make money on the Prius. Now, 15 years since the Prius’s debut in Japan in 1997, the hybrid has become its own successful line of profitable models. For at least four or five years after its introduction, the Prius was ridiculed as a costly science experiment that would never make money.

Reuters and the analysts it consulted are ready to declare the Volt a financial loser—not quite two years after the introduction of the Volt.

Adventures in Neverland

Dennis Virag, president of the Michigan-based Automotive Consulting Group, told Reuters that the Volt is “over-engineered and over-priced." Sandy Munro, president of Michigan-based Munro & Associates, said, "I don't see how General Motors will ever get its money back on that vehicle." Munro, the analyst who said the Volt’s $75,000 cost “includes development,” borrows a move from CNW’s playbook by including broad-based sunk development costs into the per-unit price. In determining the energy costs of the Prius versus the Hummer, CNW included 4,000 data points, for items such as energy used to transport Japanese workers from their homes to auto plants.

Reuters point to “weak sales” as “forcing GM” to idle Volt production this month—but fails to mention the company’s need to retool for production of the Chevrolet Impala, which shares its assembly line with the Volt. After a year of media reports indicating that low Volt sales are a sign of failure, Reuters casts August’s record high number of Volt sales—not as an indication of improved traction in the marketplace—but as a bad thing for the automaker’s bottom line.

It’s not until paragraphs 21 and 22 that readers learn two key facts:

“Spread out over the 21,500 Volts that GM has sold since the car's introduction in December 2010, the development and tooling costs average just under $56,000 per car. That figure will, of course, come down as more Volts are sold.

“The actual cost to build the Volt is estimated to be an additional $20,000 to $32,000 per vehicle, according to Munro and the other industry consultants.”

Reuters manages to quote Doug Parks, GM's vice president of global product programs and the former Volt development chief. "It's true, we're not making money yet," he said, regarding Volt. But Parks added that the car “eventually" will make money. "As the volume comes up and we get into the Gen 2 car," he said, "we're going to turn (the losses) around."

It's well understood in the auto industry that when a car company develops a new model, it needs to recoup research and development costs over a period of years.

Of course, all of this takes a careful reading and a lot of attention to sort out. For more casual readers, the message is clear: the Chevy Volt is way too expensive. The article also casts doubt on the Nissan LEAF and Mitsubishi i, as well. Based on the Reuters story about Volt costs, it seems like it will take at least a few more years before electric cars cease to be a political football, with opportunistic reporters piling on.

Comments

· · 1 year ago

This car is more complicated and costly then a hydrogen fuelcell prototype of the same size.

· · 1 year ago

Are you sure about that gorr?

I highly doubt that an experimental hydrogen fuelcell is less complicated than an electrical motor with a gas generator.

Good luck with finding a place to fill up your hydrogen car.

· Spec (not verified) · 1 year ago

It is pretty sad. Our media is more about controversy than facts. Deep into the article, they admit the number is pretty bogus since it is based on only currently sold Volts, the Cruze actually has Volt technology in it, they are developing a Caddy with a Voltec drivetrain, etc. But the headline allows the rabid right-wing crowd to hear what they want to hear and froth at the mouth.

@dutchinchicago, Gorr is a well-known EV messageboard troll that lives on fuel cell dreams. It is obvious to anyone with a brain that if hydrogen fuel cell car was cheaper than the Volt then the automakers would be build them and selling them today. But no, fuel cells cost more. They are much cheaper than a few years back but they are not cheap enough yet and certainly cost more than PHEVs.

· Frank the Volt Owner (not verified) · 1 year ago

All of this negative reporting is just political b.s! This is just being done to drive up the 'click counters' on websites because it enrages both sides, lovers and haters. Most people who hate on the car have never even been in one or driven one. I own a Dodge diesel truck and a Volt, for what it costs to fill up my dodge ~100.00 I have driven my Volt 6000 miles! Just like the prius, one day the Volt will be seen as what it is, a brilliant solution. Hopefully after the election is over all of this political b.s. will stop...

· PAT (not verified) · 1 year ago

Lies, bs stories and hypocracy is the hallmark of rightwing propaganda. Just listen to Fox for a minute and the bs comes out. No facts just made up stories. When they are challenged in fcats they claim that they are an entertainment business so are entitled to lie. Oh well...
Just drive the Volt and one sees the good balance, drive power, silence inside and many other plus factors than driving a ICE car.

· · 1 year ago

I’m supprised they didn’t point out that the Model S is losing $8-10 million per vehicle (but that number will come down as they sell more).

· · 1 year ago

And to top it off, Spec, gorr usually has nice words to say about the Volt. whenever it's compared to pure EVs. So, yeah, I guess it's par for the course for gorr to be, well, not par for the course.

And, yes, this begs the bigger question: if fuel cell cars were really viable today, someone would at least be building one (or more precisely, converting a conventional drive train car) to run on hydrogen.

There are thousands of such example of battery EVs done this way - and some of them are very impressively done in regards to both performance and finish detail. On the budget end of the spectrum, one could find a used GEO Metro (which happens to be what gorr owns in the real world) in fairly good shape for a couple thousand dollar and competently convert it into an EV, with DC motor and lead acid batteries - and cherry picking some clean used components - for just a few thousand dollars . . .

http://www.evalbum.com/1595

If you're willing to get into the $15 to $17 range, you could utilize an AC motor. with everything purchased new. Add a few thousand to this, if you want to go with lithium cells . . .

http://www.evalbum.com/2030

At around the upper end of this GEO Metro conversion price point, with lithium calls and an AC motor, you begin to cross over into what it would cost to simply buy a factory new entry level EV (Mitsubishi i, Nissan Leaf, etc.) and you then have to weigh that option carefully.

But, if you're really committed to own a totally unique custom car that happens to be electric powered, the sky is the financial limit. I didn't notice a price on this beautiful fiberglass replica Porsche 550 with AC motor, lithium cells and a 100 mile range, but I'm going to guess around $40 thousand dollars . . .

http://www.evalbum.com/3660

I did actually find some recent (vintage 2010) online information regarding conversions of conventional (ICE) cars to hydrogen. One will note (gorr, are you reading this?) the ENTRY level is somewhere between $30 to $60 thousand dollars! . . .

http://www.greencarreports.com/news/1078004_electric-car-industry-sums-u...

So, gorr, if have about TEN TIMES the amount of money (!) it would take to convert your GEO into an entry level EV, you could probably do an entry level hydrogen retrofit on that same car.

But, then, as Dutch mentioned, you'd still be searching for a hydrogen filling station, unless you've got another spare $30 thousand dollar kicking around to buy one of those nifty PV panel electrolysis rigs.

· · 1 year ago

Thanks, Brad, for reminding us of that famous Hummer is cheaper (and has less environmental impact) than Prius episode!
Meanwhile, on this one, Bob Lutz, who knows what he's talking about, dispenses with this nonsense at Forbes: http://www.forbes.com/sites/boblutz/2012/09/10/the-real-story-on-gms-vol...

· · 1 year ago

Regarding the topic of this story: fuzzy math on actual cost of a Volt. Yes, it was something probably bought and paid for by a Koch-funded superpac.

· · 1 year ago

Well, you know, when you count the entire automobile R&D development budget starting from Rudolph Diesel's first prototype until today, against the cost of the Honda Fit, you can clearly see why Japan's economy is struggling. They're losing $17,119,932 per vehicle sold!

· Anonymous (not verified) · 1 year ago

All you libs just keep listening to ABC, NBC, and CBS you will get the truth there alright.
Reuters is about as liberal as you can get. All I ever here from you libs is how bad Fox is. Fox is not even consertive anymore. But they are slightly more trustworthy than the mainstream / lamestream media.

The truth hurts huh.

Jeff

· eyedrmike (not verified) · 1 year ago

Jeff, regarding Reuters political leaning:

Reuters is in bed with the Saudi government, so they have a vested interest in fighting anything that may threaten our dependence on Middle Eastern oil.
http://thomsonreuters.com/content/press_room/science/657646

OH! and the word is "hear", not "here", and Fox is NEVER reliable as has been proven over and over by many fact checking organizations (I know, don't burden you with facts, you just keep on spewing organic animal waste fertilizer)

· smithjim1961 (not verified) · 1 year ago

"The real story on GM's Volt costs" from Forbes, http://www.forbes.com/sites/boblutz/2012/09/10/the-real-story-on-gms-vol...

· · 1 year ago

. . . and, Jeff, Fox never has been "consertive," but they most certainly are "conservative." Interestingly, most of here are "concerted" in our disagreement regarding your opinions of news gathering agencies.

Sorry . . . I misspell words or bungle sentence structure on my posts often enough here but, when you're on the defensive, it's always a good idea at least let the computer do at bit of the spell checking for you. When it comes time to extract the foot from ones mouth, it's a relief to be wearing freshly laundered socks on those occasions.

Yeah, that Bob Lutz interview puts it to rest for me. I can smell the cigar smoke from here. An absolutely perfect retort.

· Anonymous (not verified) · 1 year ago

The reuters "journalist" must be on Team Romney's math squad...they forget to include all those Amperas built in Germany as well, but hey, thats in Deutschmarks, not dollars, right ?

· · 1 year ago

The same fuzzy math says elsewhere that Tesla will be profitable next year, but it's quite true there are very few product lines in the auto industry that are really profitable. The VW Golf, the Toyota Camry, the Ford F-series, those are the cash-cows of the industry. With products which production lifetime is more than 5 years, you can't say anything about profitability when the product is less than 2 years on the market.

· · 1 year ago

Note from Bob Lutz words: "A Li-Ion battery today runs about $350 per KWh."
That's less than last year.

· M Lucas (not verified) · 1 year ago

Enough of the numbers and what these cars costs to build. We don't have a choice anymore, driving an EV is becoming a moral imperative. Glad to see GM is finally doing the right thing and taking the hit for delivering this car to the masses. If anyone would take the time to learn about the amount of suffering in a gallon of gas they would consider an EV for their next car purchase unless they were a heartless-souless person. If we think the Gulf oil spill was bad try living with it everyday like in Nigeria where the water is too polluted for the common person to fish for their dinner anymore and the elite soak up the oil profits leaving nothing for everyone else. Watch a docu-drama called 'The Age of Stupid' for a quick understanding of what it takes to make a gallon of gas and the cost of burning it in our cars.

· · 1 year ago

Wow, we got some ringers in this short thread already, don't we??

This math is identical to what GM trotted out regarding the EV1's demise. It is interesting seeing it turned 180 degrees. GM reported that it cost them $100M to develop the EV1, and since they only made 1000 cars, then obviously, the cars cost $100k each! That's just not sustainable, so the program needed to be killed. Forget that they are the ones who controlled the number produced (which was closer to 2,000) and that so much of that technology is used across their lines now. Nope... all pinned on 1,000 cars. This was GMs main excuse to stop the program back in the day. And now look what we have here. The same dumb math being used against them.

I'm not implying that this math SHOULD ever be used. I just find it comical how it has bitten them in the butt. And how Lutz is just all up in arms about how anybody could be so thick.

· Anonymous (not verified) · 1 year ago

And most sadly of all, all the other "news" outlets will repeat it as gospel
so much for fact checks.

· · 1 year ago

Just as they did when GM *wanted* them to with the EV1... :sigh:

· · 1 year ago

I have a question and I couldn't find the answer to it on Google.

Why did it take Toyota that long to make the Prius profitable? Why does it take long in the first place? What factors go into a car that make it profitable? It just sounds like having a car company is such a nagging pain. The company itself will not be profitable in the short run. Just trying to see why that is.

Thanks guys.

· · 1 year ago

The other ironic twist is how much Reuters spent to research and write this article versus how much they'll get back in ad revenue. My guess is that unlike the Volt, people won't be clicking the banner ads on this one in two years. ;)

· · 1 year ago

@MFong

Very Simplified example to show why it takes so long to make a new-tech car profitable:
-It costs $100 million for Research
-It costs the company $35,000 in parts and labor to make the car
-Car sells for $37,500 (ignoring middle men and such)
- $2,500 profit per car --- fuzzy logic would say after 100 cars are made, each car cost $1 million to make ($100 million / 100 cars)

To break even - time to pay of the research costs - the company would have to sell 40,000 cars.

This, again, is very simplified. The count of cars is much higher due to modifications for each vehicle year, further research, etc.

· Bill Howland, (not verified) · 1 year ago

Yes the Volt may be overly complicated, but at this late in the game it doesn't matter much. (See Bob Lutz's Video re: breakdown of cost).

As complicated as the volt is, it does work, and there have been few complaints of any serious problems. As Danny DeVito says, " Its the most solid Chevy I've owned".

If GM churns out a few hundred thousand of these things they will be making plenty of cash even if they lower the price. And think of all the petroleum saved seeing as the typical volt owner uses by far electricity as their primary transportation mode.

As usual the LameStreamMedia doesnt know what they are talking about.

· Bill Howland, (not verified) · 1 year ago

@Gorr

Sorry man, Fukushima Daiichi meltdowns killed your vision of cheap hydrogen from Gen 3+ Nuclear Plants. We've already gone from 20 new nukes to just 4, and even Mr. Nuclear himself Jeffrey Immult (GE CEO and USA's economic advisor), admitted Nuclear is just too expensive compared to competitive sources.

When it becomes generally known how dangerous Nuclear really has been, and is likely to be in the future (look at all those worn out hulks running in Ohio). Germany is totally getting rid of all their Nuclear Plants albeit that the industry is footdragging.

I just don't see it making any economic sense, and more importantly, where is the incentive for an American to drive a hydrogen car? My Electric only is only 1/3 the operating cost where I live with high cost electricity. Some areas of the country only pay 1/5th the cost. Hydrogen is tripple the cost of gas currently With few Nukes in the future to make cheap H2 for you, what then is going to convince John Q. Public to purchase it? EV's at least are being voluntarily bought.

· EVlvr (not verified) · 1 year ago

Darrelldd, the EV1 was most likely going nowhere beyond the initial lessors back then just as the Leaf right now is finding few buyers beyond the loyalist early adopters. On the other hand, the Volt has mainstream appeal. Pulling the plug on the EV1 and not on the Volt is easy to understand if you put a cap on your emotions for the EV1, and accept the impurity of the Volt.

· · 1 year ago

I understand the situation just fine, EVlvr. I'm not sure why you think your crystal ball is any more accurate than anybody else's (guessing that the EV1 likely was going nowhere) but I'm happy to listen to your opinion.

What you seem to be implying is that it is OK for GM to have lied about finances because the EV1 (and I guess the Leaf ??) sucked.. I'm not on-board with that sentiment... assuming I'm reading you correctly here.

· Modern Marvel Fan (not verified) · 1 year ago

@darelldd,

First of all, EV1 was a leasing program. GM didn't see the wide appeal of EVs due to lack of "public EV infrasture". Sure, it was a GM's mistake for NOT sticking with it like Toyota did it with Prius. But math was simple. GM lost a lot of money on EV1 while its SUV/Truck division was basically printing money. It was for "profit".

Now. Volt is a new breed. GM turned around and realize that there is future for this car. So, it decided to commit to the program and try to make it cheaper (EV1 was designed from ground up as EV. Volt shared many existing platform parts to be cheaper to make). So, why are you complaining about GM's 180 turn around for "something good" for the EV community. Volt is a bridge technology before all the public EV charging facilities are in place. There is nothing wrong with the technology or the idea. For people who have "range anxiety" fears, it is a perfect solution for them to try it out without worrying about EV ranges. Sure, they don't use much gas in their Volt. But that is the point. Soon or later they will become fully aware and understand how to use their EV properly.

Personally, I think your attack on the Volt or GM program is more based on your hate toward GM's EV-1 program. Maybe it is time to grow out of it and fully embrace what Volt is gonig to do to the EV community. it is actually going to bring more people to the EV topic as a whole than a pure EV will ever do.

Also, just so you know, currently beside Tesla, there are no 150 miles + EV for sale. In my Volt with 5,000 miles only 28 gallon has been burned. In those "gas" trips, NO EV can meet my range requirement of 160 miles beside Tesla. And I am NOT going to get a second car just so I can cover those trips...

· · 1 year ago

MMF -

Thanks for the education on what the whole EV1 program was about, and why it was terminated! I also like the bit about how I'm attacking the Volt because of my hate toward the EV1 program. Nice thought!... but no.

You paint with a broad, inaccurate brush. You are reading into what I'm saying, and not reading the words I wrote, nor their intended meaning. GM lied in order to facilitate what they wanted to do - stop the EV1 program. Now the Press is using the same crazy math against GM, and GM is crying foul. I've not said that there is anything wrong with the Volt technology nor the idea. I have not complained about GM's turnaround to make something good. I'm only complaining about how they lied to get their way, and are now complaining when the *same* inaccurate math is working against them. Where did I lose you?

Thanks for the education on what the whole EV1 program was about, and why it was terminated!

I'd love to say more, but I actually have to do something productive.

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