Why the Chevy Volt Slowdown is a Good Thing for Plug-ins

By · March 04, 2012

Chevy Volt

The five-week shutdown of the Volt production line is a good thing for plug-in vehicles because it will help align production with demand and keep GM's revenue on the vehicles higher and fund ongoing vehicle development.

So General Motors announced that it is taking a five-week hiatus in the production of its flagship greenmobile, the Chevy Volt, even though it had a solid sales month in February and the company is embarking on new promotional campaigns for its flagship plug-in vehicle. I for one am glad they made the tough choice to stop production.

I do feel sorry for the 1,300 UAW workers who will be off work (well, not too sorry since they stand to collect a good portion of their salary while off due to their union contracts). I am more sorry demand is not strong enough to justify continued high-volume production.

But, I'll say it again. It's a good thing and a smart decision on GM's part. And other than the aforementioned impact on workers and the negative publicity, it's a good thing for the plug-in vehicle industry.

Here's my rationale. The Volt is a great car. My extensive test drives have proved to me that its technology did everything it was advertised to do. But it's an expensive car. GM could have put a Cadillac label on it and no one would have squawked – and its $41,000 price tag might have made more sense (even though federal and state incentives can knock that down quite a bit) . As a compact Chevy (particularly sitting on the lot with a similar-size Cruze going for half the price), the high price and its new technology have found buyers, but mainly among the techy, wealthy early adopters. Those who've bought the vehicle, including neighbors I've talked to and owners I've met at a Bay Area EV Meet-Up last year, love the car. My neighbor trekked more than 400 miles south to be the first on his block to get a Volt. I doubt he will be the last.

While its price is high, the Volt delivers the goods. It has a solid feel and quality features throughout. It's on road performance is pure EV for 40 miles and great hybrid for the rest of the tank. The interior echoes the high-tech underpinnings of the car.

To rationalize that $40K price (or $350/month lease), GM has to match supply with demand. Otherwise it will be forced to add incentives to move the iron in the same way it does when it has slow-selling pickups, SUVs and sedans. The result would be to devalue the perceived value of the vehicle and add to the losses that GM is sustaining with each sale (by their own admission). The first two months of 2012 Volt sales were disappointing – 676 in January and 1,023 in February for a 850/month average. That's better than last year's average, which included a production shut-down for model change-over. But it's a pace that will be painted as a failure by many because of high-volume projections by GM (and repeated by our federal government, GM's shareholder). To compound that "failure" by having declining retail prices and "fire sales" to move excess iron would be to seriously tarnish the image of GM's plug-in car (and by extension this just re-born industry).

Everyone who wants a Volt (or any other plug-in car) should be able to get one. This is not about limiting production in spite of demand. This is about following the market. Yes, Volt prices are high, as is almost always true with the first generation of new technology. Prices will come down as volumes rise, though that rise may not come until the next generation of the car when GM is able to lower its internal costs. Look at what happened with the Prius. You could argue it took three generations (after the first Japanese mode and first U.S. model) until the 2004 model broke through and achieved serious market presence

I applaud GM's decision and hope it will be a short-lived hiccup in the company's foray into a new segment.

New to EVs? Start here

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