Can the Chevy Volt Recharge GM?

Last Updated Jan 27, 2010 1:43 PM EST

GM is publicly confident that its $1 billion investment in the Volt will pay off. The automotive press, though, is not so sure.

Alex Taylor, Fortune magazine's longtime car
writer, href="">calls
the Volt "misguided, even foolhardy." He questions
whether it gives enough value, in either environmental or performance terms, to
make it a strong alternative to the Prius or other hybrids. Those cars may not
be as interesting technologically, but they also cost a lot less than the Volt
will. And GM will not have the electric field for itself for long: Nissan has
announced that its own electric car, href="">the Leaf,
will also go on the market next year.

Yet some are more optimistic: "So far," says
Rick Newman of href="">U.S.
News and World Report
, "the Volt is standing up to scrutiny."
An analyst at href="">Car
and Driver
liked driving an early, electric-only version. The general
view might be described as intrigued but skeptical. For GM's part,
says Jon Lauckner, who as vice president of global product planning has overseen the development of the Volt, the company is
totally committed: "We are prepared to go the distance with this

Richard Piellisch, editor and publisher of the San
Francisco-based Fleets and Fuels newsletter, has been following the car industry's efforts to
replace the internal combustion engine for years. Here is what he thinks of the

Is the Chevy Volt any good?

It looks very good. A large team of experienced people is
taking its time to make this happen — a car that you rarely, and
maybe never, have to buy gasoline for. Yet the Volt looks and has the size of a
nice modern car.

Historically, a lot of start-ups, going back to DeLorean in
the early 1970s, have failed. It takes a car company to design a new kind of car. The Volt, with two propulsion systems and the battery being the more important one, really is a new kind of car.

Outside estimates are that the first-generation Volt will cost about
$40,000. Is that too high?

That is the $64,000 question.

But if the Volt does come in it at something like $40,000,
it is going to hurt. Even with current tax incentives, the price won’t
come below $30,000; whereas if you went for a conventional gasoline-powered
car, you could spend about $20,000 for similar performance and styling. Why
spend so much more unless you are trying to make some kind of statement?

In San Francisco, where there are a lot of doctors and
lawyers and green-oriented people with money, it may do well. But I don’t
think there are enough of those people around to make it a commercial success
at such a high price. And remember, too, these kinds of people have not been
buying GM cars for a while. A $40,000 Chevy — that is a difficult
stigma to overcome.

GM uses the term “paradigm shift” to describe the Volt. Is it?

Yes, I think it is. Drive a car into garage and plug it in,
that’s a big difference. If you drive less than 40 miles a day, you
could conceivably never buy gasoline.

I do think GM is committed to this, but I am also reminded
that not so long ago, it was very bullish on hydrogen. In the late ’90s
and early 2000s, hydrogen was the clean fuel du jour. Now no one at GM talks
about it. That said, I think battery-driven vehicles are more likely to succeed
than hydrogen. You don’t need a lot of new infrastructure for
something like the Volt: There are electrical outlets in every garage. That’s
a lot different from having to develop a “hydrogen economy.”

Is GM haunted by its history with the hybrids?

Absolutely. All the American automakers missed the boat on
hybrids. They could have done it before Honda and Toyota but decided not to.
During the Clinton era, the Big Three took federal money to develop hybrid
prototypes — the href="">Partnership
for a New Generation of Vehicles. While some of those vehicles made it to
auto shows, none made it to showrooms.

How important is the Volt to GM?

It’s important, but let’s keep it in
context. For one thing, GM is going to eat some losses before the Volt becomes
profitable; and it seems willing to do that. Remember, too, even if the Volt is
very successful, it will not be more than 5 percent to 10 percent of GM’s
bottom line for years. If you think of six million unit sales a year as a
conservative baseline (GM sold 8.3 million vehicles in 2008), 5 percent would mean selling 300,000
Volts—and that is certainly a long way off. For the first generation
Volt, GM is estimating production of 60,000. U.S. consumers bought a total of
314,000 hybrids in 2008, for a 2.4 percent market share.

But if the Volt works, it will change the perception of GM
as an innovative company. And if the Volt really does prove to be a paradigm
shift, GM could find itself in the driver’s seat. Twenty years down
the road, every vehicle is going to be some kind of hybrid. And if oil prices
rise, that could happen faster.

That’s a lot of “ifs” —
and every “if” is a big one.

The Volt sales projections in this article have been updated since their original publication.

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