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Rumors of the Chevy Volt's and Nissan Leaf's Demise Have Been, Ahem, Exaggerated

Both the Chevy Volt and the Nissan Leaf have been in the market for less than six months, but some members of the blogosphere are already writing their obituaries. Autoblog Green's Sebastian Blanco, for instance, posted a short but pointed item noting declining February sales for both cars.

The real kick in the tuckas, though, was offered by econoblogger and notorious auto know-nothing Megan McArdle of the Atlantic, who compared the Volt and the Leaf to... wait for it... the Edsel!

Here's a taste:

[D]id two major auto manufacturers dump huge sums of money into a technology that is struggling to get its sales volumes into the four figures?

It certainly wouldn't be the first time that companies have made this sort of colossal misjudgment. It wouldn't even be the first time an auto company has done so. (Remember the Edsel)? March and April sales volumes should be telling: gas prices are high, and the Leaf is supposed to hit 4,000 production units this month. If volumes remain low, we may be looking at green elephants.

Looking at numbers, missing the market
For the record, these are the February numbers for both rides. Leaf, 67; Volt, 281. Yes, those are down slightly from January. Yes, you could look at those numbers and come to the same conclusion as McArdle. But then you would be perpetuating her proud tradition of opining on the auto business without even a basic understanding of how the market actually works.
Currently, the Leaf and Volt are being sold in limited markets. Here's some useful point-of-view on how the two vehicles are currently being distributed. Importantly, some Volts aren't even being offered for sale -- they're instead functioning as test-drive models, or "halo" vehicles intended to attract customers to Chevy dealerships. And as far as production goes, pretty much every car that rolls off the assembly lines has already been claimed by an owner.

Ignorance is the soul of witlessness
McArdle doesn't seem to know this (nor does she seem to know that the CEO of Renault-Nissan is Carlos Ghosn, not Charles), which makes me think she's appalled by the idea that two major carmakers would invest heavily in innovation and then -- horrors! -- phase in their market introduction to ensure there aren't any significant real-world problems. "Colossal misjudgment?" Sounds more like quality control to me.

It will be another few months before currently allotted Leaf and Volt production comes fully online, by which point both vehicles may individually surpass the early numbers logged by the Toyota (TM) Prius in its first six months in the U.S. market back in 2001: just shy of 6,000 cars sold. Of course, gas was much cheaper in those days, so Prius sales were largely being propelled by environmentally conscious early adopters, not by folks hoping to save at the pump.

Losing money is actually OK
As for dumping "huge sums of money into a technology that is struggling to get its sales volumes into the four figures," the same charge could have been leveled at Toyota after the Prius debuted. That vehicle cost billions to develop and didn't really earn out until the 2008 gas crunch. Now look at it go.

The Volt and Leaf may experience the same market dynamic (although I suspect rising gas prices will juke their popularity). What's more important is both cars define their niche. Volt, with its range-extending technology, is the clear transition from hybrids to longer-range all-electric cars. Leaf is the first mass-market EV -- a Tesla (TSLA) Roadster for the rest of us.

So why all the bad vibes?

It's not hard to understand why libertarian-trending McArdle would be rooting for bailed-out General Motors (GM) to fail with the Volt -- or why she'd quote reliable GM critic Edward Niedermeyer of The Truth About Cars on why Chevy can't support Volt production goals. But what's her problem with the Leaf? Wasn't it Nissan, after all, that in 1981 pioneered using non-union labor to build cars in Tennessee, a right-to-work state?

As for the Edsel crack, it's always worth noting when this comparison comes up that Ford (F) didn't spend millions developing a radically advanced new car in the 1950s -- it spent millions trying to create a new car division so that it could do battle with GM. Bad car? Maybe. Bad corporate business decision? Definitely.


Photo: Matthew DeBord
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