September began with some positive news for General Motors - record monthly sales for the Chevy Volt. That feat was soon eclipsed by Reuters’ analysis that the automaker was losing a whopping US$50,000 on ever car sold, but that figure is under dispute by an industry insider.
GM sold some 2,700 Volts in August, setting a new high mark in sales. That success has been credited to promotional monthly lease deal and car pool access in California. The Volt beat out rival Nissan’s Leaf, which has seen its sales whither.
That’s good news for GM, but is still comparatively few units sold to its conventional gasoline powered vehicles. Monthly sales for the Chevy Cruze were 25,975 in August, and the Chevy Silverado, GM’s top selling model, ended the month at 38,295 sales.
Then there’s the question of profits - as in, are there any? Reuter’s reporters Bernie Woodall, Paul Lienert and Ben Klayman calculated that GM was taking a big loss on every Volt sold by comparing the selling price to its manufacturing cost.
The reporters based their figures on automotive analysts’ estimates that it costs $89,000 to produce a Volt, and did not factor in the wonders of Generally Accepted Accounting Practices.
GM veteran Bob Lutz took issue with Reuter’s $50,000 loss estimate in a guest article in Forbes, deeming the statement, “preposterous.” Lutz offered an accounting lesson in “fully accounted profit” — which is based on the units sold during the entire lifetime of a product — and broke down the Volt’s variable cost.
The Volt, Lutz estimated is, “either close to “variable break-even” or may be on the cusp of a positive gross margin.”
“Maybe the Volt, a first-generation technology masterpiece and the most-awarded car in automotive history, will never make a really decent profit…. But succeeding generations of the same technology will,” Lutz said.
It’s possible that the Volt could one day be a common sight in driveways and on the streets. One market research firm believes that over 130 million EVs will be sold in 2020 (including the two wheel variety), and aggressive new U.S. government fuel economy standards might make its platform the lynchpin of future GM models.
(Image credit: gas2.org)
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