Chevy Volt's Price Likely to Spur More Leases Than Purchases, Analysts Say
By Scott Doggett July 28, 2010
(Editor's note: An analyst quoted in this article compared the Chevrolet Volt's pre-incentive price of $41,000 to the post-incentive $49,000 price of the yet-to-be-built Tesla Model S. Before a $7,500 federal tax credit is applied, the Tesla, according to a previous announcement by company officials, will have a base price of $57,400, making the gap between the two cars slightly more than $16,000.)
By Danny King, Contributor
Don't bother calling Bob Barker, because as far as the Chevrolet Volt is concerned, the Price May Be Wrong.
That's the general consensus of automotive-industry analysts, who say General Motors may have ensured that the first batch of its extended-range plug-in electric vehicles will be predominantly leased, as opposed to purchased outright, because of a base, pre-incentives sticker price of $41,000 that may appear extravagant for a Chevrolet sedan, new technology or not.
With less than 40 percent of U.S. vehicles priced at more than $40,000, GM, which has invested about $750 million developing the Volt, may alienate potential buyers who see a car that looks somewhat like a Chevrolet Malibu within the price range of German sports sedans or GM's Cadillac luxury badge, albeit with a $7,500 federal tax credit that brings the base price of the car down to $33,500, said Edmunds.com industry analyst Jessica Caldwell.
"If GM had launched the Volt when they started teasing us years ago, it could have successfully commanded a hefty price tag," Caldwell said, noting that there now are a wider range of vehicles in the Volt's price range with improved powertrain technology and packaging. "Tesla's Model S will start at $8,000 more and is better targeted at people who can afford to pay $40,000-plus on a vehicle."
That sticker price may not be that relevant, though, because of the Volt's limited production for the first calendar year - 10,000 vehicles - and a lease price analysts say may be far more palatable to potential customers.
GM's cheapest lease plan, at $350 a month over three years, matches that of Nissan's all-electric Leaf, although the Volt's $2,500 initial payment is $500 more than the Leaf's.
That $500 difference is a relatively small price to pay for what's essentially Volt's on-board gas-fueled generator and accompanying far greater driving range. And it's a tiny price to pay compared to the cost of purchasing a Volt, especially considering that the extended-range plug-in hybrid costs about $8,200 more than the Leaf and Volt buyers won't be eligible for any of the thousands of dollars in rebates and tax incentives some states offer buyers of pure electric vehicles.
And with just 10,000 Volts being built through the end of next year, GM shouldn't have a problem moving the vehicles, whether they are leased or sold, according to Jim Hossack, analyst at Tustin, Calif.-based consulting firm AutoPacific.
"$350 is remarkably low," Hossack said of the monthly lease payment. "Sometimes, you want to lease new technology rather than buy it."
Both GM and Nissan are providing impressive battery warranties to address concerns prospective buyers may have regarding the models' pricey battery packs. GM earlier this month said it would include an eight-year or 100,000-mile warranty on the Volt's lithium-ion battery pack. Nissan this week said it would offer the same battery warranty for the Leaf.
As for comparing the Volt to the Leaf, GM executives have argued that there's no comparison because Volt's on-board engine, which will give the car more than three times the 100-mile single-charge range of the Leaf as well as the option of filling up, eliminates the so-called "range-anxiety" issues of the Leaf.
On the other hand, given the fuss GM executives have made about the Leaf's limited driving range between charges and the Volt's ability to go on "forever" - as long as there's gasoline for the on-board generator - the General hasn't been particularly generous with the lease-mileage restriction it's placed on the Volt. That restriction is 12,000 miles a year, or 32.8 miles a day, after which undisclosed excess-mileage fees will apply.
GM may feel it can charge the $8,200 premium over the Leaf because the generator will increase its residual value, said George Magliano, director of forecasting for North America at IHS Global Insight.
"They're two very different cars. You have to charge that thing (the Leaf) after 100 miles, so they're probably going to appeal to different types of customers," said Magliano, adding that GM is "trying to take advantage of a higher residual value. But at the end of the day, nobody knows if it's going to hold that residual value."
Either way, as production ramps up beyond its official batch, GM may be in a position to lower the price below $40,000 as the per-unit costs fall, and both Caldwell and Hossack say the automaker may need to do just that.
"If the $7,500 tax credit remains in place, they may be able to hold the price," Hossack said. "But I suspect they'll have to cut the price with time."
LEAVE A COMMENT
The Volt remains a cramped 4-seater, with the intrusion of the batteries into the passenger space especially in the rear seats notable.
The notion that a very complex hybrid is likely to retain it's value better than a simple EV is also fanciful.
A hundred years of experience has shown that pure EVs have very low maintenance costs, with half the parts such as a transmission not even in the Leaf.
No doubt GM will sell, or much more probably lease, the unambitious 10,000 they intend to build in the first year, but there are far better plug-in hybrids coming.
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