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What’s ailing the Chevy Volt?

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On Friday, GM announced it was halting production of the Chevrolet Volt until April, so as to maintain “proper inventory levels.” Sales of the electric vehicle have been disappointing, with the company missing its target of 10,000 Volts sold last year. Why hasn’t the car caught on?


Not buying it.

GM executives have said the recent frenzy over a Volt battery fire in crash tests has hurt sales. On the merits, the fires weren’t a huge concern — the Volts only caught fire days or weeks after extreme lab testing, and according to a government investigation they’re no more likely to catch fire than gas-powered automobiles. Still, panicky headlines ensued. Conservatives started denouncing the company (Rush Limbaugh called GM “a corporation that’s trying to kill its customers”). And GM needed to retrofit new vehicles. Add that up, and GM sold only 603 Volts in January, down from 1,520 in December.

But the scare over batteries is only a partial explanation. After all, Volt sales rebounded in February to 1,023 vehicles sold, and it looks like the fire scare is slowly subsiding. But neither the pre-panic nor post-panic numbers were anywhere near the rate needed to meet GM’s goal of 45,000 Volt deliveries this year.

A more likely explanation is that the Volt is just far too expensive for many customers. The car gets about 94 miles per gallon, according to the EPA, but it starts at $39,195, and only upper-income buyers with a big tax bill can qualify for the $7,500 federal tax credit. As auto blogger Jonathan Welsh writes, “Even if you never used gasoline in the Volt, you’d wait about 12 years before you saved enough on gas to make up for the Volt’s price premium.” (The Volt has a gas engine that kicks in when the battery runs out.)

Indeed, plenty of analysts have pointed out that the Volt is essentially a hybrid version of the Chevy Cruze, a compact car that gets around 40 miles per gallon but costs just half as much. And sales of the Cruze have been booming. Fuel-efficient cars are doing well in this age of high pump prices. It’s just that, when consumers do the math on how much they’re likely to save on gasoline, the Volt doesn’t seem to add up. (Granted, this calculus depends on quite a few variables. If, say, gas started climbing above $4 per gallon and a person drives 15,000 to 20,000 miles per year, suddenly the Volt would look like a better deal in comparison.)

Now, there are a few reasons why the car could rebound in 2012. For one, there’s California. GM recently announced that Volts built later in the year will have emissions low enough to qualify for California’s HOV lanes, which could make the car more attractive. Volt buyers in California already qualify for an additional $1,500 tax credit.

All told, though, electric vehicle sales remain fairly unimpressive. The Nissan Leaf, a slightly cheaper all-electric competitor to the Volt, sold just 9,674 units last year — more than the Volt’s 7,671 sales, but about half of what the company expected. Still, Nissan has just started selling Leafs all around the country, and other cars like the 2012 Toyota Prius Plug-In Hybrid are soon hitting the market.

And history suggests that weak sales early on aren’t always a sign that a car is doomed. At the Rocky Mountain Institute, Randy Essex and Ben Holland point out that when gas-electric hybrids first rolled out in 2000, the Honda Insight and Toyota Prius had sales of just 9,350. Those figures looked anemic at the time, too. But in the ensuing years, the technology caught on and more than 2 million hybrids have been sold in the United States. If that’s any prologue, the future might not look so bleak for the electric car.

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