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The recent decision by General Motors to temporarily suspend production of the battery-powered Chevy Volt is just the latest chapter in the ongoing saga of a government-backed vehicle plagued by consumer disinterest, safety concerns, taxpayer abuse, and crony capitalism.
GM cited anemic sales figures as the basis for its decision to halt production of the Chevy Volt, a “range-extended” electric car that can go 35 miles on a fully charged lithium-ion battery before a small gasoline engine generates power for further driving when the battery runs low.
GM had planned to produce 60,000 Chevy Volts in 2012 — including 45,000 for the US market — but reportedly only sold 676 Volts in January and1,023 in February, leaving the company with an inventory stock of 3,596 vehicles, enough to last through the spring without building another unit.
As such, GM announced that beginning March 19 it will temporarily lay off 1,300 workers for five weeks so that the car company can “maintain proper inventory and make sure that we continue to meet market demand.” To achieve that goal, GM has decided to use the intervening weeks in production delay to launch a new national ad campaign to boost the Volt’s consumer appeal.
However, it remains to be seen how effective that ad campaign will be given that market demand for the Volt has been tepid at best since GM introduced the vehicle into the US market in January 2011 as its answer to Toyota’s popular Prius hybrid and Nissan’s all-electric Leaf.
Yet, despite spending billions of taxpayer dollars developing, promoting and subsidizing the Chevy Volt — GM sold only about 7,700 Volts in 2011 after targeting sales of 10,000 vehicles.
For its part, GM has blamed the Volt’s lackluster sales on negative publicity surrounding the car being the subject of an investigation in 2011 by the National Highway Traffic Safety Administration over fires occurring in Volts during crash testing, including one vehicle that caught fire and three others whose battery packs sparked or caught fire.
It should be noted that the federal government gave a $105 million grant to GM to help it produce those battery packs as well as a $151 million grant to LG Chem to produce the Volt’s battery cells.
While federal officials eventually cleared the Volt of any safety risk, GM Chairman and CEO Dan Akerson testified at a congressional hearing in January 2012 that the Volt had become “a political punching bag,” and as a result, had suffered “collateral damage.”
Of course, to be fair, consumer decisions about the Volt have been driven as much by price as by fears that their car may spontaneously burst into flames.
For example, while the Chevy Volt retails at around $40,000 before a government tax credit of $7,500 is applied, it still sells several thousands dollars higher than its hybrid and all-electric competitors. As one auto industry analyst said of the Volt’s sticker price, “You’re in BMW 3-series territory. For a Chevy customer, this is really new territory.”
Another economist, noting the $16,700 price for a fuel-efficient, gas-powered Chevy Cruze Eco, said, “The price premium on the Volt just doesn’t make economic sense for the average consumer when there are so many fuel-efficient gasoline-powered cars available.”
The “price premium” certainly doesn’t make economic sense for taxpayers as government “investment” in the Volt has, according to The Mackinac Center for Public Policy, made each Volt cost $250,000 for every one that’s being sold.
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