Human Events Blog

Voltonomics: Losing big money on every sale

Reuters offers a jaw-dropping look into the bizarre economics of the Chevy Volt, which is basically Obamanomics on wheels:

General Motors Co sold a record number of Chevrolet Volt sedans in August — but that probably isn’t a good thing for the automaker’s bottom line.

Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.

Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher. There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce.

So the low sales numbers of the Volt are actually saving both GM and taxpayers money in the short run.  The company loses $49,000 on each unit, and taxpayers prop up every sale with a $7500 tax credit (which Barack Obama wants to increase to $10,000 apiece.)  If enough people refuse to buy Volts, it would do more for deficit reduction than Obama’s silly Buffett Rule obsession.

But of course, that would leave us on the hook for a big chunk of the billion dollars sunk into development of the Volt – a deficit Volt defenders have always assured us would be erased someday through unit sales.  Obviously, that’s not going to happen with low sales and a hefty loss for every unit sold.

Hybrid cars like the Toyota Prius are eating the Volt’s battery-powered lunch, but Reuters notes the Prius cost a fortune to develop too, and took a decade to reach the point of profitability on each unit sold.  We’re nowhere near the point where a critical mass of consumers will conclude that the high sticker price and maintenance cost of such cars makes them a superior alternative to conventional, fuel-efficient engine technology.  But of course, the Obama Administration is working to address that problem as part of its “transforming America” agenda, what with rising gas prices, and the recent doubling of fuel efficiency requirements for automobiles over the coming decade.

Remember, both Obama and his Energy Secretary, Steven Chu, have wished for gas prices in the $6 to $8 per gallon range, precisely because it would force Americans to re-evaluate their energy consumption habits.  At 150 or 200 percent of today’s painful prices, the purchasing calculations of middle-class auto buyers will change dramatically.  There is little genuine demand for cars like the Volt – if it were sold for anything near its true unit price, there would be virtually zero demand.  But the power of the State will be used to create that demand, by socially engineering tomorrow’s consumers to desire what the consumers of 2012 disdain.

Meanwhile, we’ve got a billion dollars spent to develop an overpriced car that is nevertheless sold for about half of its true cost, along with a $7500 taxpayer subsidy, so that buyers with an average income of $170,000 per year can purchase an expensive toy with absurdly discounted leases, and give themselves a big hug for “going green.”

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