This week, Chevrolet announced that their new electric car, the Volt, will initially be sold for $41,000.  The car represents a different direction for GM and incorporates a brand new electric powertrain.  This is the car that has been highlighted as the future of GM and in some cases even positioned as the savior.  However, judging by the initial pricing, I wonder whether GM will miss the mark and the US tax payers will be left holding the bag.

Background

The Volt is different from today’s hybrid electric vehicles like Toyota’s Prius, Honda’s Insight or Ford’s Fusion.  These cars use a drivetrain that relieas on batteries and a traditional combustion engine.  At low speeds, they run on batteries and the combustion engine kicks in at higher speeds or when the battery gets low.  In contrast, the Volt is fully electric and relies exclusively on batteries and electric motors for propulsion.  The batteries offer a limited range of about 60 miles and need be charged nightly.  The car also incorporates a traditional combustion engine which is used to charge the battery and will never drive the wheels directly.  The new design raises significant questions about car performance when the battery is depleted and battery life.  Since this is brand new technology for GM and they are the first car manufacturer shipping in volume, the answers to these questions are not clear.  As with all new technology, there is a substantial risk in purchasing V1.0 of anything and the Volt is clearly meets this criteria.

The current situation

Chevy will begin shipping these cars late this year, but the price is not competitive.  $41,000 is a substantial premium to the competition which better the Volt in all categories except mileage.  The following table illustrates some alternative car options and their prices. Read More »