GM Admits There's No Market for Chevy Volt - Updated

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Volt and AkersonA Reuters' article earlier this week created quite a buzz when it suggested that General Motors was losing $49,000 on every Chevy Volt sold. While many continue to debate just how much money GM loses on the politically-motivated car, a more important story on the Volt was reported by Automotive.com last week which explained the increase in August sales numbers for the vehicle. The piece exposes how GM (along with taxpayers) is heavily subsidizing leases and even gets an embarrassing admission from GM on the struggling Volt that, "The whole idea is we're creating a market." And this blockbuster, "There is no plug-in market."

The quotes came from GM spokesman, Jim Cain, whom I spoke with earlier this week. Mr. Cain told me that a full two-thirds of August sales were attributed to leases. This is about three times the lease rate for the overall industry. Some customers are able to drive a Volt for two years for under $4,000 out of pocket thanks to tax subsidies and GM incentives. Think about this, taxpayers pay GM dealerships $7,500 as the customer pays $4,000 so that a Chevy Volt can be put on the road for two years. Is this really taxpayer money well-spent?

I am still not able to get a clear answer on just why GM continues to spend millions of dollars marketing a vehicle that loses money for them. Rising CAFE standards might explain why auto manufacturers have to build high-efficiency, high-cost cars that consumers do not want, but why would GM lose more money than it has to by spending a disproportionate amount of funds advertising the vehicle? Ford and Mitsubishi offer plug-in vehicles which sell in even more dismal numbers than the Volt, but at least they are not throwing good money after bad by hyping the vehicles and spending tens of millions of dollars on ads. Since the strategy by GM does nothing to help shareholders and the bottom line, I must assume the continued Volt farce is motivated by political reasons. The Obama-appointed management at GM seems to have a costly green-minded agenda as the President campaigns upon the perceived success of the company and Treasury refuses to sell the government's ownership stake in the automaker.

While the manipulated August Volt sales of about 2,800 were trumpeted as a great accomplishment, the sales pace is still far below GM's goals. To put it in perspective, the car sells about one-tenth of what the conventionally powered Chevy Cruze does. Add to that fact that the sales are driven by taxpayer and shareholder funded incentives. Top it of with the realization that the car loses somewhere between thousands and tens of thousands of dollars on each vehicle sold. Only politically-minded spinmeisters during an election season would present those facts as an example of green energy success. While it seems obvious that the attempted deception will continue at the expense of taxpayers, it remains to be seen if Mainstream Media and auto industry analysts will continue to ignore or even promote the folly while politicians remain quiet spectators of the P.T. Barnumesque Chevy Volt circus.

Mark Modica is an NLPC Associate Fellow.

UPDATE: GM Spokesman, Jim Cain, contacted me to clarify his stance and earlier comments on the lack of a market for the Volt. Mr. Cain now states that it is not that there is "no demand for a vehicle like the Volt," but rather that there is "no customer base" and it "is a marketing challenge." While I'm not sure how that is an improvement to the Volt situation, I do want to be fair and give GM's point of view.