Some Chevy Dealers Pull Plug on Volt – 2012 Sales Well Below Goals

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Volt and AkersonThe final tally is in for 2012 Chevy Volt sales. The good news (which is what most headlines will trumpet) is that sales for General Motors' flagship green vehicle tripled from 2011's paltry 7,671 to a slightly less paltry 23,461 in 2012. The bad news is that the number is almost half of GM's sales goal of 45,000 in 2012 for the Volt. The further bad news is that the Volt has so little demand in most regions that some dealerships are refusing to pay for required tools to repair the vehicles and are choosing to cease selling the vehicles instead.

To put the sales figures in perspective, Toyota's hybrid Prius family achieved sales of 236,659 in 2012; over ten times that of the Volt! You wouldn't know that from the amount of hype the Volt has gotten compared to the Prius. Furthermore, taxpayers had to foot the bill for over $150 million in federal subsidies ($7,500 per vehicle) for the Volt for it to reach its unimpressive sales figure while the Prius needed no support to smoke the Volt's performance. On a monthly basis, the Prius sold over 20,000 units in December while the Volt still could not even break the 3,000 mark. Approximately a third of Volt sales are in California, where the vehicle receives favorable HOV lane treatment and most of the sales have been driven by subsidized leases.

The Volt is offered by about 2,300 Chevy dealerships, making the average amount of cars sold per dealership about one a month. While GM's Obama-appointed management chooses to maintain an illogical focus on the money-losing Volt, some individually-owned dealerships are deciding that selling the vehicle just isn't worth the investment. A gas2.org article points out that some dealerships will not spend the required approximate $5,000 for specialized tools (which lower the risk of electrocution and fires) for the Volt and would rather just not sell the car.

The $5,000 required investment comes on top of an initial amount of about $5,000 that was spent on tools for the Volt. Many dealerships have sold only a few Volts in the two years they have offered the vehicle, barely even recouping the original tool investment, if at all. The decision to not spend another $5,000 for a vehicle that sells in such small numbers seems to be a logical one based on economics rather than politics, something GM should take a lesson from.

It is harder to figure out why auto manufacturers like GM would focus on plug-in electric vehicles rather than conventional hybrid technology as they try to reach higher EPA fuel economy requirements than it is to figure out why Chevy Dealerships would choose not to sell Volts. Consumer Reports recently reported that hybrid technology offers the better value. Despite the clear evidence that consumers prefer standard hybrids over plug-in vehicles, GM has chosen not to compete directly in the sector that includes the Prius (which sells 20,000 vehicles a month) and instead will focus on competing against cars like the Nissan Leaf (which sells less than 1,000 a month) as admitted by product chief Mary Barra in an autonews.com article.

Let's look at why the Prius is so much more popular than the Volt and why Consumer Reports says that conventional hybrids offer the better value. The new hybrid Toyota Prius C starts at under $20,000 and gets about 50 miles per gallon. Compare that to the Volt which starts at about $40,000 and gets approximately 30 miles per gallon after traveling about 35 miles on an electric charge. You pay double for a car that needs to be plugged in all night to save a maximum of less than a gallon of gas a day! Factor in the cost for electricity and you can save a bit over a dollar a day in gas (neglecting the fact that the Volt requires premium fuel) for the mere investment of an additional $20,000 compared to the Prius. Of course you will only be required to pay $12,500 of that premium as taxpayers are on the hook for the other $7,500 so you can break even in about 25 years if you choose the Volt.

The only reason (other than political influence) I can see for car manufacturers to offer money-losing vehicles like the Volt, which do not have wide consumer appeal, is that it is increasingly difficult to reach rising fuel economy requirements without having vehicles offered that are rated in the 90 mpg range and above. The problem with the rising EPA requirements seems to be that manufacturers don't have to sell a lot of the high mileage vehicles to the public; they only have to offer them.

The formula for calculating Corporate Average Fuel Economy (CAFE) is complex, but in general, manufacturers get more credit for offering vehicles with high MPG ratings than actually having them sell in large numbers. Extra credit is given for offering plug-in electric vehicles, adding to the incentive to offer these types of vehicles over choices that might make more sense. A cynical person might suspect that some lobbyists from firms that stand to profit (like those that build charging stations) from a new plug-in segment might be influencing the illogical focus.

As manufacturers continue to develop vehicles that get high mpg ratings but do not sell, the public's price tag goes up. Not only is taxpayer money wasted in tax subsidies, the cost of all vehicles goes up as automakers must make up for the losses. Worst of all, the nation's dependence on oil is not being greatly reduced if the high mileage vehicles that manufacturers are forced to offer don't actually sell.

It would be a lot more logical if CAFE standards were based more on how many vehicles were sold rather than how many vehicles were offered and if extra credit wasn't given for building politically-favored plug-ins. The MPG requirements could be reduced and automakers could focus on building vehicles that are more fuel efficient and that the public will actually buy. Based on the political circus and illogical focus that we have had thus far from government's green agenda (like the Chevy Volt), it does not seem likely that our government has the sense to see just how ludicrous it is to force auto manufacturers to build cars that will not sell and then have taxpayers foot the bill. But one can still hope.

Mark Modica is an NLPC Associate Fellow.