The temporary halt in the production of the Chevy Volt isn't a sign that the Volt is dead or that electric cars are disappearing, but rather that General Motors executives must now separate the Volt's hype from its real value in the marketplace.
The five-week shutdown, announced on Friday, occurred after the giant automaker saw that it wouldn't meet its earlier forecasts of 45,000 annual sales for the Volt, and that its inventory levels were rising too fast. "We made the move to keep the proper inventory levels and to match production to demand," GM spokesman Randy Fox told Design News. "But we have no intention—none whatsoever—to pull the plug."
Auto industry experts said they believe GM is committed to the Volt, but added that the company's executives succumbed to the huge hype surrounding the vehicle and began forecasting sales numbers that simply weren't realistic. "There was never the potential for the Volt to be this high-volume, this soon," said David Cole, chairman emeritus of the Center for Automotive Research. "The economics of this just didn't make sense."
General Motors says it isn’t pulling the plug on the Chevy Volt, despite a halt in production. (Source GM)
The Volt has been a media sensation virtually since it rolled out as a concept car at the Detroit auto show in January 2007. Within days of the rollout, more than 250,000 consumers weighed in on a GM.com Web survey, declaring that they would be interested in buying a Volt. The reality, however, has been far different than that. In 2011, the Volt's first full year on the market, GM sold 7,671 Volts—about 3,300 less than the company's conservative forecasts. In January 2012, sales figures dipped to just 603, which GM blamed on the publicity stemming from a fire during testing by the NHTSA (National Highway Traffic Safety Administration).
Some experts believe that GM executives recently began comprehending the reality, after first getting too caught up in the great expectations. "Dan Akerson (GM CEO) made a pronouncement about reaching 45,000 sales this year," Cole said. "He should never have done that. But he did." By the time GM executives realized that the Volt's sales were not going to hit earlier targets, inventory levels had already risen too high. As a result, the automaker has had to temporarily lay off about 1,200 hourly workers and 130 salaried employees at its production plant in Hamtramck, Mich. The workers are scheduled to return to the plant on April 23.
Stiff competition
Experts caution not to read too much into the Volt's five-week production halt. Plug-in hybrids, they say, are under development by just about every car manufacturer in the world today, and their future is bright. "Plug-in hybrids are going to take off, but it's just not going to happen as fast as people in the industry expected," said Hrishikesh Sathawane, electric vehicle and energy storage analyst for Lux Research.
"The technology is very solid," Cole said. "But the economics are just not there right now. The batteries, power electronics, and motor-generator technologies are still too expensive." In terms of economics, batteries are the biggest problem. Cole estimated that battery packs continue to cost automakers $800/kWh to $1,000/kWh. Sathawane put the figure "above $1,000/kWh." Similarly, the National Academy of Engineering and Toyota have also placed the cost above $1,000. The costs are that high because automakers must add structural protection, electronic controls, and cooling systems to the lithium-ion cells that they buy. Even at a low number of $600/kWh, a 16-kWh battery (like the Volt's) would still cost approximately $9,600.
Cole said that battery costs are coming down, albeit slowly. He said he has talked to high-level engineers at Ford and GM who expect costs to dip below $300/kWh within 10 years. He added that the Volt's cost is also dropping fast. "In the first year, they've already taken $4,000 out of the price of the Volt," he said. "Now, they have another $15,000 to go."
When the Volt returns, however, it will still face stiff competition. The Chevy Cruze Eco, built on the same platform as the Volt, offers more than 40 mpg and costs half of what the Volt does. Moreover, start-stop "micro-hybrids" and mild hybrids are now hitting the marketplace, and will provide a less costly alternative to the Volt or to the all-electric Nissan Leaf, Sathawane said. All of these alternatives will contribute to the lower expectations for the Volt and other electrified vehicles over the near future.
"In the long term, we want to move away from carbon-emitting vehicles, but that's not going to happen in the next few years," Sathawane said. "It's going to take its sweet time."
This story was originally posted by Design News and EE Times.
