Think GM's Volt Is Failing? Think Again

Tickers in this article: NSANY GM HMC

In explaining Volt's recent sales gains, a key step came in February when the car gained eligibility for a coveted California's Clean Air Vehicle Decal, enabling single-driver access to high-occupancy vehicle lanes after GM added a low-emissions package. Now "we're getting a lot of traction in California," Cain said. Additionally, incentives valued by at about $10,000 -- including a $299 monthly lease rate for the 2013 model -- have boosted sales. The Volt is eligible for a $7,500 tax credit.

The incentive spending reflects intense competition for green buyers between Toyota's (TM) Prius, the world's best-selling hybrid; Nissan's (NSANY) Leaf; and Volt. The three offer differing technologies. Volt uses electricity stored in a battery to power it for 35 miles, then switches to a gasoline engine that powers an electric generator to extend the vehicle's range by about 300 miles. The Leaf is battery powered and has a range of about 73 miles. Prius has a gasoline engine that shuts down when the electric one suffices.

GM said six of 10 Volt sales are "conquest" sales to buyers who previously owned other brands: the top trade-ins are the BMW 3 Series, Honda (HMC) Civic and Prius. But Volt sales will likely slow this month due to low inventory after production is suspended for four weeks to allow for retooling so that GM's Hamtramck plant, where Volt is built, can also build the 2013 Impala.

Volt's price is high because the cost of introducing new technology is high, but "we're working hard to bring it down," Cain said. "Each new generation should bring it down further and keep us on the road to profitability. (It takes time) to get experience with the technology, to get more efficient battery packs. You just can't miracle this stuff."

Kevin Bullis, energy editor of the MIT Technology Review , recently wrote an essay titled "As GM Volt Sales Increase, That Doesn't Mean It's Successful." He remains skeptical. "It is too early to know how things are going," Bullis said, in an interview. "The Volt is doing well, but still falling far short of what GM had originally claimed it would be doing by this point.

"The costs are very high because battery costs are still high and the whole architecture of the Volt is expensive," he said. "It has everything you put in an ordinary car, plus a more expensive and complicated transmission, a huge battery, and all the power electronics that go into controlling the battery. There is no way this kind of architecture will ever be as cheap as a pure electric vehicle or a pure internal combustion engine.

However, "over time, battery costs come down," he said. "GM has made a lot of investment in bringing down battery costs and there are a lot of interesting technologies around. Then you start to talk about does it make sense economically (if) it pays for itself in a few years.