Defenders of the Chevy Volt have often defended its titanic federal and state subsidies, which currently run up to $250,000 per unit sold, by claiming sales of the car will eventually bring the compulsory taxpayer cost per unit down to Earth. The idea is that many of the heavy-duty government expenses were made up front, so once enough units are sold, all those millions will even out to only a few bucks per unit. $250,000 per unit might seem like a lot of money to force taxpayers to pump into a car that stickers for about $41,000, and is purchased by people whose average income is $170,000 per year, but eventually we shall Win The Future, and it will all seem like money well spent.
Except… it doesn’t look like those rosy GM sales projections for the Volt are panning out. At all.
According to GM’s own numbers, the Volt sold only 1,529 units in December 2011, which is a great improvement over the paltry 326 units sold in December 2010, but nowhere near sales projections. It’s also well below sales of the comparable Nissan Leaf. The total number of units sold in 2011 was only 7,761. $400 million in up-front subsidies, plus vast sums extracted from taxpayers at every step of production and sales, to sell less than 8,000 units of a cranky boutique automobile to people with six-figure incomes.
GM occasionally tries to blame low Volt sales on production problems – we just can’t manufacture the darn things fast enough to meet demand! – but production has actually exceeded purchases on a consistent basis. Distribution of Volts to dealerships is another matter, but Motor Trend had an article in November that said GM was “releasing roughly 2300 demonstrator models” (which dealers had formerly been required to keep on the lot for a certain period of time) to make “about 4100 Volts available for purchase to the general public.” They don’t seem to have been snapped up by auto buyers.
At any rate, supply won’t be a problem for too much longer, because General Motors CEO Dan Akerson told the Detroit Free Press that “we want to ramp Volt production to roughly 60,000 in 2012.” You read that right – sixty thousand units, which would anticipate a nearly one thousand percent increase in Volt sales over 2011.
You and I are going to be forced, at gunpoint, to fork over a lot of money to finance that production binge! Unless Rep. Mike Kelly (R-PA) has anything to say about it. As reported by The Hill, Kelly – who used to be a Chevy salesman at his father’s dealership – introduced a bill to end the $7500 tax credit for those who purchase Volts and other electric cars:
“This is not to say I don’t support the development of electric cars,” Kelly said in December. “I do, but not at taxpayer expense.”
Kelly’s bill, H.R. 3768, is largely a response to the poor market showing of the Volt and other electric cars. Kelly, who has served on the board of the Chevrolet Dealers Advertising Association, said in a December op-ed for USA Today that GM is selling Volts in the hundreds each month, compared to the thousands of sales of other models, which shows a “lack of mainstream market demand.”
He also said the Obama administration is to blame for blowing federal funds on a car no one wants.
“The misuse of taxpayer dollars to promote the electric vehicle is emblematic of the Obama administration’s overall misunderstanding, and ultimate manipulation, of the free market principles that undergird our economy,” he said. “President Obama has become the ‘Venture Capitalist in Chief,’ gambling hard-earned taxpayer dollars in green projects and industries that are more politically than performance driven.”
Kelly also argues that electric plug-in cars are generally more expensive and thus bought by high income households, and that given the fiscal crisis, now is not the time to be subsidizing these upper income purchases.
This would not only throw a wrench in GM’s ambitions plans to hatch 60,000 new electric parasites next year, but would also do considerable damage to the electric-car aftermarket, which is already hindered by high maintenance costs for these vehicles, and the inconvenient truth that electric cars are purchased primarily by rich people as toys. Who wants a used one?
All of this brings us back to Econ 101, and those dreary laws of supply and demand, which have been the ruin of all who sought to rewrite them.
Pop quiz: what will the demand for the Chevy Volt be in 2012?
It’s a trick question, I’m afraid.
The correct answer is: zero.
Absolutely no one on Earth wants to buy a Volt for its true price, which approaches $300,000 per car when all the subsides are added back into the sticker price. There isn’t much chance GM’s hoped-for sales bonanza of 60,000 units would materialize next year if the tax credits supporting each purchase are canceled. Even if the credit remains in place, GM would be gambling that artificial conditions imposed upon the public – rising fuel prices and shortages – created a market that currently does not exist. That’s a rather daring gamble, of the sort that is much easier to make with other peoples’ money.
Update: Great news – the Volt won a Worst Product Flop of 2011 award!
Update: Even greater news – 8,000 Chevy Volts to be recalled to deal with battery firebomb issues! That’s a recall of more Volts than they’ve actually sold.