GM announced plans to cut the price of its plug-in hybrid, the Volt, by 13%. That comes out to a starting price of $34,995, or about $5,000 less than previous year models. That's also before federal rebates and promotional incentives, so the price of the car has dropped considerably. The question becomes, then, how is GM going to justify this price drop - their goal is obviously to sell more cars at a lower margin, but how much margin are they seeing in the car to begin with.

The Volt debuted in 2010 after GM spent $1.2 billion in developing the car. Estimates rolled in on how much it cost the company to build each car, with figures ranging from $75,000/car to $88,000/car back in 2010. Those numbers included a $56,000/car development cost, so the real average production cost was somewhere in the range of $20,000/car to $32,000/car. That leaves a slim margin, by automaker standards, for a car that costs $40,000. Now that it's $35,000, where will the savings come from?

Shared Components

Component sharing has long been a GM savings trick as it balanced multiple brands sharing the same platforms -- mixing a few custom components to give an individual car an identity while the majority of parts are the same -- and its one that unfortunately has already been done to death on the Volt. The car shares its chassis with the compact Cruze (the Delta II platform), and what unique components it has are necessary for its functioning as plug-in electric vehicle.

So about those custom parts...

Component Price Negotiation

This article discusses the issue GM has had in negotiating prices for these custom parts with vendors. Since its debut in 2010, GM has only sold 61,000 Volt vehicles worldwide (sales figures for the rebadged international version, the Opel Ampera, are included in this tally). In comparison, the company has sold nearly 750,000 Cruzes internationally in the same amount of time. Vendors are able to negotiate higher prices per unit on Volt components due to the lower volumes needed, and likewise, Chevy is able to use volume as leverage when negotiating prices for Cruze components.


Save for its digital dash and center column, the Volt is a fairly sparse vehicle. As mentioned earlier, there has been plenty of parts bin raiding already, and there aren't a lot of expensive surfaces in or outside of the car. Redesigns to cheapen up components -- cost transformation initiatives -- would be few and far between.

GM, and by extension its sourcing department, is caught in a Catch-22. They are under pressure to save money to account for the recent price drop. To save money, they need to sell more cars. To sell more cars, they need to keep the prices down.

Right now the corporate line is that the Volt's story isn't only about sales figures and the car is countering the low numbers with other benefits to the company, namely its Voltec system's value to other platforms in the company. However, history certainly isn't on the electric cars' side at GM.

Share To:

Nicholas Hamner

Post A Comment:

0 comments so far,add yours