By Carl Bagh: Subscribe to Carl's RSS feed
July 28, 2010 11:23 AM EDT
GM says good-bye to guzzler days, officially prices its much anticipated electric model Chevrolet Volt at $41,000.
The cost seems a tad bit higher for a model that runs 40 miles on battery which can further reach 300 miles when the 1.4 liter gasoline engine generator kicks in.
Considering it has an early mover advantage GM could be aiming at a price skimming strategy. However, Nissan acted the spoil sport when it launched its electric car Leaf for $32,780. The all-electric Leaf has a range of 100 miles.
Both the car prices will further reduce once the $7,500 federal tax credit for electric vehicles is availed - which would drastically reduce Nissan Leaf's price to around $25,000. However GM matches the $349-per month lease deal that Nissan is offering and also gives an eight-year, 100,000-mile battery warranty.
Leasing seems to be a good bet for GM as there remains some ambiguity regarding the durability of lithium batteries. This risk is assuaged by leasing, as the batteries are expensive to replace, thus taking the onus away from a customer.
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Yet the model also faces stiff competition from other gasoline powered cars which cost less than $20,000 and are high on mileage. Potential threat also comes from hybrid cars like Toyota Prius.
But one needs to wait and see if the GM pricing of Volt is tenable especially when other players move in with cheaper variants. Possibly the early-mover advantage can help it garner volumes thus helping generate economies of scale but the primary trigger could be the reduction in battery prices - the main component behind the pricing of electric cars.
Also the customers will have to get accustomed to battery recharging methods. Volt can be recharged overnight from a standard 120-volt outlet in a garage and can be done twice as faster with an extra 240 volt outlet. The duration to charge and availability of charging kiosks will further decide the acceptability of the product.
However the range offered by Volt i.e. of 40 miles seems to be a limitation pertaining to U.S. geographic positioning whereby most of the states are sparsely populated and destinations far flung compared to Europe or Asia. Hence it will have limited reach restricted to urban areas.
But the market seems to be heating up, with multiple ties developing among auto makers, primarily in the electric car segment like Mitsubishi's alliance with Peugeot, Toyota's and Daimler's investment in US electric start-up Tesla and Daimler's alliance with Renault-Alliance.
Even as GM pitches much on Chevy Volt with backing from the government the transition from building V6 engines to environment friendly engines will not be easy. In fact, the current Volt model uses the off-the-shelf engine that was used in its Chevy Cruze model - an expensive proposition for use as a generator. GM is currently working on a much smaller gasoline engine for its second generation Volt.
The transition from "Big" to "Small" will require GM to change its DNA, towards which it has taken significant steps like diluting brands such as Pontiac, Saab, Hummer and Saturn. Also the present buy of financing arm AmeriCredit can assist it in financing EV's at better deals before cheaper battery variants hit.
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