General Motors on Tuesday set a price of $41,000 for its electric Chevrolet Volt -- $8,000 more than its nearest competitor, the Nissan Leaf.
GM said on Tuesday it has begun taking orders for the Volt and would offer a $350 per month lease option for the much-anticipated vehicle as it launches in a handful of U.S. markets starting with California.
The biggest question surrounding the Volt has been its price and profitability given the cost of the lithium-ion battery pack supplied by Korea's LG Chem and the hundreds of millions of dollars that GM devoted to the project over the past four years.
Every day we've been asked a single question: How much will it cost? said GM marketing chief Joel Ewanick on a conference call to announce the pricing.
GM executives, including former Vice Chairman Bob Lutz, had previously indicated the Volt would be priced near $40,000.
By setting a higher price and restricting Volt production, the automaker -- now majority-owned by the U.S. government -- has taken steps to limit its losses on the plug-in vehicle.
The long-awaited announcement on pricing for the Volt comes three days before President Barack Obama is scheduled to visit the Detroit-are plant where the vehicle will be built.
GM is expected to file for an initial public offering as soon as August that would allow the government to reduce its 61-percent stake in the automaker.
GM launched the Volt development project four years ago, in part to shake an association with gas-guzzling trucks and to show it could compete with the likes of Toyota Motor Corp on hybrid technology.
With a price of $41,000, the Volt will cost as much as some luxury vehicles. The top-selling Cadillac CTS has a price starting at $35,165.
You have to expect you're going to pay a premium for this kind of technology, said Erich Merkle, an auto analyst and consultant at Autoconomy.com.
But the $350 lease payment on the Volt also makes it competitive with the upcoming Leaf, which has a lease offer of $349 per month.
U.S. taxpayers who buy a Volt will qualify for a federal tax credit of $7,500. Some states, such as California, are offering additional tax incentives.
GM: BUY A VOLT, BUY A REAL CAR
Ewanick said GM marketing would portray the Volt as a real car, attempting to draw a sharp distinction from pure electric vehicles like the Leaf, which lack a backup source of power once the battery is spent. People don't want to be stranded on the way home from work, he said.
The Volt is designed to be recharged overnight for about 40 miles of electric driving, depending on driving conditions. The car will also have a small gas engine expected to give the vehicle a total range of about 340 miles.
Nissan Motor Co's battery-powered Leaf claims a driving range of 100 miles. It has a U.S. retail price of $32,780.
Tesla Motors, a Silicon Valley start-up that went public in June, has the only highway-ready electric car now on U.S. roads with the $109,000 Roadster.
About 600 Chevy dealers in California, Michigan, Washington, D.C., Texas and New York will sell the initial limited production run. GM expects to produce 10,000 Volts for the 2011 model year and about 30,000 for 2012.
Jesse Toprak, an analyst at industry-tracking Web site TrueCar, said the Volt will sell out, leaving GM with the challenge of managing a waiting list.
In the meantime, he said, the Volt gives GM the chance to win over better-educated and wealthier car shoppers in markets like California who would never have considered a Chevy.
The Volt is a halo car for GM, and it's real importance is in bringing people into showrooms, he said.
Ewanick said it was uncertain how quickly GM could bring down the price of the Volt in future model years, saying that depends on still-uncertain reductions in battery costs.
There's a lot of technology that has to happen for us to lower prices, he said.
(Reporting by Kevin Krolicki; Editing by Matthew Lewis, Phil Berlowitz and Carol Bishopric)