April 07, 2008
GM Volt Cost Estimate Up
We really aren't ready for Peak Oil and we aren't going to be ready in a few years. GM's pluggable electric hybrid Chevy Volt was originally projected to cost $30,000. GM's latest estimate for the Volt's cost? $48,000.
Figuring out how to make wipers, a stereo and other accessories that don't kill the Volt's range has proven a tough nut to crack, and it's one reason the Volt's price seems to be rising. The Volt came with a $30,000 price tag when GM unveiled it at the North American International Auto Show last year. At this year's show, Lutz told us it could hit $40,000. Now he's saying it could hit $48,000 and it could be years before GM sees a profit from it.
GM wants the Volt to go 40 miles on electric power before switching over to gasoline. The 40 miles is enough to let most people drive to work and back. Then to avoid gasoline usage you'd have to plug the car in every day. Easy to do if you park in your own garage. Not so easy if you don't.
GM will probably start out selling the Volt at a loss. Though if oil production starts declining by 2010 then the demand for electrically powered cars might allow GM to sell the Volt at a much higher price.
"When GM brings out that electric car, they're going to be taking a huge loss on that for a number of years," UAW President Ron Gettelfinger said in a speech to a business group.
Battery cost is a big problem.
The Volt's 300-pound battery pack will be among its most-expensive components. Menahem Anderman, a battery analyst based in Oregon House, Calif., has estimated each such lithium-ion pack may cost about $10,000.
GM is attempting to show the batteries will last 10 years.
"Production timing of the Volt is directly related to our ability to predict how this battery will perform over the life of the vehicle," said Frank Weber, Chevrolet Volt and E-Flex systems global vehicle chief engineer. "The challenge is predicting 10 years of battery life with just two years of testing time."
At 10 years life expectancy the cost per year for the batteries works out to over $1000 once interest on the money is considered. But maybe the batteries will last longer.
GM should kill the Volt and kill it now. Continue with research but bringing this vehicle to the showrooms will be a disaster for GM. One which GM can ill afford at this time. It is great for public relations; but the bottom line is that not many people will buy this vehicle for $30 thousand much less 48. GM is throwing money away on what will be little more than a conversation piece. They should continue with incremental steps and focus on hybrids.
Scoring points with environmentalists is fine, as long as the company is around to make a real contribution to moving our society away from oil. That will be accomplished by making vehicles that are economically viable to the public. The Volt does not look to be that vehicle.
As a successful expert in Silicon Valley on marketing pure electric cars said, pure electric cars are economically feasible especially in countries where there is no big automobile industry, but this would NOT be easy for those countries that have a big and entrenched automobile industry. This is why electric car infrastructure is first attempted in countries like Denmark , etc, which do not have entrenched automobile industries. For instance, although the electric cars of Denmark in 2011 will be built by Renault-Nissan, there would be big resistance against building these cars for France even though Renault is building the actual electric car, since there is a conflict of interest. The reason is because it is very difficult to make a big profit from pure electric cars, since the pure electric cars have a lot less components than internal combustion engine cars, and hence with the exception of the battery, the electric car itself would ultimately become a very cheap commodity. Additionally, the longevity of a pure electric car would be much more than an internal combustion car, since there are very few moving parts in a pure electric car. This means that with the exception of the battery, tires, the cheap electric motors, etc, the electric car itself could easily last 40 years, and so this would be an economic disaster for automobile car manufacturers. This is one reason General Motors, and even European and Japanese manufacturers would delay the pure electric cars as much as possible, that is until we really run out of oil.
Have to disagree with Bryan. They better build the Volt and get it right. Price is less of a factor than quality and creditability.
As for Altairnano. I own a good chunk of that stock. Lately that has not been good news; you win some and you lose some. Their product is technically terrific but the big companies keep going elsewhere for sourcing. The Altairnano CEO was just canned and rumors are plentiful about why. That is probably a good move, the company seemed stalled.
Price is more of a factor for me; I've got a 5 mile commute, and already have an IC engine car I can use for longer trips. A cheap vehicle with 20 mile range would be just the ticket for me, but the very fact that I'm *not* driving all that far to work means that I'm unlikely to recoup the cost of a $30,000 electric car.
I may just dismantle my last battlebot, and build an electric moped attachment for my bike.
Don't be discouraged by the apparent price change - it's not really changed much.
Lutz originally said they expected to sell the Volt for under $30,000, and at a loss. That suggests a breakeven of perhaps $35K, and a theoretical list price of around $42K. Now Lutz is saying breakeven is around $40K, and list ought to be $48K (in a perfect automotive world, where an initial subsidy wasn't needed). That's only an increase of about 14%. Don't forget, they haven't said that they plan to actually charge $48K - that's only theoretical - they're still planning to sell at a loss (as did Toyota with the Prius, for it's first 5-6 years).
Also, they're saying that the cost has increased because of the very short timeline for designing and sourcing parts (they're saying this premium should go away in a 2nd generation), and because they're now leaning towards building in a bigger warranty cushion for the battery, just in case (this can also be expected to go away with time). This sounds to me partly justified, and partly PR to justify a higher price, given greater than expected demand.
I don't see any fundamental problems here.
Also, don't forget that a serial PHEV (or extended-range EV, or ErEV), with large production volumes, should be substantially cheaper to produce than a parallel PHEV, and competitive with a conventional hybrid. Also, it's true that operating and maintenance costs would be much lower for an ErEV.
Also, please note that Menahem Anderman is not a reliable source - he appears to be one of those people who manage to market themselves to the media as a go-to source for commentary, while actually not being an authority. He's always excessively pessimistic on EV's. The Tesla batteries are going for $400/KWH, and in volume the A123systems batteries should be even cheaper (they don't have relatively expensive cobalt), not the $600/KWH he projects.
They could be more realistic about range say around 25-30 miles
and use cheaper batterys like those from firefly energy.
"They could be more realistic about range say around 25-30 miles and use cheaper batterys like those from firefly energy."
Yes, but they want this to be a no-compromise, high-tech PR smash hit, and low range, or lead-acid batteries wouldn't do that. Also Firefly wasn't quite as far along as the Li-ion firms like A123systems (which has had batteries in power tools for several years) - Firefly batteries are very promising, but they aren't actually in end-user customer hands yet anywhere.
GM's problem is that they need the higher range in order to make the savings per year large enough to justify the purchase price.
Look, someone like Brett Bellmore driving 5 miles or me driving 2.5 miles per day would never recoup the extra cost of the batteries. GM needs people who will drive at least 20 miles each way in order to save as much as possible to pay back the higher cost.
GM's ideal customer is someone who parks in their own garage at night and parks next to their own business where they can plug in and charge up during the day and who has 40 miles to drive each way (80 miles total). That person can save 40 miles worth of gasoline per day.
What does that work out to in dollars saved? Suppose the Volt uses 250 watt-hours per mile for 80 miles. So they use 20 kwh per day. At 15 cents per kwh they spend $3.00 per day in electricity. If instead they bought gasoline at $4.00 per gallon (assuming higher prices in 2010 - and that might be quite low for 2010) and got 40 mpg/gallon (comparing to a Prius) they are going to spend $8.00 per day in gasoline. So with the Volt they save $5.00 per day.
At $5.00 per day saved (and this is a really best case assuming the ability to recharge at both ends) and 250 trips to work per year they save $1250 per year. If the Volt costs $12500 extra over a Prius then they take over 10 years to save the money. Note that these are the ideal buyers who have the perfect travel needs to let them make use of 2 full charges of the batteries per week day.
Now, if oil production starts dropping in 2010 and the price of gasoline goes to $10 per gallon then the money could be saved back in a much smaller amount of time.
I'm expecting Peak Oil to happen Real Soon Now. So the very high priced Volt might unfortunately pay itself back.
I agree, it's a bit hard to cost justify a $35K volt at $4/gallon. A few thoughts:
1) most utilities should have time-of-day pricing that will give night-time pricing well below $.15/KWH - more like $.03/KWH. PG&E is aggressively rolling them out, and I believe SCE has it's own large program - you're probably served by one of them. Utilities across the country have them - see http://www.thewattspot.com/ .
2) The Volt price will come down with volume - eventually it should be competitive with a Prius, even before fuel & maintenance savings.
3) The Volt is going to be larger, quieter, and have better performance than the Prius.
4) 90% of cars have offstreet parking available per US-DOT(though a relatively small % insist on parking on the street, and using their garages for storage, something I would expect to change if there were substantial savings available from plugging in - wouldn't Store-n-GO make more sense?).
5) Most potential buyers intuitively include the cost of externalities in the price of gas, so their personally perceived savings are higher.
But within less than 10 years, and probably within 5 more years, batteries will probably improve a lot and the price will decline considerably, making pure electric cars very competitive. Then Volt and other plug-in hybrids will become obsolete.
Even if the range was only down to 10 miles instead of 40 that'd still be useful. That'd shave the battery cost down a quarter to ~$3000 from ~$12000 assuming there isn't a power issue. Each time you park, you'd have to plug in, and it would save you a quarter of a gallon of gas - which is probably enough of a savings to motivate people to bother to do it.
I still think it'd be neat if there were some way to supply electricity to platoons of cars on a freeway to both power the car and to top off the battery/caps. Perhaps also at stop lights as well. The combinations of platooning and the supply mechanism would be necessary because platooning can get 3x the traffic density which amortizes the cost of embedding the electrical distribution in the road across 3x the cars and solves some traffic congestion issues at the same time.
Randall doesn't mention that the Volt would be saving money anytime it was driven. Try 365 days in a year not 250. Cars last a long time; fuel may be $4.00 per gallon in 2010 but what will it be by 2020? I would also expect the depreciation rate to be low for a serial hybrid getting great mileage.
But that is merely speculation about $$ numbers and others can choose their own and predict more savings. Or less.
A more significant fact is that people don't buy cars to minimize expense. Within limits they will pay more for what they want. That is why I believe GM must produce a good quality, desirable Volt. It must be economical to operate - otherwise why make it - but that alone will not be enough.
Forget about cost savings - we may see 70s style shortages again where there is no gas in the gas stations. How much would an all-electric car be worth then?
Since GM is going to be only one of dozens of players in the electric vehicle market, I won't be too concerned if the Volt succeeds or fails. Others will succeed or fail, as well, on the merits of their products and business plans.
This is such a sick joke. The amount of oil saved over the lifetime of one of these vehicles will not even cover the amount of oil consumed during the production and R&D phases. If it costs an extra 100 barrels of oil per unit, and a barrel of oil is worth about 1000 miles, then you'd have to drive this thing 100,000 miles just to cover the cost premium for the development of this vehicle. And then you'd have to drive it another 100,000 to pay for the electricity. (You may not have to buy gas, but you'll still need to spend money to fill it up.) The EV1 was more cost effective than this. Why did they scrap that to build this? And why are they pretending they havent gone through all this before? (With low-power wipers, radios, lights, etc.) GM is so stupid it's a wonder they are still in business. I wish they would go out of business, because after the EV1 it is clear they are acting as nothing more than a front for OPEC profits. They will never develop an economical PHEV.
Even if the electricity was free it would still take a long time to pay back the additional cost.
I've already sketched a best case where the person totally recharges the battery 10 times per week or 520 times per year. Sure, drive 365 days a year. But the average person isn't going to be able to run down the battery more than once per day.
The players at the car level are far less important than the players at the battery level. So far A123Systems is in the lead. I do not see a strong number 2 player at this point.
"Even if the electricity was free it would still take a long time to pay back the additional cost."
Sure. I think we're agreed on that. The point is, this is just the beginning. GM will be able to sell as many as they can make for several years to early adopters who include the cost of externalities in their cost/benefit calculations, and by then the batteries will be substantially cheaper, and economy of scale will make the Volt (and other plugins) successively cheaper, in the familiar virtuous cycle.
Don't forget, all of the additional costs discussed lately by GM are temporary startup costs, and that the battery cost from Anderman is exaggerated - these are large-format batteries, and fundamentally cheaper to make than small, existing small format cobalt li-ion, like Tesla's.
"I do not see a strong number 2 player at this point."
GM indicates that the other competitor, a li-ion spinel, is keeping up with A123systems just fine, and that GM is having trouble deciding because they're both good.
The wildcard here is Toyota, which made a large tactical error with cobalt li-ion, and is likely to make a small strategic error by staying with parallel hybrid architecture a bit too long. Regardless of these errors, Toyota is taking plugins very, very seriously. Don't forget, GM needs the PR, but Toyota doesn't, so Toyota will stay quiet until the unveiling of their plugin, which is almost certain in 2009 (they've vowed that GM won't beat them with a li-ion vehicle of any kind, and a plain hybrid doesn't need li-ion....).
I don't understand why people are so down on GM. This is a company that provides health insurance for 1,100,000 retired Americans and their families, not to mention 100,000 jobs with decent pay and great benefits. Everyone rants about the lack of availability of health insurance. Well if you all keep on buying ugly imports, you will find over a million more people without insurance. Also I can't imagine who is going to pay for the pensions of all those workers if GM goes down. The government is supposed to pick up the tab by law, but how can they in the current situation. STOP BUYING IMPORTS PEOPLE! WAKE UP!
I think that GM should manufacture two types of Volt: one with smaller, cheaper batteries (let's say only 20 miles) and other with bigger and more expensive batteries (40 miles). Then the first one will be cheaper and the second more expensive, and everybody can decide what model to buy and make the calculations to see if it is worthy or not to have one of this plug-in hybrid.
The battery cells only account fot $5,600 of the cost of the car, so that strategy would only reduce the price by $2,800 while greatly reducing the value of the car.
Most of the premium for the Volt is just the R&D to put it into production. IOW, the first car costs $1B, and the 2nd costs $25K.
What a laugh. I'd rather purchase a decked out Dodge Challenger and burn gas like mad than pay for that litte quark. Keep the price low and I'll bite. Otherwise, let it go the way of the EV-1 for all I care.
48K is defenatly out of my league (especially since CAD wont stay on par with USD forever). 30K is my upper bar; I can maintain, feed, and insure a car at that price. But the real bite for me would be around 25k-27'500$. I'm a green-inclined person, and I try to do what I can for the ecology, when I can afford it.
This being said, 40 Miles is more than enough for me (30miles there and back), but I think by the time the Volt is available the competition (honda, toyota, and I heard maybe Wolkswagen) will have better alternatives. So unless the price goes down, they wont have my money and someone elses will.
The question for GM is : Do we take the gamble like Henry Ford, or do we play it safe ?
Have a nice evening all,
If you will charge GM Volt battery at home and work, with electricity, which isn't cheap and clean, the life of battery set will be reduced drastically.
If you decide to buy an $8000 to $10000 battery set every 3 to 4 years buy a GM volt.
Overusing the hybrid car battery can dramatically shorten the battery life span.
Coal is used to create almost half of all electricity generated in the United States. ...
Who Needs a Hybrid When You Can Have a Diesel?
Volkswagen Jetta TDI turbo-diesel delivers 50 mpg.