General Motors (GM) recently made its long-awaited announcement about the pricing of its messianic plug-in hybrid electric vehicle (PHEV). While the Volt will cost $41,000 in the U.S. – or $33,500 after a $7,500 federal income tax credit, the real news is that GM is offering a very attractive three-year lease for the Volt of $350/month with $2,500 due at signing. For comparison, Nissan announced that its all-electric vehicle (EV), the Nissan Leaf, will lease for $349/month for three years after an initial payment of $1,999. This, despite the fact that the Leaf’s sticker price is more than $8,000 lower than the Volt’s (see the April 7, 2010 LRPJ – client registration required). GM also recently announced that it will “increase U.S. production capacity of the [Volt] by 50 percent, from 30,000 units to 45,000 units, in 2012,” although production for the 2011 model year will be limited to about 10,000 units for its November 2010 rollout.
So is GM’s optimism misplaced? Edward Niedermeyer points out in a New York Times editorial – entitled “GM’s Electric Lemon” – that the Volt requires “premium gasoline, seats only four people (the battery runs down the center of the car, preventing a rear bench) and has less head and leg room than the $17,000 Chevrolet Cruze.”
However, the Volt’s primary competitor is not the Cruze, but the Nissan Leaf. Leasing terms are key here because, with lots of uncertainty around any new technology (the cycle life of the Li-ion batteries causes particular concern), many customers would prefer to lease than to buy. Since the Volt and the Leaf will be priced comparably and have similar warranties, the Nissan Leaf’s all-electric status will likely tip the scales in its favor among the eco-conscious minds of the early adopters. Moreover, Nissan has the advantage in that its lower sticker price will make it easier to convince lessees to buy the vehicles after three years, while GM risks having to take back heavily-devalued Volts. In addition to these unfavorable comparisons, the global electric vehicle market is likely to disappoint the overinflated expectation that the Volt will help salvage GM’s fortunes (see the Lux Research report, “Unplugging the Hype around Electric Vehicles” – client registration required). Unfortunately for the U.S. taxpayers who have billions of dollars riding on GM’s success, all signs point to another disappointment for the automotive giant.
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