Sep 05

Will GM Lease the Chevy Volt Battery Pack?

 

for_lease.jpg

There have been many references in the news media to the idea that GM might lease out the battery pack.

We have previously discussed how this idea may have originated from Compact Power CEO Prabhakar Patil. More recently, a report from the Financial Times continued to expand on the idea and indicated that GM themselves may be considering the scenario.

I have alluded to this possibility on previous posts as well, and many readers have picked up on this and expressed concern.

What I can tell you from knowledgable sources is that GM is apparently giving a lot of “board-room time” to this idea, and may be working with 3rd party underwriters and partners. I have been unable to get an “official” GM statement on this issue, and I suspect the reason for this is that there is no official position yet.

Although, there was just a report about a comment by Nick Reilly, the President of General Motors Asia Pacific. Quote:

“People won’t buy a full car. They will buy a car and rent or lease the battery and the cost of leasing the battery will be the same as, or less than, the cost they’re paying today for petrol. So the motoring costs of an electric vehicle don’t necessarily have to be much higher than the cost of today’s vehicles,” he said.

Mr Reilly said the leasing approach could speed up the adoption of hybrid vehicles. “Before we were saying it will be an awfully long time before we can get the costs down so people can afford it, but actually if you offset the fuel costs, people can afford it,” he said.

The issue of requiring a lease agreement even for part of the car is unpleasant for some potential buyers, who are really interested in ownership. The idea also brings up memories of the EV-1′s required lease and eventual recall and destruction.

So why would GM be considering this?

Well, for one thing, perhaps cost is the issue. We have been told many times that cutting-edge lithium-ion battery technology is expensive, mostly so for a first generation system. How much will the pack really cost? Articles looking at the Volt’s pricing suggest the pack could be between $5000 and $10,000. Current low end laptop grade lithium ion batteries are sold at bulk for $250/kWh, and high end medical/scientifc grade ones go to $1100/kWH. Since the Volt’s pack is 16kWH, then price could be anywhere from $4000 to $17,600. The median of that range is $11,000, which sources tell me would be a “game-ender” for the Volt. So I think the range will be between $5000 and $8000 from the supplier, for a median cost of $6500-$7500 or roughly $450/kWH. Since this could account for 25% of the car’s total cost, leasing it out separately could lower cost to the buyer.

The next reason for GM to consider leasing is premature failure and liability exposure. What if the packs don’t work out over the long-term, with those risks multiplied by 10′s of thousands of vehicles. Remember, this technology has never been in mass-produced cars ever before. If the driver doesn’t own the pack, if it fails or leads to his/her death or disability, would GM’s liability be less. This is a question for a lawyer. Any of you out there?

Finally, we can consider that the technology will improve rapidly in future years. Many people here have thought about “swapping” out packs as they get better and with longer ranges. Also, since lithium is a limited natural resource, recycling the chemicals could help to reduce cost of future packs. If the packs were leased, GM would own them and thus be able to retrieve them from you in a few years, in exchange for a better pack. They could then take the lithium back in put it into the newer packs.

So in conclusion, it seems that the lease option has some strong arguments in favor of it. Personally, it wouldn’t really matter to me as long as I could get the car as soon as possible. What do you think?

This entry was posted on Wednesday, September 5th, 2007 at 9:07 am and is filed under Battery, Financial. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

COMMENTS: 38


  1. 1
    OptimisticMF

     

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    Sep 5th, 2007 (9:37 am)

    The key thing here will be communication. People buying the Volt are going to be informed customers, not just “shoppers”. These customers will also likely have at least a passing knowledge of the EV1. GM needs to be clear about the intent and terms of its lease agreement if it hopes to be successful with it. otherwise, it will just be overcomplicating (is that a word?) a product that will require some effort for most consumers to understand in the first place.

    As I’ve said before, I will do whatever I can to be an early adopter of this car, but I will lease my first model. I typically own my cars, but with technology this new, it is almost certain that a Volt produced in 2013 will have significant improvement over a first generation Volt from 2010.


  2. 2
    Steven B

     

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    Sep 5th, 2007 (11:14 am)

    Considering the previous discussion of V2G technology, if it becomes an option, do you think I would be able to allow the utility company to take over my battery lease? Austin Energy here in Texas is leading the way with EV grid-integration and San Antonio’s CPS is liable to adopt such a program (our grid is becoming stressed during the late summer) and I think that it may become a possibility. I will only forget about the Volt if there’s a better range-extending EV on the road in 2011, so battery leasing is not a deal-killer for me. But I am interested in the answer to what I just asked. Post the data if it becomes available, and thanks for doing such an awesome job on the website.


  3. 3
    Tom

     

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    Sep 5th, 2007 (11:31 am)

    This certainly 0pens the door for some serious questions that we as consumers will have before purchasing a VOLT. If I am correct in Mr. Rielly’s quote.” Cost of leasing the battery will be the same as, or less than, the cost of petrol.” I thought the whole purpose was to eliminate the cost of gasoline, not replace it with another $3.00 dollar a gallon equivalent ?
    As consumers, why would we take the chance with a totally new automotive concept and not have monetary gains in our favor ? This certainly is giving us secondary thoughts in purchasing a VOLT.
    In addition to this, the states and federal government will find new ways to tax this auto for highway usage. So, again the consumer will be behind the eight ball!!


  4. 4
    OptimisticMF

     

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    Sep 5th, 2007 (11:51 am)

    This may be a bit off topic, but I was looking at vehicle tax credits on the Google and noticed that the number of vehicles eligible for full tax credit equals the number of vehicles that GM aims to put into production (60,000). Has anyone else mentioned this and I missed it? Coincidence? I think not…

    Anyway, I think a separate battery lease is just a bad idea. They need to sell the public on a new technology. Adding complexity will turn off a lot of potential buyers. GM needs to be more clever than this. Charge a premium for the car with the bettery or lease the entire thing. They will have to come up with a workable scheme to recycle the materials in the battery, but that shouldn’t be too hard. They could even use it as a selling point if they would guarantee a set price for the battery when its returned. This would boost the resale value and ensure that GM customers came back to the showroom.


  5. 5
    Drake

     

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    Sep 5th, 2007 (12:25 pm)

    Tom – I am sure that once PHEV technology is well established in the market, new taxes will appear on such vehicles. A large chunk of the current taxes on gasonline go to road construction/maintenance afterall. Having said this, however, it will be many years until even a cent of taxes is levied against PHEV owners. If the governement is going to shell out thousands of dollars in tax breaks for people that purchase PHEVs then it would not be very smart to then go and tax them like regular vehicles. Also, the Internet is a nice example for this point- for many years purchases made on the Internet were 100% tax free, partly to spur so called e-commerce. The same will surely go for the Volt and other PHEVs.

    Concerning the final cost of the Volt with or without lease- GM is smart enough to make owning a Volt profitable for the user. There are not enough altruistic people out there to make the Volt project a success otherwise. The Volt WILL save us money. There is no doubt in my mind about this. And depending on how world events pan out between now and 2010, it may be saving us truckloads of money. Time will tell.

    Concerning the battery lease, I have to agre with Lyle here- just give me my Volt. I don’t really care if the battery will be leased or not. Here’s my breakdown of the issue:

    Benefits of owning your Volt battery
    - no additional costs each month after the vehcile is paid off

    Benefits of a leased battery
    - Not owning 1.0 technology
    - Being able to potentially have the battery replaced with newer technology (if GM will ultimately own the battery, I am sure that it will be removable in one manner or another).
    - Smaller initial cost of the vehicle

    Ultimately how much would a lease on the battery really cost each month anyway? $40? I really don’t care either way.


  6. 6
    Mark  Bartosik

     

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    Sep 5th, 2007 (12:26 pm)

    Whether I would consider a lease depends on the terms. I think that a lease needs to weight a lot towards giving the Volt owner the control. For example:

    The Volt owners must have the absolute right to buy out the lease at any point for a sliding cost that would be figured out in advance. Otherwise there is EV1 mistrust.

    Would a lease restrict the use, for example, if I wanted to have an after market V2G system installed.

    Would a lease give you a mileage allowance or a charge cycle allowance? Would you be charged a usage fee at the end of the lease for using more than your allowed charge cycles?

    Would I be able to terminate the lease, and upgrade the battery at a time of my choosing? If so then it might be bad for the leaser.

    It also complicates the marketing of the Volt no end.

    I think that leasing the battery as an OPTION is not a bad idea, however, it would be bad to REQUIRE leasing of the battery. Purchase and leasing must be of very similar end result cost.

    Would you need a credit check to lease the battery? Maybe you have bad credit, but still have plenty of cash. So you can buy the Volt but they won’t lease the battery to you!


  7. 7
    Estero

     

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    Sep 5th, 2007 (12:27 pm)

    The last time I checked into car leasing there were many restrictions on the miles that could be driven and significant penalties for exceeding the limits. This is one of the reasons I have never leased a car and probably never will.

    I am concerned the leasing of the Volt batteries will include restrictions on the total number of miles driven, number of deep discharges, the number of charge/discharge cycles, etc., etc., etc. This will kill the Volt for me!


  8. 8
    Estero

     

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    Sep 5th, 2007 (12:38 pm)

    There is another point to leasing. Once GM starts down that road where the only way to purchase a Volt is to lease the batteries it will never change. The leasing of batteries will soon become a “cash cow” to GM, never to be changed. Trust me on that!


  9. 9
    Z

     

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    Sep 5th, 2007 (12:47 pm)

    I have saved $30,000 in an account waiting to buy a car that will take me to work and back, roughly 40 miles, without using gas (yes I know the volt would only do this with the heat/air off in theory). For the most part I will buy the first car available that:

    - I can pay cash for (30,000 or less)
    - will go 40 or more miles
    - will go highway speeds (65-70mph)
    - DOES NOT HAVE ANY LEASE REQUIREMENTS

    I may be waiting a lot longer than I thought, the money is gaining interest, so be it :)


  10. 10
    Questions

     

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    Sep 5th, 2007 (1:31 pm)

    I have no problem with this at all; but we are likely to soon hear from people who like to whine about everything.

    The people who set up the most conditions for buying the Volt without knowing anything about it, are the ones least likely to purchase one in the end (“…because the doors are too long.”)

    This is a brilliant idea–especially if it will result in a lower cost to obtain a Volt.
    My only hope is that it will be a simple affair.
    Maybe they should sell the batteries at full price to the people who object.


  11. 11
    Tim S

     

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    Sep 5th, 2007 (1:39 pm)

    I agree with Estero. My concern is that the lease agreement will milk me to death. I drive 101 miles a day for work. That is 2 full charges per day, plus a little gas each way. How much will leased batteries cost me under these circumstances? A flat $40.00 per month as Drake suggests would be fine with me. As long as it is a flat reasonable price. So that is about $90 per month to run the Volt. $25 a month at home and $25 a month at work to plug it in, followed by $40.00 for the leased battery. I go through about $200 in gas per month. I could still save money, but have to wait and see had badly GM will mess this up. I’m not buying another car until the Volt is out, then do some comparision shopping between PHEV and gas.


  12. 12
    Matt986

     

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    Sep 5th, 2007 (2:41 pm)

    If GM goes with some sort of lease on the battery, then the sale price of the rest of the car needs to be priced much less. I’m talking sub $20k.


  13. 13
    Estero

     

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    Sep 5th, 2007 (3:33 pm)

    I’m not sure what people are thinking when they suggest it will be a simple matter to exchange the Volt 1.0 batteries for newer improved 2.0, 3.0 or later versions 2-3 years down the road. All the evidence to-date suggests it will be a whole lot more complicated that it is with the lead acid batteries.

    The exchange of batteries is likely to affect many things; weight and balance, battery a/c, power management, recharging, connectors, computer software, etc., etc., etc.

    I suggest to all who support the idea of leasing the Volt batteries that they might want to reconsider!


  14. 14
    OptimisticMF

     

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    Sep 5th, 2007 (3:41 pm)

    Estero,

    I think you’re right. That’s why I’m going to lease the entire car. The only reason to buy one is if you want to save it as a collectible, otherwise, lease it and buy one in 3-5 years when they have worked the bugs out.


  15. 15
    kent beuchert

     

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    Sep 5th, 2007 (3:50 pm)

    It sounds as though many here are mostly looking for the VOLT to save them money. If that’s your motivation, then buying ANY car, VOLT or otherwise, before the one you’re driving goes belly up doesn’t make much sense.
    I see two possibilities here : 1) GM will offer driving range options : 20, 30 or 40 miles, so that those who can make do with less than 40 don’t need to pay for unneeded
    batteries, yet retain the ability to add obn extra batteries in the future, should their driving situation change, or the batteries become cheaper.
    2) mortgage rather than lease the batteries over a 10 to 12 year payback period. This would allow total ownership and also should be cheaper than a lease, since the owner is
    taking the risk of the batteries not lasting that long, and there would thus be no risk premium uinvolved.


  16. 16
    kent beuchert

     

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    Sep 5th, 2007 (3:55 pm)

    I think some here are losing sight of the fact that even while driving using the range extender, the VOLT is a VERY economical car to drive. It’s not as though
    you are going from cheap electric transportation to a Land Rover or Hummer
    when the range extender kicks in. In the past I would have killed to get 50 MPG in city traffic (or highway too).


  17. 17
    Dave G

     

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    Sep 5th, 2007 (5:33 pm)

    I think leasing the battery separately is a bad PR move for 3 reasons:

    1) It’s like waving a red flag that there will be reliability issues with the battery.

    2) It makes people distrust GM thinking they will pull another EV1.

    3) It’s not at all how people buy cars today. Poeple either lease the whole car, finance it, or buy it.

    The last point is most important in my mind. Remember that MOST PEOPLE RESIST CHANGE. The only way to get most people to accept something new is to give them everthing they are used to, plus something new that they may want but aren’t forced to use. Thats whats so great about a PHEV. People don’t have to plug in unless they want to.

    For example, 10 years ago when computer CD burners became mainstream, did they immediately stop selling floppy drives? No. Most new computers came with floppy drives for many more years, and this is a market where people expect rapid change.

    So don’t force people to change the way they buy cars! If GM wants to add an option to lease just the battery – fine, as long as you can still buy the car in the normal ways.


  18. 18
    Doug

     

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    Sep 5th, 2007 (6:09 pm)

    This is very interesting. I really enjoy your web site and posts and can’t wait to buy a Volt. I would be willing to pay a premium for it just to be free of purchasing gasoline. I hope they do give us the option of buying the battery though. However, I would lease the battery if there were no choice.


  19. 19
    Bill R.

     

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    Sep 5th, 2007 (6:22 pm)

    Personally, I think GM wants to get this vehicle to market ASAP, but will not be able to do some of the long term testing of the battery pack to meet the 2010 production deadline. Premature battery failure could be disasterous (especially if a replacement pack is $10-20K with std industry markup on parts). So a lease avoids this problem.

    I don’t believe GM views the battery lease as a means to make profit. If the lease is too expensive, aftermarket battery packs will become available and people will buy them.

    One concern I would have is the fact, as mentioned by others, that the terms of any lease are important. If its like the EV-1, at some point in time, GM could end your lease and not renew. Without other battery options, your Volt will lose a great deal of its appeal and value. One reason that GM seems to have the lead in this product line, I believe, is that they have probably signed exclusivity agreements with vendors like A123 so that they (A123) cannot provide battery packs to GM competitors. This means if A123 batteries are intrinsically safe (unlike some Li-Ion batteries from Japan), GM has a true advantage just from its commercial arrangements with its suppliers.


  20. 20
    Matt986

     

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    Sep 5th, 2007 (7:07 pm)

    Leasing the battery pack would be akin to leasing the engine in your car. Thinking you’ll get an upgraded battery pack in the future would be like leasing your car’s engine, and expecting that you’ll be GIVEN a new engine when a new, more economical model comes out.

    Ain’t gonna happen.

    I’d rather outright buy it, even if GM finds a better battery a couple years down the road.

    Kent, I don’t think different, lower range, battery packs are a good idea… they all have to be engineered. Don’t let the perfect be the enemy of the good. ;)


  21. 21
    omegaman66

     

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    Sep 5th, 2007 (7:19 pm)

    Some people lease and change cars regularly. Others and hate the concept. Very few in the middle. A very polarizing concept.

    I hope the option is there too buy.

    Things we want to know. Terms of the lease? It was mentioned it was going to be about the cost of what you spend in gas? OUCH!!!!

    As I have said the main motive for most people to buy a volt is to not get killed at the pump! So the terms of the lease and how much is crucial.

    I continue to doubt the cost people are throwing about. I believe the cost of the car will be about 28K and the battery will be about 20K!

    Hopefully I am wrong on this and the cost will be less.

    GM will lease the battery to keep initial cost lower! But will make more in the long run probably.

    Things we need to know. What does upgrading the battery or changing the battery involve? Can mechanically inclined people do it. Safety will be a big issue here and look for the goverment to require you to have training to do it yourself. The voltage will be high and could kill you instantly if you get shocked. These batteries are not toy batteries.


  22. 22
    Paul

     

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    Sep 5th, 2007 (9:21 pm)

    Maybe this will be an interesting survey. If given these two choices, which would you select?

    1) Buy a new Volt complete with a battery system for $30K
    2) Buy a Volt for $24K and lease its battery system for $100/month.

    Lets assume that the Volt and its battery system have GM’s current 5 year warranty.


  23. 23
    NoFriendOfOpec

     

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    Sep 5th, 2007 (10:42 pm)

    So after five years, you’ve paid $6,000 to lease a battery.

    How many people do you think are willing to invest another $5,000 into that same battery (to buy or lease) that’s half way through it’s life cycle, in a car that’s already five years old ?

    Leasing the battery would be a great way to kill this car from the get go.

    As for the price… If I can’t recoup the $5,000 in gas savings and $5,000 in a tax credit over five years (due to an expensive battery that offsets that benefit) then, it makes no sense for me to buy the Volt. That would be like paying $30,000 for a Chevy Cobalt with lower CO2 emissions.

    If the battery tech is legit, it would benefit GM to buy A123 to control the technology and price. Think of it as a big, Toyota crushing sledge hammer ;>)


  24. 24
    Don

     

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    Sep 5th, 2007 (11:54 pm)

    Without the battery cost a series hybrid is a fairly cheap critter. Small ICE. Straightforward electric motor hooked up to one transmission.

    Without the battery a series hybrid should cost much less than a comparable ICE car.

    On first blush this smacks of trying to find a way to charge more overall than the $30K target by selling the car sans batteries for “under $30K” and seperating out the batteries as “fuel”


  25. 25
    omegaman66

     

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    Sep 6th, 2007 (1:26 am)

    I guess we will all be guessing for a couple more years on the price. Even if they came out with definitive figures right now the car would end up selling for something else end the end. The Fall of 2010 is three years away. A lot can change in that period of time… both good and bad.


  26. 26
    Johnnie S. Paul, Jr

     

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    Sep 6th, 2007 (6:41 am)

    Purchase, or no purchase…there is no leasing. I would be afraid that GM would use the lease program as a way out, like the EV1 program. I will purchase a Volt when comes to market, but I will not lease the battery to make the purchase…I’ll turn instead and maybe wait on the Hybrid X from Toyota.


  27. 27
    Dave

     

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    Sep 6th, 2007 (7:35 am)

    If GM did lease the battery and rendered the car useless….I have a couple of thoughts:

    1) it would destroy GM’s credibility as a car company and may be the death of GM;

    2) it would open the door for aftermarket conversion or battery companies who would fill the void.


  28. 28
    obvious

     

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    Sep 6th, 2007 (1:43 pm)

    How about the obvious solution of having both leasing and buying as options on the batteries, just like we have for most cars? If you want to lease, you lease. If you want to buy, you buy. End of story. This is not complicated.


  29. 29
    Lyle

     

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    Sep 6th, 2007 (6:49 pm)

    It is my unofficial understanding that A123 can still work with other vendors, I know they have recently been having talks in Asia.

    BTW started a poll about leasing:

    http://www.gm-volt.com/volt-vote/


  30. 30
    Jack the R

     

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    Sep 6th, 2007 (9:18 pm)

    Leasing the battery I can see, if it’s clearly explained to the customer that they are going to take the used battery at X years and, say, resell it to a power utility for off-hour energy storage – and let the customer lease a new improved battery in it’s place. That’s a win-win situation all the way around.

    What I don’t like is this talk of weekly payments. That’s too much of a hassle. But if it’s one monthly payment lumped into the regular car payment, or if you can pay the full cost of the lease up front and be done with it for X years, and take out a lease on a new improved battery when x years are up – that’s acceptable.


  31. 31
    Van

     

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    Sep 8th, 2007 (11:41 am)

    Apparently the only reason provided for the lease option is a business write-off. So for fleet sales, a battery lease versus a vehicle lease makes little sense to me.

    Second, what will the battery cost? Certainly not significantly below $500 per KWH, or $8000, and not significantly higher than $1500 per KWH or $24,000.

    Now if the Volt, minus the battery costs about $14,000, then the Volt could cost between $22,000 and $40,000. And since it only has an AER of about 20 miles, and an extended range mileage of about 55 MPG, it might seem a little pricey, since a Prius costs about $24,000, and will get about 52 MPG with the next generation HSD.

    Hopefully we will not be forced to buy a low cost Lithium battery with short circuit fire hazard, or a safe battery at high cost, but that is how the tea leaves seem to arranging themeselves.


  32. 32
    Mark

     

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    Sep 8th, 2007 (5:55 pm)

    I do not agree with this AT ALL. GM didn’t allow the out-right purchasing of the EV-1, and guess what happened? they recalled every one of them and destroyed them, And even arrested those who would not give it up! What guarantee do we have that they will not do this again? What guarantee do we have that they will not suddenly change their mind, stop producing the batteries and not give Volt owners any recourse? I would like to know this.


  33. 33
    Paul

     

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    Sep 9th, 2007 (12:39 am)

    What guarantee do you have that GM won’t destroy the Volt project? None. What guarantee do you have that the Sun will rise tomorrow? Again, none.

    However…

    This is a different (apparently wiser) GM executive team than existed during the EV1 project. Compared to the EV1 project, the Volt is being taken 100x more seriously and being given 100x more resources. Also, GM executives now realize they are being watched through a microscope. And at this point, I think they will do whatever it takes to pull GM’s corporate reputation out of the crapper. Destroying the Volt project would be corporate suicide at this point, and they certainly know it.

    So in my opinion, one’s buy/lease decision should be based on economics and the possibility of battery system failure. It should not be based on any GM mistrust/resentment from what happened with the EV1.


  34. 34
    Len

     

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    Sep 22nd, 2007 (10:20 am)

    Battery – Lease??? Buy??? I have been driving electric vehicles for the last six years – only problem, the batteries don\’t last more than a few months – and I am talking about top quality deep-cycle batteries ($200+ each for 12 volt batteries) with expected life times of 6 to 8 years. The batteries have a 2 year guarantee and test \



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    ca870307

     

    ca870307
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  36. 37
    Brandon Clarke

     

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    WheyProteinIsolategirl

     

    WheyProteinIsolategirl
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