GM-VOLT : Chevy Volt Electric Car Site

January sales figures for GM were announced yesterday, and the automaker continued to see positive gains with overall sales coming in 22% greater than a year ago.

Included in the total of 178,897 cars and truck sold, GM announced that it had sold 321 Chevy Volts. This is in addition to the 326 Volts sold in December, indicating 647 have so far reached customers. Nissan for its part only sold 87 Leafs , and only 19 in December for a total of 106 units sold, less than one sixth as many as Volts.

Demand for the Volt has been red hot, and sales figures would be much higher if GM wasn’t deliberately pacing themselves. “Right now we’re selling every one we can make,” GM spokesman Tom Wilkinson said, “so as shipments rise we expect sales to rise as well.”

Nissan has 20,000 people who placed $99 deposits for a Leaf, so they could have sold more as well but for the fact they are being exceptionally cautious.

GM has plans to continue building on the Volt’s  momentum. In addition to new plans to build 25,000 Volts this year and up to 120,000 next year, the Volt team is highly focused on reducing costs.  After all with demand at $41,000 it is certain more would be sold a a lower price point.  GM CEO Dan Akerson has charged his team with taking at least $7500 in cost out of the car by its next generation. With the federal tax credit still in place that would put the car well below $30,000 and in the reach of a far greater amount of people.

Auto journalist Peter Valdes-Dapena of CNN analyzed discussed several areas GM is working to cut cost from the Volt.

The battery is believed to cost $10,000 and could be made cheaper by reducing its size. Currently GM only uses 65% of the 16 kwh pack for driving duty. As they become more comfortable with the battery’s durability it is possible to move that band closer to 90%, possibly reducing lithium cost by a third. Also new advanced lithium cathode technology the company has invested in could amplify those reductions by increasing energy density. “You do extensive amounts of research and development and you get the same functionality or better with fewer cells,” said GM Ventures President Jon Lauckner, “and you take a whole lot of cost out of the vehicle.”

By increasing production volume costs will become lower due to economy of scale.  Units become less expensive the more that are built and sold.  Putting the Voltec drivetrain in other models will also help in that regard.

Electric motors are expensive because they rely on valuable rare earth elements like neodymium which are only available in limited quantities from places like China.  Engineers are designing new electric motors that do not require rare earths and will thus be less expensive.

The Volt contains specialized first generation accessories like air  conditioning, heating, power steering, and braking that are powered by electricity rather than by the gas engine as their traditional counterparts are.  For the first version of the Volt these parts are particularly expensive.  GM engineers are now simplifying and refining those components so that they will be less expensive by the next version

Finally there is the possibility some of the neat high tech features found in the current Volt, like the LCD screens and capacitive center stack, could be made optional to produce a more economical future version.

Source (CNN)

GM finished finished 2010 strong, with December sales up 7.5% for the month, which outpaced cross-town rival Ford for the first time in…well, a long time.   Ford closed out the last month of the year with an increase of 6.8% (or possibly 3.5%… depending  on how you like to account for the sale of Volvo in Chinese hands).

For the year, the overall industry rebounded to about 11.5 million cars sold, which would still be a 30-odd year low if it were not for 2009.  GM’s part in that recovery was an additional 130,000 vehicles to consumers, while upping their sales 6%, to around 2.2 million vehicles.   Ford did still end the year as the strongest domestic automaker with a 15% gain.  /yes, I realize that Chrysler finsihed the year up 17%…but 17% of nothing is still nothing, and I refuse to write the words ‘strong’ and ‘Chrysler’ in the same sentence

Internally, all core brands reported double digit gains for the year, with Buick leading the way at 52%.  Cadillac, buoyed by the strength of the new Equinox SRX, gained 35%, while GMC posted 29%.  Only Chevrolet, GM’s largest division, which was expected to catch most of the ‘run-off’ from Pontiac and Saturn, could be considered a disappointment for the year, up around 16%.

Overall, the darling of the auto sector, was Hyundai, finishing up 24%, with Nissan second at 18%.   Toyota ‘brung up’ the rear amongst the large manufacturers at ‘no gain’

According to Don Johnson, vice president of GM U.S. sales (and possible undercover Miami detective), the auto industry will record another substantial year over year gain for 2011, up to about 13 million vehicles sold, before once again closing in on the more historical 16 million level, and then levelling off.

“Our sales this year reflect the impact of GM’s new business model,” Johnson said.  “The consistency of results that we achieved demonstrates the focus on our brands, dealers and customers, and how we compete aggressively for every sale, every day.”

Volt/LEAF Statistics for December

Inside the numbers, GM disclosed that they sold 326 Chevrolet Volts in their first month of availability.  GM had around 90 Volts in dealer inventory at the end of the month unsold.

Nissan, for its half of the electric car market, recorded 19 sales of the LEAF in the US for the month. While another 90(ish) cars did make landfall before the end of 2010, consumers did not take possession before the month’s end, and therefore were not counted.  Total deliveries internationally have not yet been tallied, but look to be around 100 units.

(GM Sales Report)

I can honestly say this is a post I have been waiting to make for a long time.  I figured I’d get my first chance in a couple of days when automotive companies release December sales figures, but since the Associated Press got hold of this data earlier I can post it now.

December was the first month the Chevrolet Volt and Nissan LEAF electric cars started deliveries in the US, kicking off the electric car future for our nation.

Both companies have begun the process deliberately very cautiously with the intention of slowly ramping up sales this year.   Nissan and GM are carefully monitoring the early adopters’ experiences and will adapt to their feedback in these early stages.  Nissan has bit more to be concerned about as the advent of new owners experiencing unpleasant range anxiety or actually running out of charge could delivery a crushing blow to the nascent industry, and the company’s pure EV plans.

According to the AP, GM sold between 250 and 350 Chevy Volts in December while Nissan sold a mere 10 LEAFs.  Nissan has been careful to only allow LEAF sales in warm locales, as suddenly dropping them into the deep freeze of the north will lead to many low EV range reports.  In fact Volt ranges for me in the NY area are in the mid to upper 20s with high use of cabin heating and lots of high speed highway driving.

Also noted in this report is a rumor which was started here on the GM-Volt.com Ownership forum which was of course not mentioned, referenced, or linked by the author.  The rumor suggests that GM will end the current $350 per month Volt lease deal on January 3rd.  This deal is highly sweetened by a $2000 corporate cap cost deduction, a super-low 0.6% APR interest rate and a $7500 reduction in the depreciation value by the federal tax credit.

It was created to allow the car to be affordable to those zealous early adopters who really can’t afford a $41,000 car.  With a handful sold, the company and its leasing associate US bank might soon pull back.

GM is being a bit coy about what will happen to the lease deal.  In the report, GM spokesperson Rob Peterson was quoted as saying the lease deal “will extend into 2011.”  Peterson said the deal won’t last forever, though current waitlisters will be honored.  ”I don’t have the specifics on how long it will be out there,” he said.

Volt marketing director John Hughes shares a similarly vague message with GM-Volt.com.  ”It is our intention to continue the Volt lease into the 2011 CY,” he said.

In a recent post, I argued that purchasing was the better option anyway.  In a poll GM-Volt readers agreed. Of 564 respondents, 44% said they were buying the car, and only 15% said they were leasing it.  An additional 26% were undecided, while 15% of readers said they had no plans to own the car.

Source (AP)

The business case for the Chevrolet Volt hinges critically on the price of gas.  Certainly there are a group of us out there who will run out and pay top dollar to drive the latest and greatest technology, and there are also those among us who will pay a premium for the ability to drive will little to no gasoline.  However, for the Volt to be embraced by a large swath of the population, it has to make economic sense.

Also for GM to be able to justify a high selling price for the car, making it profitable, consumers need to benefit financially through the use of electricity as a major fuel source.

It has been said many times that $2.50 per gallon gasoline does not help Volt sales.

People surely remember two years ago when oil reached $140 per barrel and gas prices broke the $4 per gallon barrier.  Interest in hybrids available at the time skyrocketed as did interest in the Volt, based on the traffic surge seen on this website.

That small peak faded but recently prices are beginning what appears to be a steady sustainable climb.  National gas prices have just broken the $3 per gallon mark and oil prices are approaching $100 per barrel again.

John Hofmeister is the former president of Shell Oil, and as such could be considered an authority on the subject. In a recent interview he revealed that it was his opinion the US could see $5 per gallon gas by 2012.

“I’m predicting actually the worst outcome over the next two years which takes us to 2012 with higher gasoline prices,” he told Pratt energy television.

He believes these high prices will result from growing global demand. Sales of gas-powered cars are continuing their dramatic  pace in China and India, and as those economies continue to grow so too will oil demand there.  The supply of easily accessible oil can only go down. Also with recent reports indicating American gas usage is declining since the 2008 gas price shocks, higher prices will be required to sustain revenue.

At $5 per gallon gas, the Chevy Volt becomes economically viable, and frankly could only be a good thing for the electrification of the automobile.  The greater economy, perhaps not so much.

Source (CNN)

I am someone who typically leases my cars.  I like the simplicity of monthly payments and the ability to turn in a car after three years so as to be able to go out and get a new one.  For the most part the lease allows me to pay the depreciation of the vehicle without having to deal with the hassles of selling it.

It was my original intention to do the same with the Volt, but after reviewing the difference between leasing and buying I decided to buy it in the end.

The main differences for the Volt that led me to this decision was the presence of the $7500 tax credit and the possibility of having a particularly valuable car after two or three years, due to limited supply, an early VIN  number (008), and possible underestimation of residual value in the lease.

Before going into this discussion I strongly advise anyone buying a Volt should only be paying MSRP and not a dollar more.  If your dealer wishes to charge a surcharge, go elsewhere.  Each car has a profit for the dealer baked in.  Beware of variably named items such as coating, tinting, prepping and freight and shipping.

Though I have the added option of heated leather seats, for the purpose of this exercise, consider a base model with an MSRP of $41,000 and 15,000 miles per year (higher than the usual 12,000).  Also keep in mind my discussion for the sake of discussion is a bit simplified and slightly inaccurate.

Leasing

When you lease a car, your monthly payment is based on the selling price, the down payment, the residual value, the tax on the car, and the money factor which is the interest rate the bank is charging.

To calculate the lease price you add the cost of the depreciation (MSRP -RV), the financing cost [(MSRP) + RV x MF], and the tax (MSRP*tax).  Divide the sum of these three by the number of months of the lease and you have the monthly payment.

The finance plan for the Volt, however, is skewed unfavorably against anyone who might wish to buy the car at lease end.  The leasing company, US Bank, gets the $7500 federal tax credit.  They could have applied that to reduce the selling price of the car, but instead tacked it on to the residual value, artificially inflating it.  In either case, the depreciation paydown would have been the same, but by tacking it on to the residual value you would have to pay back that $7500 if you decided to buy the car at end of lease. I took issue with this.

As it stands, the car costs $41,000 and has a residual value of 43% (at 15,000 miles per year).  That means at lease-end it is worth $17,630.  The depreciation paydown should be $23,370/36 or $649 per month. The $7500 tax credit is added to the residual value, and there is a $2500 down payment (includes first month payment.) There is also a $695 destination charge and a $2000 cap cost reduction which is a large subsidy apparently paid by GM, and another redeeming value of the lease. Thus the total depreciation paydown is $41,000 – ($17,630 -$695 + $7500 + $4500). That’s $12,065, which divided by 36 is $335 per month.

The finance charge is an extremely low 0.6% APR which converts to a money factor of 0.00025. The finance charge is thus (RV + MSRP * MF), or [($17,630+$41,000)*.00025] which equals $14.65 per month. At this point the lease is thus $350 per month.

The last item to add is the tax.  Though the Volt lease deal is $350 per month, taxes on the car have to be added.  They amount to ($41,000*.0875).  That sum divided by 36 months equal $100 per month.   Thus the total monthly payment is $450. I, however drive 22,000 miles per year.  Adding 21,000 more miles at 18 cents per mile is $3780.  Divided by 36 months and adding to each month results in a grand total of $550 per month.

Thus at the end of three years I would have paid out $21,950. To then buy the car would cost an additional $25,130 for a total cost of $47,800.

Buying

I reasoned the best way to buy the car outright would be to put down $7500 in cash and then recover it next April when I receive the tax credit. This would allow me to purchase the car for $33,500. The finance company will float you the $7500 (with interest) that can be paid back in April of 2011. Or they will give a 0 percent loan for the $7500 if you pay for the rest of the car in cash.

 Added taxes is $2931, which are unfortunately paid on the pre-tax credit amount. Also I chose to finance the car which is offered at 4.74% adding $5999 in interest when paid over 6 years. In this scenario, the total effective cost is $42,431 which is still significantly less then the $47,800 it would cost to first lease then buy.  Also by owning, I could also easily choose to sell the car at year 2 or 3, a much more difficult proposition if I had leased it.

Conclusion

The lease deal is extremely favorable if you are certain you will only want the car for three years and plan to drive less than 15,000 miles per year, or are limited by a monthly budget.  If you wish to take full advantage of the tax credit and plan to sell the car, buying is the better option. Purchasing is also a benefit as the future market value of the car may turn out considerably higher than the 43% currently estimated on the lease, depending on battery performance and the future price of gas.

What have you done or decided to do?

Today the first Volts have arrived to dealerships from Detroit, and are being picked up by customers across the nation. Today there will be 5 simultaneous deliveries including one to a retired airline pilot named Jeffrey Kaffee, in Denville, NJ who is the first overall. Kaffee traded in his Prius for the Volt. With the number of deliveries multiplying rapidly in the coming day weeks and months, people taking ownership now have to now decide whether to buy or lease the car.

At an MRSP of $41,000 the cutting-edge Volt comes in at a relatively affordable $33,500 after the $7500 federal tax credit it deducted. GM’s banking partners have formulated some creative methods for dealing with the credit such as floating the buyer a zero interest separate $7500 loan that comes due when they get their tax refund.

The lease option was created to make the car even more affordable, making the car available to a larger group of drivers.

The terms of the lease were spelled out in the Summer as $350 per month with $2500 down for a 36 month lease with 36,000 miles.

What hasn’t been known is what the car’s residual value will be at the end of the lease, and what the customer could then buy it for.

Volt marketing manager John Hughes notes that every deal “will be a little different,” and “depends on the equipment and how the deal is written.”

“There’s some variability in it,” he said. “We’ve given dealers all the parameters.”

Rather than spell out those subtleties for us and long with the myriad of disclaimers that accompany them, Hughes said it was best we “talk to dealers to ask details.”

Gordon Lai, a sales manager at Singh Chevrolet in Riverside, California, offers us the following details which he said came directly from GM:

US Bank (National)

Term: 36 Months
MSRP: $41,000.00
Selling Price: $41,000.00 [If dealer charges more, the payments change upward.]
Acquisition Fee: $695.00
Cap Cost Reduction: $2,000.00
Down Payment: $2,150.00
Balance/Amt. Financed: $37,545.00

Program Rate: 0.60

Program Residual: 43.00% (12,001 miles to 15,000 miles per year)
Low Miles Residual: 44.00% (12,000 miles or LESS per year)
Base Residual Value: $18,040.00
Federal Credit: $7,500.00
Contract Residual Value: $25,540.00

Program Payment: $349.51
Featured Payment: $350.00
First Month’s Payment: $349.51
Down Payment: $2,150.00
Security Deposit: $0.00
DUE AT LEASE SIGNING: $2,499.51* [plus fees noted below]
Advertised Due at Signing: $2,500.00

Total Monthly Payments: $12,582.36

Disposition Fee: $395.00 (Due at Lease End)

*Other Fees Due at Signing: All DMV Registration Fees, DMV Doc Fee, 8.75% Sales Tax on First Payment.

“The figures above are SPECIFICALLY for a Base Model Volt sold at MSRP only ($41,000),” said Lai.  “Add any options, dealer markups, increases in Sales Tax, etc… and the Payment goes up, or the ‘Out-of-Pocket’ down payment goes up.”