Tuesday, September 02, 2008

1 Volt or 2 Priuses?

Original Article

Let’s say that in 2010 you have $40,000-$50,000 to spend on a new hybrid car. Would you rather buy one Chevrolet Volt, or for about the same money, two Toyota Priuses?

That’s shaping up to be the value proposition, or close to it, for the Volt, when it is projected to arrive in late 2010.

General Motors calls the Volt an “extended range electric vehicle,” able to run 40 miles on its lithium-ion batteries alone before needing a recharge. Because the Volt will be equipped with a small gasoline engine to run an onboard charging system (the engine is connected only to a generator, not the wheels), by most definitions it is a hybrid.

The good news for Volt fans — and there are a lot of them — is that Rick Wagoner, chairman and chief executive of General Motors, announced on June 3 that the Volt has a green light for production. The bad news is that four weeks later, G.M.’s vice chairman, Bob Lutz, told a Seattle newspaper the Volt could cost “about $40,000.” And that even at that price G.M. would lose money on it — just what G.M. needs, more things to lose money on.

Mr. Lutz has also suggested a more “realistic price” for the Volt would be about $48,000.

When the Volt first appeared in concept car form at the 2007 Detroit auto show, its price was targeted for around $25,000 — competitive with hybrid vehicles like the Prius (which now costs $21,500) and the Honda Civic Hybrid ($22,600). Prospective buyers, G.M. said, would be willing to pay a bit more for the Volt, since it could theoretically be operated gas-free for short trips.

Later, however, the estimates for the Volt’s price began to inflate faster than that of a Pentagon hammer — first, to $30,000, then to $35,000 and of late, toward infinity and beyond. (Should we even bring up the possibility that Chevy dealers might be tempted to add their own markups to the first Volts?)

Just in case a carrot is needed to stimulate interest among early adopters and the environmental do-gooders, G.M. is now lobbying Congress for a $7,000 tax credit to help offset the Volt’s ballooning price. (Senator John McCain has said he might support $5,000 in connection with his plan to offer a $300 million cash prize to the first entity that develops a better automotive battery.)

But will incentives like tax credits — which, by the way, cannot be deducted by those paying the dreaded Alternative Minimum Tax — be enough? So far, G.M.’s track record with its current hybrids, vehicles now eligible for tax credits of $1,300-$2,200, has not been characterized by success.

Embarrassingly, G.M. has had to delay the launch of its highly promoted “mild hybrid” versions of the 2008 Saturn Aura, Saturn Vue and Chevrolet Malibu because of a battery recall. General Motors discovered the batteries already installed in 9,000 2007 model Aura and Vue hybrids were likely to fail prematurely. So a recall was launched in February, and it is still not completed. Batteries for those vehicles had to be replaced before more could be made available for the ‘08 hybrid vehicles, Tom Wilkinson, a G.M. spokesman, told The Associated Press in late June.

In the meantime, G.M.’s competition keeps moving the bar: new Honda and Toyota hybrids (including a new Prius), priced in the $20,000 range, are due to appear early next year; more fuel-sipping clean diesels are being announced; fuel-cell technology continues to advance; and increasing numbers of hydrogen-powered cars are already in the hands of test-fleet drivers.

So, by the time the 2011 model year Volt appears, a new generation of highly fuel-efficient green vehicles will have a head start in the marketplace. The $40,000-plus Volt could be the most expensive of the lot, and one wonders how much could its price, relative to other hybrids, influence its appeal?

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