High gas prices: Good or bad for GM, the Volt?
Success dependent upon gas prices?
Chevy Volt sales and GM’s success
Will Chevy Volt sales be dependent upon gas prices? That’s the question StraightLine asked yesterday.
While I have an answer to that question, that’s not the question I would ask. Instead, I’d ask, are higher gas prices good or bad for GM, regardless of the Volt?
Back in 2008 I was helping a friend shop for a Toyota Camry hybrid. One July summer morning we stopped by a Toyota dealership that actually had 2 Camry hybrids on the lot at the same time – quite a feat in those days, as hybrids were selling as soon as they hit the lot, even with dealer markups as high as $5000. While that morning seemed a normal morning at Toyota, just next store the GM dealership was a very different scene, as high gas prices squashed any interest in most new GM vehicles.
The next time gas prices spike, however, GM will be different. GM will have a new, high profile sale’s tool and marketing weapon for fighting high gas prices: the Chevy Volt. So, back to the question that got us here, are Volt sales dependent upon gas prices?
Probably, but does that matter?
Volt sales for the first few years won’t be limited by gas prices, but by limited production capabilities. It could easily be several years – even a decade – before GM is producing 100,000 Volts per year for the US market. Moreover, it might take well into the 2020’s before GM actually recoups its production costs and starts achieving real profits via Volt sales – at least that was the opinion of Obama’s Auto Task Force.
Thus, will low gas prices hurt Chevy Volt – excuse me, Chevrolet Volt – sales? Probably if gas prices stay around $3.00 through the next five years, but does that really matter? Is the Volt really about sales?
For instance, if gas prices spiked and GM started making 150,000 Volts per year to meet increasing demand, but the same gas prices crushed sales on GM trucks and SUVs, would that be good or bad for GM?
My guess is that it would be very bad for GM.
For the next several years, probably at least the next decade, GM’s future is not dependent upon Volt sales, but it is probably dependent upon gas prices remaining relatively stable. For now, the Volt just needs to perform safely, and as planned. While the Volt might be a great sale’s tool for selling other GM vehicles, the Volt itself will be far more about marketing than sales for some time.
Thus, I doubt GM will be praying for much higher gas prices any time soon.
Using Hybrid and electric vehicles are more affordable than using fuel & gas vehicles in now a days the prices of fuel are so high that anyone has to think twice before buying a petrol or diesel car.
This is really good question?
Because, today’s fuel & gas prize so high,in future gas & fuel prize increase day by day. so many people not afforded vehicle.
I think many company will be manufactured large amount of hybrid & electric vehicle.
I like One model of Toyota that model name is corolla altis. Its eco-friendly and economical version-Altis CNG. The Altis CNG increases mileage and enhances savings.
Regards,
Micheal
I think that if gas hits $5.00 or more, many folks “will” spend more for the Volt even though the gas savings will not fully offset the higher cost.
Americans get very emotional about paying high prices for gas. They will do what ever they can to avoid giving money to the oil companies even if that means paying more money for a car like the Volt.
If you look in 2008 (when gas hit $4.00) Most dealer listed the Prius at at over $30K (sometimes with a $5K dealer surcharge!!!). What happened??? Toyota Dealers sold every last vehicle to the point that Toyota could not keep up with demand.
Yes. Some Americans will simply buy a conventional fuel efficient car. But there will also be a lot of Americans who will go out and buy a Volt….
I guess the way I view incentives is whether or not they are cost-effective – i.e. are they sustainable from a longer-term economic point of view?
So.. if the return on investment for a 20K solar array to power a home actually pays for itself and then some over 20 years – and the impediment to it’s initial construction is the up-front cost – then I could see my way to an argument for the government to “invest” in that solar array when the homeowner could not.
Notice I do not say “would not”.
The difference between those two is the problem that we have.
If you could borrow the money yourself for a 20K solar array – and at the end of 20 years it would pay for itself in lower electricity costs AND that would INCLUDE the interests costs on your loan then why would you not undertake this yourself rather than spending that money on something else?
And if you actually had that choice and chose not to do it – why should the govt incentivize you?
I agree with “duh”, at least through the next 5 years.
The Volt is good for challenging the paradigm and “thinking outside of the box”. However, if gas prices rise, the Volt is irrelevant for the foreseeable future.
If gas prices hit a sustained $6.00 in the US, the auto industry would change drastically and quickly or it would cease to exist. I doubt the big three could even survive gas prices if they hit $4.00 later this year, $5.00 next, and $6.00 the year after. (Actually, I don’t have any doubts).
Anyway, since I’m on the competition angle today:
What if we just had one basic credit for alternative vehicles worth $5,000 for achieving 60 mpg on the EPA’s city cycle?
For instance, 1.) 60 mpg on the EPA’s city cycle, 2.) Any combination of real world mileage, CO2 reductions and/or domesticity.
For example, a car that achieves 40 mpg – and I’m just making numbers up – might receive 20 extra mileage credits for using a fuel that reduces CO2 and is from America, such as ethanol, natural gas, etc.
Perhaps that’s not the best path, but shouldn’t we try to have alternative fuels, composite materials, batteries, safety software, etc. all competing against each other, and in combination with each other?
Isn’t that what the science is teaching us?
I think this is a “duh” question.
DUH.. do I want to pay high gasoline prices or 40K for a new car instead?
DUH?
option 3 – buy a cheap but traditional fuel-efficient car for 10-20K.
that’s what will happen if gasoline goes to 4, 5 or 6 dollars a gallon.
That’s why the Prius took off.. not so much because it was/is a hybrid but at least as much because it is NOT $30-40K.
You can buy a Highlander for 40K but not too many folks are doing it…
I just am pretty skeptical that high priced gasoline is going to drive people towards high-priced cars.
that’s my “duh” comment…
I think the VOLT is toast a “blip” in the rear-view mirror of automobiles.
I do not think it is irrelevant. It marks a turning point in the way that we look at automobiles and energy use. It’s mere existence ( I hope ) will force everyone to at least recognize that gasoline/ICE is not the only option available.
This is really a good question. Does it really matter?
Darn it, I could take either side on this question. If I look at technology in general, we are making really wonderful and significant advances every day. So from that aspect, IF, I was an environmentalist I would say higher gas prices might be good. Why – higher gas prices might force more people to buy improved Eco-friendly technology more quickly.
On the other hand, we are in an entirely different set of circumstances than when Bill Ford and Lee Iaccoca recommended an increase in the gas tax which would have resulted in higher fuel prices. Things change quickly don’t they?
The point is well taken that if gas were to hit something like $5-6.00/gallon, truck and SUV sales would most likely evaporate significantly which could hurt GM. If gasoline remains cheap however, GM keeps producing high profit margin trucks and SUV’s an a Volt every once in a while. This is not a bad business strategy since battery technology will most likely improve quite a bit in the next few years. Darn Chicken and Egg thing again huh, LOL
Of course peak oil could trump everything. When peal oil hits I believe fuel prices will skyrocket. Some people believe gasoline could hit $5-8.00/gal quickly. In that case truck and SUV sales would fall quickly hurting GM’s profit cow. It could also hurt the Volt sales since GM could not ramp enough to sell further undermining their ability to survive.
In summary; as a person who always has an opinion [be it right or wrong, LOL] I am going to take a stand and say I believe it would be in the long term interest of GM to see gasoline prices rise. Systematically over a period of years would be best.
I of course welcome all opposing views.
Tom G.