When Chevy Volt battery costs are cut in half, what happens?
A Chevy Volt battery pack
Is the Volt a $30,000 car with a $10,000 battery?
Last I heard, GM is selling the Chevy Volt plug-in at cost. Likewise, GM has suggested that its battery pack costs about $8,000 per Volt, however, soon the Volt should be able to utilize new chemistries and materials to cut the cost of the Volt battery in half.
So, would Volt sales shoot through the roof?
Obviously, a cheaper Volt would lead to more sales, but how many more? More important, what happens when plug-in tax credits expire?
Today, the Volt costs almost $40,000. After a $7500 tax credit those costs drop to $32,500. If battery costs are cut in half, that could bring the cost down to $28,500 — still a lot more than a comparably sized Chevy Cruze, for instance. But, once the tax credit expires, the base Volt cost would jump back to $36,000.
Now, to be sure, other Volt costs will also decline as scale improves, but GM still needs to accrue a profit from Volt sales and Volt sales eventually have to help recover R&D costs — both past and future. So, I’d argue that in a best case scenario a 50 percent reduction in Volt battery costs, plus a few thousand here and there due to scale, only equates to a plug-in tax credit offset, as a best case scenario.
Some how, the numbers just don’t seem to add up.
Take away tax credits and offer the battery pack for free, and the Volt is still a $32,000 vehicle. Considering there still isn’t yet any profit margin, can scale do anything but create a profit margin?
I’m not trying to be cynical. I honestly believe that plug-in vehicles will be a critical component to killing OPEC dependence and moving the US energy paradigm towards an oil-free future, but the numbers seem to suggest that such a future isn’t going to be very cost-effective for some time if plug-ins and lithium-ion are the key technologies.
I have to be missing something, right?
As our host said: “It really is time for a new America, but it has to be an America that voters from both sides of the political aisle can buy into, not just one half of them.”.
I fully agree with this statement while realizing that nothing will ever happen as long as we stay as divided as we are today. While the political season will soon be in full swing the handwriting already seems to be on the wall.
EV tax credits will most likely be cut if not completely eliminated. Tax credits for Solar PV on homes which were to last until 2016 will also probably disappear. Renewable energy credits and/or certificates will also be significantly reduced or eliminated. Fuel economy standards might even be rolled back; who knows.
I am very concerned that all of the gains we have made up to this point will be lost with a few strokes of the pen. We really seriously need to find ways to work together for the good of the country and I don’t see us making any progress in that direction.
Tom-
I think we should have concrete goals, such as OPEC independence by 2020, foreign oil independence by 2030, and oil independence by 2040 — or something along those lines.
But, there has to be goals. There has to be a concrete business plan.
Unfortunately, I agree with Smurf’s points about the almost political impossibility of achieving any aggressive change in energy policy because serious change would have to be achieved by a grand compromise.
Nevertheless, my plan would utilize oil tars, and natural gas, but only as short-term interim solutions to quickly squash our dependence upon OPEC. Even if such domestic resources don’t make oil cheaper, even a little more expensive, tapping into these resources could create a lot of jobs, and with the right kind of incentives, I believe that big energy companies could be incentivized to think long term sustainable solutions.
A serious change in the energy paradigm will take decades to complete and energy companies have the ability to think long term. So, think grand compromise. How can we take advantage of short term domestic fossil fuels to end OPEC dependence as quickly as possibly AND keep energy costs low while concurrently building out new sustainable supplies at a few percent per year — say 3 percent per year for 3 decades, for instance.
Nevertheless, it all has start with real goals and benchmarks towards those goals that all the players involved agree to before starting.
To me, rebuilding the US economy is not going to be easy. In my opinion it’s going to take an unbelievably massive program with real long term vision, but also cost-effectiveness. It really is time for a new America, but it has to be an America that voters from both sides of the political aisle can buy into, not just one half of them.
Dahc,
I agree that the technology will not advance as fast as WE want it to.
If energy independence is going to happen in our lifetime, it will have to be in alternative fuels.
Desire and politics will play a big part.
Most peoples’ desire is simply to have cheap gasoline. Their desire for oil independence is fed by the belief that this will lead to cheaper gasoline prices.
And politically, as long as we have half our politicians promising cheap gasoline from domestic drilling and claiming we have more oil than Saudia Arabia, we will not make any significant strides toward energy independence…….
So I am thinking – maybe we should define what our goals are first. Is our goal to be 100% energy independent by some date or is some percentage like 75% o.k.? Is importing oil from Canada’s tar sands o.k and if it is can we subtract that amount from our total imported quantity? Or do we go for 0.0% imports?
By the way; according to the T. Boon Pickens website we imported 322 million barrels last month which was 56% of our oil and we spent $36.4 billion for that oil. That is $436.8 billion dollars up in smoke every year to get our behinds from point “A” to point “B”.
Is this insanity or what?
I honestly don’t know if there is a simple answer, Tom.
For instance, we can say that people don’t own cars that long, but consider the legacy effect.
There are roughly 250 million vehicles on US roads, at 15 million sales per year, which could be very high today and in the next several years or decades, it still takes almost 2 decades to recycle the fleet.
12 million sales per year might be a more realistic number — which means 2 decades+.
But, if economic times don’t improve considerably soon, not only is 12 millions sales per year unrealistic, but ever more consumers will hold onto vehicles longer.
Inevitably, I think pushing towards hybrids makes the most sense — at least in terms of battery vehicles — because they are most cost-effective and they could be upgraded to plug-ins if a major battery breakthrough is achieved.
But, because of the legacy effect, if we’re not all-in hybrids or EVs, today, then drop in fuels seem most critical.
Go by Nissan’s numbers. 10 percent by 2020. That means 90 percent will still require liquid fuels by 2020 and the legacy effect ensures they’ll still need liquid fuels for about another 15 – 20 years.
If we’re not moving very aggressively today, then it just means that liquid fuels are that much more important for decades longer.
The truth is, we’re not moving that aggressively today, and that guarantees foreign oil dependence for decades more.
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I don’t know; maybe hybrids aren’t the right strategy to achieve energy independence that is.
Maybe we should just go all electric or higher efficiency Internal Combustion Engine {ICE} vehicles. If you can buy a 30-40 mpg car with and ICE why pay extra for a hybrid that takes 7-10 years to recover the cost? People don’t usually own cars for that long anyway. Aren’t we just wasting money?
Instead; for most daily drivers – just go pure electric. Forget the dual power trains of ICE’s, electric motors and batteries and all the plug in hybrid stuff. Reserve the plugin parking spots for all electric vehicles wouldn’t that make more sense?
I don’t know; what do you think. Are hybrids really the answer?