When Chevy Volt battery costs are cut in half, what happens?
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?