Posted by: bmeverett | January 18, 2009

Deus Lo Volt! (God wants a Chevy Volt!)


The great Detroit bailout continues with billions flowing to GM and Chrysler to get them through these difficult times and save Michigan from becoming an underdeveloped country. It’s not quite clear, however, what GM is supposed to look like after its impending transition. The simple view of the few remaining free-marketers is that GM should start making profitable vehicles, allowing them to become once again a viable company and (dare we hope?) repay the money we have given them. That doesn’t seem to be the view of the democrats, however. Michigan Governor Jennifer Granholm has been telling anyone who’ll listen that GM’s future is in a high-tech plug-in hybrid called the Chevrolet Volt, made of course in Michigan. For those of you not members of the technorati, a Chevy Volt is an electric car that can be recharged at home every night with enough power to drive about 40 miles. The car also has a small gasoline engine to recharge the battery after its drained. Pretty cool, right? Perhaps, but profitable? Unlikely.

The Volt is supposed to hit the showrooms in 2010. Let’s take a quick look at what it will have to offer. The Volt will be about the size of the mid-size Chevy Cobalt, which is a little longer, but a little narrower. Both will offer 4-passenger sedans, but the Volt will have a small trunk (10.6 cubic feet versus 13.9 cubic feet for the Cobalt). The Cobalt has a sticker price as low as $16,000, but let’s go with a top-of-the line SS Turbocharged model with a sticker price of about $24,000, which means you could actually buy one for around $21,000. The Volt, on the other hand, is reported to have an expected sales price around $35,000. If you can get a 10-year car loan at 7.5%, you would pay about $2,000 more per year for the Volt than for the Cobalt. OK, but you’d get that back on fuel savings, right? Let’s see.

According to a study by the Electric Power Research Institute (EPRI), a plug-in hybrid with a 40-mile all-electric range (PHEV40) would on average use electricity for about two-thirds of its travel and gasoline for the rest. The press likes to gush about the 150 mpg rating of the Volt, but it makes no sense to divide total miles traveled by the amount of gasoline used. Electricity must be made out of some other form of energy – usually coal in the US. The Volt simply uses a different fuel.

If we take GM at its word, the fuel cost comparison for an average driver would look like this:

Cobalt:

Total miles driven per year: 12,000

Gasoline miles: 12,000

Gasoline mileage: 25 mpg

Gallons of gasoline per year: 480

Price per gallon: $2

Annual gasoline cost: $960

Volt:

Total miles driven per year: 12,000

Gasoline miles: 4,000

Gasoline mileage: 49 mpg

Gallons of gasoline per year: 82

Price per gallon: $2

Annual gasoline cost: $164

Electricity miles: 8,000

kWh per mile: 0.3

kWh per year: 2,400

Price (residential) per kWh: $0.11

Annual electricity cost: $264

Annual fuel cost: $428

Annual savings: $532

On balance, you’d be paying $2,000 more every year for a car that would save you about $530 a year in fuel. Even if gas prices went back up to $4 a gallon, you’d still save only $1,300 a year in return for your $2,000. And that’s if everything worked as planned. The Volt still has some serious questions. Will it really drive 40 miles on a charge? Will the battery last the full life of the car or will you need a $10,000 replacement after a few years. Will the battery catch fire? How reliable will the car be? How would you charge it when you’re away from home?

There is a small segment of the consuming population that will buy this car because it’s a cool gadget or because they want the greenest possible lifestyle and can afford the expense. Most people, however, need to be rational consumers and buy cars for cost and safety as well as for cachet.

What about the environment and national security? Wouldn’t the Volt be a step forward? That’s not clear. GM likes to crow that the Volt will produce zero emissions in all-electric operation. That’s true, but generating the electricity produces a lot of pollution. GM’s answer: that’s not my concern. Despite all the hype about wind solar and a rejuvenated nuclear program, most of the anticipated growth in US electricity generation (even without plug-in hybrids) will be coal. Taking into account the whole system from coal production to driving happily down the road, the Volt would probably produce more air pollution and maybe 15% less CO2 than the Cobalt.

Will the Volt be profitable? GM doesn’t think so. On January 14, GM Vice President Larry Burns called for a “public/private partnership” to make electric cars successful. In other words, the market won’t support the Volt. Congress doesn’t think so either, since it’s already voted a $5,000 tax credit for the purchase of a PHEV.

We’ve already given GM $5 billion, and they’ve come right back and asked for more. Encouraging this bankrupt company to build expensive gadgets instead of profitable cars is likely to ensure that we have to give them billions and billions every year to keep them going. People in Michigan may like that, but the rest of us shouldn’t.

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Responses

  1. This car is AWESOME! I want one so bad, who wouldn’t?! Wish the price tag wasn’t so steep though, and I think that 40k is for base. 😦 Oh well I’ll be sure too look out for a used, my Prius is just fine for now! 🙂


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