Future of Auto Industry Up for Grabs with GM's Volt Debut

By Michael Kanellos

General Motors (GM)–the lumbering, money-losing giant of American industry–will formally unveil the Chevy Volt today to celebrate its 100th anniversary. The event, though, will mark more than a new car for GM and a triple-digit anniversary. It will set the stage for a turn in the balance of power in the automotive business.

The Volt won’t start reaching consumers until late 2010. The initial reaction and test drives among customers will be more crucial than what gets said today. But the public will get the formal look at the car today and get some technical details. These will be hashed out and some consensus or momentum may begin to emerge.

If the Volt lives up to its promises, it will serve as a wake up call to the large Japanese automakers. GM has been the principal proponent among large manufacturers of plug-in hybrids. Plug-ins can be charged from wall sockets. They get better mileage than regular hybrids and nearly the same mileage under average daily driving conditions as fully electric cars. Because the Volt will drive the first 40 miles on electricity and most Americans only drive about 26 miles a day, these cars will function effectively as electric cars.

Mass manufactured plug-ins, though, are expected to cost only about $6,000 or so more than standard hybrids when coming out in volume and tens of thousands less than equivalent all-electric cars. The Volt is initially expected to cost close to $40,000. That’s a good $16,000 over the cost of a low-end Prius right now, but the Prius has been in volume production for several years. Toyota (TM) has sold more than 1.6 million hybrids to date.

Toyota, Nissan (NSANY) and Honda (HMC) are building plug-ins as well, but clearly GM has done its homework. If it got the Volt right, the company won’t be a laggard in a key market anymore. Motor Trend also reports that Opel and Vauxhall, two GM brands, will come out with series hybrids like the Volt in 2010 too. Thus, it will be a global assault.

Success also means bad news for all of those electric car start-ups like Tesla Motors. While some of these companies plan to concentrate only on high-end electric sports cars, some (like Tesla) plan to get into the sedan market, in which case it’s going to have to beat GM on price, market penetration and advertising.

But if the Volt doesn’t live up to billing, stockholders are going to really be asking questions and/or voting with their feet. GM has lost $57.5 billion in the last 18 months. The price will also need to be below $40,000 and GM will have to demonstrate how the price will decline in the coming years. If the Volt doesn’t cut it, the future will be more bleak than the present for GM.

We also might get a glimpse into the future of battery maker A123 Systems. GM said it has already decided on a battery maker for the Volt. The contest is down to two groups, one of which includes A123. If A123 is part of the winning bid, its coming IPO looks a lot better. GM owns around five percent of the company so they tend to be favored. If GM went with the other group, it could be a tough IPO to sell.

We’re not sure if they will release the name of the battery maker or not. But it will be something to listen for.

Comments

[Jeff B.:]

Yes, but the real news is that GM will celebrate it's 100 anniversary by lobbying our elected officials (along with Ford & Cerberus-Chrysler) for a tax-payer funded bailout. Hopefully, our elected officials are not dumb enough to give it to them. The Volt is a nice idea, but the battery technology & cost effectiveness is unproven. Right now, this is all pure hype.

2008 Sep 16 10:26 AM

[User 263532:]

Hype? Ok, agreed, however a government subsidy for the Volt/electric cars could be a huge incentive for other automakers to research and produce electric cars.

2008 Sep 16 12:52 PM

[Byallmeans:]

Since when is a Loan you have to repay a bailout. When you bought your house did the bank give you a bailout? when you bought your car did the bank give you a bailout? I think not. The Funds being lobbied by the automakers and that includes all of them even the asian manufacturers can take advantage of them was part of an incentive package passed by congress and approved last year. The incentive package is a group of 4% loans to be repaid and to be used to retool older automotive infrastructure to build fuel effecient small models. The wording is in there and its tight so BAILOUT it isn't. Park the Hyperbole and quit dancing around american industry's grave.

2008 Sep 16 08:59 PM

[Byallmeans:]

Yes Toyota is testing a plug in version of the Prius. Reports have it going 6 (countem 6 miles) on the plug in battery before the standard prius powertrain takes over. Now that my friends is a serious waste of time and almost criminal to call a plug in.

2008 Sep 16 09:03 PM

[AmericanVOR:]

Every foriegn automaker in this country has had help from our government.
In other countries, it is the norm for their governments to support their industries, especially the auto industries.
So we have the foreign makes being supported by their AND our governments, yet we have to compete with that without the same support.
But wait, there's more! The government can step in and mandate the fuel efficiency standards, then walk away.
Imagine owning a business and having the government put a mandate on your product that will cost you billion to acheive, then offer no support, but yet still give tax incentives to your competition.
Add to that the uncapped opportunity for marketshare here for the forieng makes while the Chinese government mandates no foriegn make can have more than 49% marketshare. The Japanese market is all but closed to the American market.
And the American auto industry has been working like this for years. Now the shift in technology has turned into something all new, and not just an evolution. The American industry needs to change gears fast, and they will. They're just looking for a loan from our government to help that process go faster.

2008 Sep 16 10:34 PM

[User 183867:]

<<GM owns around five percent of the company so they tend to be favored.>>

I am a GM and A123 bull, but I haven't been able to substantiate this at all. Do you have a citation for this?

2008 Sep 17 10:48 PM

[ASEtech:]

If GM gets this right (which is unlikely given how much they've gotten wrong over the last few years) I think it will be a great boost. It seems like the market is moving toward plug in electric vehicles and if so, then GM is ahead of the competition. However, even if they do get it right it seems unlikely that they will be able to do much with their new found consumer acceptability since they are so used to just building whatever they want instead of figuring out what will sell. In the end it probably doesn't matter, they will just ask for more money and we will give it to them. It would make my auto repair business a lot easier if I could do that!

2008 Dec 31 11:42 AM