The Chevy Volt madness continued this week with General Motors announcing that consumers will see a $5,000 decrease in the price of President Obama's favorite green wonder-car. Sales of the Volt have been dismal, with most consumers refusing to be as smitten with the car as the President and the few enthusiastic green ideologues who seemed to believe that spending approximately $20,000 more for a car (over a gas-powered rival) that can save them about $3 a day in gas makes sense. What seems to go unrecognized is the fact that the price cut comes at the expense of GM shareholders, not to mention the costs to American taxpayers.
The price for the 2014 Volt will start at around $35,000. Some sources, including GM, deceptively tout the reduced cost of the Volt as being $27,500, reflecting the $7,500 federal tax credit for the car. It is important to realize that the cost of the Volt remains $35,000; taxpayers are paying for the extra $7,500 subsidy. So let's be clear, the cost of the 2014 Chevy Volt will start at $35,000 with mostly affluent consumers paying $27,500 and taxpayers paying $7,500.
While buyers of the Volt will now save $5,000 compared to the 2013 model, the savings also come at a cost to others; particularly GM shareholders. You see, GM loses an undisclosed amount of money on every Volt sold. That amount has just increased by $5,000. It appears that GM has no limits to how much money it will lose to spur sales of a politically-motivated car that can not succeed on its own merits in the free market. Not only are government subsidies needed to sell the car, which are close to $10,000 per vehicle when state credits are factored in, but GM and its shareholders must bear an additional loss to make the car saleable.
The costs to GM shareholders for the Volt go beyond the money lost on each vehicle sold. There is also the cost for GM to keep an emergency hazmat team on call in the event of accidents where airbags deploy in the Volt. The volatile lithium-ion based power source is so dangerous that GM specialists will be deployed to the scene of accidents to ensure that proper procedures are taken to avoid further injuries to those involved. Explosions, super-heated fires and electrocution are some of the specific risks.
GM also has a special group of customer service reps employed to specifically deal with Volt concerns. The car is evidently so politically important to GM as to warrant special care to avoid any customer dissatisfaction with glitches that may occur. There seems to be no end to the amount of money GM is willing to lose to keep the Chevy Volt boondoggle alive.
Despite the help from cronies in the media that hyped the Volt since its inception, sales for the car have never lived up to the rosy projections made by GM when they proclaimed the car to be a game changer that would have seen sales in the 20,000 unit per month range by now. Somehow a car that could travel about 35 miles on an overnight charge and then get about 30 miles per gallon of premium fuel was expected to be a huge hit, despite the additional cost of $20,000 over similar size, gas-powered competitors.
So, what are the expected results of the additional money spent by GM shareholders? We can examine June's sales results to get a clue. GM threw additional incentives of $5,000 each on the Volt in June to help clear an inventory build-up that resulted from the lack of demand on the car. Sales rose from an embarrassing 1,607 in May to an only somewhat less embarrassing 2,698 in June. That's approximately an additional $13,500,000 to sell an extra 1,000 Volts per month. That figure will increase if GM decides to start another ad blitz for the anti-capitalistic Volt.
Let's also not forget that taxpayers bear the burden for increased sales as well. The extra 1,000 or so Volts that GM will sell will cost taxpayers about $10,000,000 more per month in federal and state subsidies. I have still not heard a reasonable justification for the high cost to taxpayers to subsidize a car that does little, if anything, to lessen the country's dependence on foreign oil. I can also see no benefit to the environment given the small percentage of fuel that will be saved. There is also the matter of volatile lithium-ion based battery production and disposal which poses a risk to Mother Earth. Lastly, let's not forget that electricity used to power the Volt still comes from mostly coal-burning power plants.
Focusing only on the costs of electric car subsidies to taxpayers exposes the illogical mindset of proponents of cars like the Volt. Subsidization may lead to approximately 2 million electric cars on US roads within the next few years. The cost to taxpayers for subsidies now jumps to about $20 billion! What's the benefit? There are over 200 million cars on the road which account for about half of America's oil consumption. We can reduce US oil consumption by less than half a percent at the cost of $20 billion. Wouldn't it make sense to wait until viable alternatively-powered vehicles developed the technology needed to succeed in the marketplace without government intrusion? Are we hampering development of technology like natural gas vehicles or other alternate technology by pushing the electric car agenda on the public?
The Chevy Volt has become a symbol of American anti-capitalism. Ignore free markets and produce a car encouraged by government, subsidized by taxpayers and not wanted by the majority of the public while ignoring the basic premise that the idea of capitalism is to actually make a profit. GM shows no signs of ending the fiasco as it doubles down and plans to introduce a Cadillac version (along with a plug-in Cruze) of the electric Edsel.
Calling the Volt an electric Edsel is actually a disservice to the Ford folks who brought us the Edsel. You see, at least Ford only waited a couple of years to pull the plug on a car that clearly was not accepted in the free market. Losses were cut in the millions of dollar range. GM clearly intends to lose billions of dollars for taxpayers and shareholders as it goes to any lengths to spur sales. Tax subsidies designed to make the Volt competitive were not enough to make the car viable. GM's $5,000 price cut on the Volt is just further evidence that government mandates and a green energy agenda gone wild is a costly burden to others that must absorb the costs.
Mark Modica is an NLPC Associate Fellow.
