We’re within a year of the launch of GM’s flagship electric vehicle (EV), the Chevy Volt, and we’re already seeing detractors call it a failure (e.g. “Revenge of the Internal Combustion Engine“) and begin using it as evidence that the entire EV premise won’t work. This outcome was predictable, not because EVs are conceptually flawed, but because the Volt is a terrible value proposition, whether measured against better EVs or against high-mileage internal-combustion engine cars. The Chevy Volt isn’t failing because it’s electric, but because it’s a bad value.
The Volt is not a pure EV. Basically, it’s a Chevy Cruze outfitted with a relatively small battery pack and electric motor attached to an independent drive train. The battery pack is low-powered enough that it depletes after just 35 miles, and what you’re driving after that is just a heavier, gas-powered Cruze (the two cars are built on the same platform). So at best the Volt is a hybrid, and not even a very efficient one, because unlike Toyota’s (and others) single hybrid drive, the Volt runs separate drive trains for its electric and gas motors. In effect, it’s trying to be a gas powered Cruze, and also an all-electric Leaf as well as a hybrid Prius. A car can be an EV, a hybrid, or a gas-burner, but not all three. I understand the desire to try to bridge the gap in an effort to appeal to more consumers, but the result is an inappropriate juxtaposition that appeals to few.
Chevy has said one reason for the lack of enthusiasm around EVs is potential customers may have range anxiety, and in the case of the Volt, who can blame them? Even combining the ranges of the Volt’s fully-charged battery pack and a full tank of gas will only get you about 300 miles, which not too different from the electric-only range of some pure-EVs, and 200 miles less than the 500 mile range of the plug-in Prius. If your daily driving averages at or below 35 miles, though, and you charge every evening, you could drive the Volt in pure-EV mode indefinitely and never fill the tank. But then you’d never be using the conventional drive train, which you paid a lot for. And for me, this is the heart of the Volt’s limitations. It has two independent drive trains and three transmissions (to make the transmissions work together), making the final car complex, heavy and expensive. The better models of cars using any of the single drive train systems (internal combustion, electric or hybrid) can outperform the Volt for the price. This includes Chevy’s gas-only Cruze, which rings in at about $19,000 and gets 42 MPG. For comparison, the Volt is about $45,000 (or $38,000 after federal tax credit; economy info below), the Leaf is $35,000 (or $28,000 after the credit) and burns no gas, and the Prius is about $28,000 (no tax credit available) and gets better than 50 MPG.
The Volt compares so unfavorably with the Leaf and Prius also because once you’ve driven that first 35 miles on electric power, drained the battery and switched to the gas engine, the Volt only gets 33 mpg. “And why, you should be asking,” quipped Motor Trend, “does the Volt in gas mode deliver 13 [I count 17, but okay – GJ] fewer mpg than the Prius?” It’s simple, the Volt is two cars in one, sporting almost entirely separate gas and electric drive trains, making it heavy, unwieldy, expensive and uneconomical. All this over engineering also makes the vehicle very internally complicated, which presents opportunities for problems; for example, the Volt’s unique liquid cooling system appears to be the culprit in recent fires. No big surprise that sales are trailing expectations.
Volts aren’t as popular on the used market either. After 36 months, a Volt will lose 58% of its value, while a Prius will depreciate 46%, according to Kelly Bluebook’s projections. The secondary market as usual is figuring out how to price value, and maybe a three year depreciated Volt at $17,000 is comparable to the equivalent used Prius at $15,000, but I think I still would choose the Toyota.
GM had big ambitions for the Volt, planning to make 10,000 units during 2011, then quickly ramp production to 45,000 Volts in 2012. To date, though, they’ve sold only 5,000. There are good reasons for this poor sales performance, but none that indicate EVs as a class are bad cars.
Nevertheless, don’t be surprised to see GM begin to announce things like “we tried with the Volt to make a big push into electric cars, but Americans just aren’t ready,” or “consumers have made it clear they prefer gas engines.” And when this happens, don’t believe it. Because the fact is that it’s not EVs Americans don’t like, it’s inferior products.
The conclusion for potential consumers seems to be, if you want a hybrid, get a Prius, it’s far less expensive, far simpler and arguably more functional than the Volt. If you want a pure EV, the Leaf is a fine choice, but there are several other interesting models from smaller, niche, pure-play EV makers that range in price and luxury from about $900 (Kandi Technologies [KNDI]) to $60,000 and beyond (Tesla Motors [TSLA]).
Electric vehicles are the future. Since we’re just at the earliest stages of adoption, though, it’s possible for one bad model to have a disproportionate negative impact on perceptions. But don’t believe the negative hype. As I mentioned recently, EVs will “‘slowly but steadily gather momentum for a few years’ until a tipping point is reached ‘where they’re obviously the superior value, and in many ways the superior performance option across the board.'”
Disclosure: Green Alpha Advisors is long KNDI and TSLA
Garvin Jabusch is co-founder and chief investment officer of Green Alpha ® Advisors, and is co-manager of the Green Alpha ® Next Economy Index, or GANEX and the Sierra Club Green Alpha Portfolio. He also authors the blog “Green Alpha’s Next Economy.”