GM Ups Chevy Volt Incentives as Demand Wanes

General Motors has announced a $4,000 rebate (or $3,000 and a four year, zero interest loan from government-owned Ally Financial) on the slow-selling Chevy Volt. The company had a choice regarding how to deal with an excess supply of Volts that is growing faster than demand. GM could have, once again, temporarily halted production until inventory (currently at about a 6 month supply) came down to reasonable levels. It instead chooses to lose more millions of dollars by spending on incentives designed to manufacture demand that otherwise is practically nonexistent.

The much-hyped Chevy Volt was originally presented by GM as a green wonder-car that would be a savior for the company with sales expected in the 10,000 per month range by now. Almost three years after first hitting showrooms, the Volt now sees sales stabilizing at a dismal rate of approximately 1,500 per month. That’s roughly one Volt every two months for each Chevy dealership.

Sales for the Volt peaked closer to a 3,000 per month range when GM last upped incentives and admitted that it was “creating market” because “There is no plug-in market.” The cost to “create market” per month for the Volt, assuming an additional 1,500 vehicles sell (3,000 total) as a result of a $4,000 incentive, would be $12 million. Considering that about 1,500 Volt fans would have purchased the car anyway, the marginal difference would mean that the additional 1,500 sales come at an extra cost of approximately $8,000 per extra vehicle sold; assuming GM can get sales closer to the 3,000 mark.

The dire sales situation for the Volt points to just how inefficient the plug-in technology is. Consider that the car already gets a $7,500 federal tax credit which goes to the wealthy purchasers. Add another couple of thousand dollars for typical state subsidies. Now another $4,000 incentive from GM and we have a giveaway of close to $14,000 to sell each Volt! Worst of all, GM refuses to admit that the car is anything but a roaring success!

Adding insult to injury, much of the taxpayer-supplied subsidies for the Volt will go towards leases (also supplied by government-owned Ally Financial) that put drivers on the road for as short a period as two years. I have previously calculated that taxpayers are paying about $10 per each gallon of gas saved in these scenarios. The non-partisan Congressional Budget Office has reported that overall plug-in electric car subsidies are estimated to cost taxpayers about $7.5 billion over the next few years for little or no benefit.

$14,000 of incentives on a Chevy Volt and GM still does not seem to be able to sell more than about one tenth the amount of Toyota Camrys that sell in a month. GM and its shareholders lose money, as do taxpayers. Maybe it is time for GM to stop the farce and cut losses for those that are footing the bill to push a green agenda that centers on plug-in electric cars that can not succeed without massive subsidization.

Perhaps electric cars will one day have the technology to be a viable alternative to gas-powered vehicles without billions of dollars of taxpayer-funded handouts. That time is not yet here. While the technology is being improved, there is no need for GM to continue to try and fool the public that demand exists for the Volt where it does not.

It is past time for GM to come clean on the limitations of the Chevy Volt, instead of wasting millions of dollars to artificially manufacture demand to try and prove that the car is a success. The idea of coming up with a viable technology to lessen the consumption of fossil fuels is a good one. Let’s just do it in a more logical manner without the misrepresentations and wanton wasting of taxpayer money. It would have been a refreshing change if GM had finally chosen to admit that demand is lacking for the Chevy Volt. The time for such honesty at GM has obviously not yet come and all taxpayers will continue to pay the price as they remain on the hook for the subsidies that are required to keep the Chevy Volt farce alive.

Mark Modica is an NLPC Associate Fellow.