Let's be fair to the Volt

A study finds that GM loses an estimated $49,000 per Volt, almost enough to buy a new Suburban for each Volt purchaser.  GM's response is only that the study doesn't allocate the development cost--an estimated $1.2 billion--over the full life of the design.  Let's figure out what the real costs will be.

OK, let's amortize the costs over, say, five years--a typical time between model updates.  We have a development cost of $1.2 billion, sales of about 15,000 annually (26,000 have been sold so far), and GM is currently paying about 6.5% on long term bonds needed to pay for this. Right? Right.  Each year, to pay off R&D costs, GM's first $300 million in revenues from the Volt must be devoted to this, or we will say it is a subsidy from....let's be fair, the taxpayer.

OK, year one, about 12,000 sold, so the R&D cost per vehicle would be about $25,000.  This year, maybe 20,000 will be sold, so the R&D cost per vehicle is about $15,000.  Overall, the company would need to recover $600 million in R&D and interest costs, so for about 32,000 vehicles, the R&D loss would be around $18,000 per vehicle.  Increase sales to the suggested 50,000 units per year, and the R&D cost lost is about $6000 per vehicle--count me skeptical on this one.

Next up is the BOM loss, and I don't think we'll be getting any precise information on this.  Suffice it to say that the estimated cost to replace the batteries with a Prius is getting into four figures, and then you've got a motor for a few thousand dollars as well.  I would have to guess that the BOM and assembly cost for the "Cobalt priced like a Bimmer" is about, or is somewhat higher than, the $40,000 sticker price.

Which is a long way of noting that my best guess about the loss GM the taxpayer is taking on this boondoggle is not quite $49,000, but is rather more in the range of about $25,000--the R&D cost not recovered plus the $7500 federal tax credit.  So in order to get a Volt in the hands of a driver, the taxpayer pays the equivalent amount for a well equipped Malibu.