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Will Cutting the Price of the Chevy Volt Make More People Want It?

General Motors slashed the price of the Chevrolet Volt yesterday in hopes that it will bring in more buyers.
Chevrolet Volt and Nissan Leaf getting charged. Image via Wikimedia Commons

After watching sales of the Nissan Leaf expand since its price was cut substantially earlier this year, General Motors announced yesterday that it was slashing $5,000 off the price for its Chevrolet Volt in order to encourage more interest in the vehicle. That would put next year's model at around $35,000, and federal tax credits could lower the price even further, leveling it out at around $27,000.

When it first arrived on the market, the Volt received a lot of buzz, but its price tag of just over forty thousand dollars made it difficult to justify financially for many.

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“When it first came out, the people who bought it were die-hard people that strongly believed in electric,” said Robin Rosen, a Volt owner and Chevrolet dealer at Oasis Auto Center in New Jersey. “The first buyers that came in had solar panels on their home and they planned on doing everything pretty green. After you took care of the customers that were in the market, then the price tag just becomes too high.”

General Motors CEO Dan Akerson agrees. “This is a unique car that has one disadvantage and that’s the cost at its current volume," he told Automotive News.

The price cut is an attempt to draw those otherwise not inclined into the Volt loop to see what they’re missing. “I find it absolutely a wonderful car,” Rosen said. She’s not alone. For the second year in a row, the car won Consumer Reports’ 2012 owner-satisfaction survey. Respondents were asked, “Considering all factors—price, reliability, comfort, enjoyment, etc.—would get this car if you had to do it all over again?” Ninety-two percent of participating Volt drivers said, “Definitely yes.”

So clearly this car has some charm. It’s just a matter of getting people to the showroom floor to see it in the first place, which hopefully lowering costs will do.

More generally, electric vehicles have a long way to go before they become the norm. Currently, of all new cars and trucks purchased in the United States, electric ones account for merely a half percent of that larger total.

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“The average person doesn’t really care” about electric cars, said Rosen, and that’s a significant problem to overcome. “Especially in today’s economy and the way everybody’s on tight budgets, people might want to be more green, but they’re not going to pay a premium for it.”

The Volt's launch competitor, the Nissan Leaf, is also poking along, and the two are selling in similar numbers. While both are valuable as symbols of their parent companies' commitment to the future, neither is exactly a blockbuster hit.

Compare that to Tesla’s Model S, which costs substantially more than the Leaf and the Volt, and which outsold the latter in the first quarter of 2013. This success has prompted GM to set up a small committee to assess Tesla’s threat level.

But Tesla’s numbers come with a caveat. It is still fulfilling orders from its waiting list, and wait time on the Tesla ordering site is pegged at a month to two months. Naturally, the waiting list is full of enthusiastic Tesla fans—people willing to shell out the cash for a car they think is upscale, beautiful, and eco-friendly. But once everyone on the current waiting list is accommodated, how will the car fare among the general public? Will it be viable in the larger public?

Importantly, the Model S is competing in a market that's less price-conscious than the Volt and Leaf. By aiming at the luxury market with price points ranging from $64,000 to $84,000 and up, depending on options, the Model S is the target of more wealthy buyers willing and able to trade range flexibility for a primo ride.

The Volt and Leaf, on the other hand, are competing in the vast mid-sized sedan space, which already is flooded with perceived eco-options and a lot of value. EVs right now aren't going to be a value proposition, which makes them harder to sell when they're pitted against gas-powered cars that are. With the price cuts, however, GM hopes that the Volt's cool technology won't be overshadowed by a higher sticker price.