GM Amps Up Volt Production

The volt is a really expensive bad idea. Great idea for a company coming out of bankruptcy to take this kind of risk.

 

Sadly, that article looks like utter horseshit. Applying all the R&D costs for any project to the first few units sold will result in the same bad analysis, for any product.
A realistic calculation would take into account the R&D costs, but also the revenue from all future sales, and also whatever benefit the R&D might have on other future models - which in this case is pretty important.

barfo

 

Slightly agree, barfo. The expectation is that the per-unit cost of the first run (or the low-rate production to start) will be higher, and then as production scales up the costs will decrease with sticker price remaining the same. You don't put the "future R&D benefit" in, though, because the R&D spent previously has been to design this particular version/model/etc of the car. If you want to, say, invest R&D in a new battery for the 2014 model, then those costs are generally included with the 2014 design and development costs, not anything that's already happened.

I haven't looked for the figures, but is there a projected sales number for the next 5 years or so? Something like 25k cars per year or whatever? That's what you'd apply all of these subsidy offsets to.

A better question might be: WTH is the gov't, doing, though, heavily subsidizing cars that only the 1% can afford to drive?

 

Some R&D done for this car will surely transfer to later electric vehicles. No car is ever designed completely from scratch. Just as they probably didn't spend a lot of R&D effort on the Volt deciding whether the wheels should be round or oblong, they may not have to redesign (for example) the battery charge connector for the next electric vehicle.

I would have to assume that GM makes sales projections, at least internally, but I don't know them.

First off, it isn't the government, it's GM. Secondly, the price will come down (if not for the Volt, then for some follow-on vehicle).

barfo

 

R&D expenses by a company are fine, and the cost of the first thing produced and sold is expensive, sure.

But all the expenses here in question are not risk capital by investors. Instead it's a boondoggle by the government and a waste and absolute misuse of our tax money.

On top of the R&D capital being taxpayer money, the government is creating revenues for the company's product by buying it when it's clearly an inferior and overpriced item.

And you wonder why we should consider not paying taxes as a form of civil disobedience against this kind of thing.

 

The Volt was under development for several years. It didn't just start because the Obama administration thought it would be cool to have an electric car. The Volt R&D effort began well before the government bailout and therefore was not based on taxpayer money.

I'm a little confused by your assertion that the government is 'creating revenues for the company's product by buying it'. Is the government buying a significant number of Volts? Link?

barfo

 

http://www.michigancapitolconfidential.com/16192

Details 18 government deals that included loans, rebates, grants, and tax credits. These things cost the taxpayers real money.

DoE awarded a $105.9M grant to the GM Brownstown plant that assembles the batteries. Compact Power was awarded $100M in refundable battery credits. $3B total.

You can't just shrug it off as if the taxpayer isn't paying that $3B.

And http://www.youtube.com/watch?v=6KJhdaQO_CM

"Chevy Volt sales inflated with taxpayer fleet buys" (and GM missed their sales target of 10,000 Volts sold, by 4,000.