Volt Falls to Electric-Car Price War

General Motors Co. GM -1.07% cut the starting price of its latest Chevrolet Volt electric car by 13%, expanding a price war among makers of plug-in vehicles in response to sluggish demand.

The price cut is yet another sign of the difficulties GM has faced trying to establish a market for plug-ins. Overall, plug-in vehicle sales are rising, driven by offerings such as the Tesla Model S from startup Tesla Motors Inc. TSLA +3.07% But despite government subsidies, they remain a niche market. Limited driving range is an obstacle for most all-electric cars. Volt, which uses a gasoline motor to extend its range to 380 miles, has to compete with fuel- efficient Chevrolets that sell for as little as half its sticker price.

Auto makers are under pressure to sell more electric cars in California, which has quotas for zero emission vehicle sales, and are offering lease deals as low as $199 a month. For some consumers the low-cost leases make driving the cars almost free once government subsidies and fuel savings are combined. The sticker price on the lowest-cost 2014 Volt will fall to $35,000 from $40,000 and could cost as little as $27,500 after federal tax incentives, GM said on Monday. Consumers will be able to lease the 2014 Volt for as low as $299 a month.

The company has about 105 days’ worth of older-model Volts on dealer lots at the end of July. Auto makers sold about 7,442 battery-powered and plug-in hybrid vehicles in July, according to data compiled by the Electric Drive Transportation Association, a Washington, D.C., industry group. That is less than 1% of light vehicle sales for the month.

Tesla’s soaring stock price is more a reflection of enthusiasm for the company’s potential than its current sales, which are running at about 1,470 cars a month in the U.S., according to Autodata Corp. Tesla shares rose 4.8% to $144.68 in 4 p.m. New York trading on Monday. Volkswagen AG’s Porsche brand-to which Tesla is sometimes compared-sold 3,820 sports cars and high performance sport-utility vehicles in the U.S. in July.

GM’s price cut follows similar moves by Ford Motor Co F -1.53% . and Nissan Motor Co. 7201.TO -0.10% Ford last month dropped the sticker price of its all-electric 2014 Focus compact to $35,200, a $4,000 reduction. Nissan, earlier this year, slashed the price of its 2013 model Leaf by $6,400 to $28,800. Honda Motor Co. 7267.TO -0.51% also cut the monthly lease on a Fit EV to $259 from $389 in June. On Tuesday, Daimler AG DAI.XE -1.04% cut the three-year lease on the electric version of its Smart car to $139 a month from $199 a month.

GM sold 1,788 Volts in July-down 3% from a year ago, despite offering up to $5,000 off 2012 models and $4,000 off 2013 models last month. The number of Volts GM sold last month was less than the average sales of its large pickups in a single day.

Nissan sold 1,863 Leafs, nearly five times as many as a year ago, reflecting the company’s move within the past year to start production of the car at a U.S. factory. Nissan has capacity at a battery factory in Smyrna, Tenn. to build up to 200,000 Leaf battery packs a year.

GM says the Volt’s higher sticker price on entry models had knocked it out of contention on shopping websites such as Kelley Blue Book and Edmunds.com, where consumers can easily compare list prices among competing cars.

Reducing the cost to build the vehicle also helped GM cut the car’s price tag, GM U.S. vice president of Chevrolet sales and service Don Johnson said. GM Chief Executive Dan Akerson said earlier this year manufacturing changes would reduce its cost to build the 2014 Volt by between $7,000 and $10,000. “We have made great strides in reducing costs as we gain experience with electric vehicles and their components,” Mr. Johnson said. “We want to pass those cost savings back to consumers and we have done that with the 2014 model.”

Volt has occupied a key role in the debate over government efforts to promote plug-in vehicles since 2010, when President Barack Obama slipped behind the wheel of a Volt and drove it about 10 feet during a plant tour.

Mr. Obama endorsed the Volt as part of a broad effort to put 1 million “advanced technology” vehicles on the road by 2015, spurred by federal investments in plug-in vehicle manufacturers and battery makers. Some of those investments, such as a federal loan to Fisker Automotive Inc. and grants to battery maker A123 Systems Inc. went sour when demand proved weaker than either had anticipated.

GM has had to scale back its ambitions for the Volt. Two years ago, GM forecast it would build 60,000 Volts in 2012. But the company sold only 23,461 Volts last year. Through the end of July, the auto maker has sold 11,642 Volts, up 9.2% from the same period last year.

“Demand for electric cars will continue to remain weak especially when you have gas selling for $3.60 to $3.75 a gallon, and ongoing improvements in fuel efficiency,” says Tom Libby, an analyst with R.L. Polk & Co., a subsidiary of IHS Inc IHS -1.99% .

Price cuts on new plug-in vehicles are helping to depress the values of such cars as they age, said Laurence Dixon, a senior automotive analyst at the National Automobile Dealers Association. The trade-in value of a 2012 Nissan Leaf today is 24.5% lower than the trade-in value of a 2011 Leaf was a year ago, he said. A one-year-old Volt also is worth 21% less now than a one-year-old Volt was at this time a year ago, Mr. Dixon said.

“The incentives the manufacturers have put on these vehicles are extremely high,” Mr. Dixon says. Factoring in the federal tax credit puts additional pressure on trade-in values, he said.

In comparison, trade-in prices for used large pickup trucks, such as a Ford F-150 or Chevrolet Silverado, are up about 8% compared with similar age and model vehicles a year ago, he said.

Article Credit : http://india.wsj.com

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