Image: 102999710
JIM WATSON  /  AFP - Getty Images
President Barack Obama drives the 2010 Chevy Volt off the line as he tours a General Motors Auto plant in Hamtramck, Michigan.
Image: Paul A. Eisenstein, contributor
By contributor
updated 8/4/2010 11:07:11 AM ET 2010-08-04T15:07:11

The Chevrolet Volt has won a presidential endorsement and the support of leading environmental activists. Now it needs consumers' embrace when it comes to market later this year.

General Motors’ new extended-range Volt is just one of many advanced electric vehicles that will charge into showrooms over the next several years. Proponents believe the nascent switch to electric propulsion will be a critical step in reducing the nation’s dependence on foreign oil and toward the goal of reducing global warming.

But skeptics question the viability of vehicles like Volt, citing their high cost and limited range as factors that could minimize demand, especially at a time when gasoline prices are relatively affordable.

Analyst Joe Phillippi of AutoTrends Consulting said he was surprised by GM’s decision to price the Volt at $41,000 , even higher than the $40,000 figure that had been floating among industry-watchers and at least 50 percent higher than a comparable well-equipped compact sedan using a conventional gasoline engine, like the new 2011 Chevrolet Cruze.

Other observers were less kind. Conservative talk show host Rush Limbaugh used the news to launch a tirade against GM, which he often refers to as “Government Motors,” suggesting the Volt will be a major failure. Commentators in mainstream media outlets including the New York Times also questioned Volt’s viability.

There’s no question the price tag is high, especially when compared with the other major battery car launch scheduled for late this year . The Nissan Leaf will come in just under $33,000. Like Volt, it will also be eligible for a $7,500 federal tax credit, which will bring the Nissan offering down to around $25,000, while Volt will have a transaction price of around $33,000 after the credit.

Lease expectations
Both makers expect to lease a significant number of their new battery cars, perhaps the majority of them. In that case, Nissan’s advantage largely evaporates, since both models will carry a lease price of $350 a month. That is perhaps a level that green-minded motorists could accept, suggested Phillippi.

“If they execute the car (Volt) as well as other recent offerings, they’ll be fine,” he said.

Indeed, despite the doomsday forecast of its skeptics, Chevrolet already is making plans to increase the production volume, which initially has been set at a quite modest 10,000 a year. The initial low production figure could create a familiar, if unwanted problem.

A spokesman for GM says the maker has “a couple of indications” that some dealers are planning to charge a premium on top of Volt’s already hefty price tag, assuming that early adopters will be desperate to get their hands on the vehicle. Even with the bump in production, a typical Chevy dealer is likely to only receive between four and six of the battery cars during its first year on the market. The factory has no direct control over what dealers charge, although there are subtle ways to discourage predatory pricing on hot products.

GM plans to ramp up production of the Volt steadily in subsequent years, with 45,000 units expected to roll off the line in the second year. Nissan is taking a similarly conservative approach to Leaf’s launch. It will initially be offered to fleet buyers, including about 100 Enterprise Rent-a-Car locations, which will permit the maker to test consumer reaction.

The near-simultaneous launches of the Leaf and the Volt will give the industry a chance to see how potential buyers receive two very different approaches to battery power.

Volt, often referred to as a plug-in hybrid, or PHEV, is vaguely similar to current hybrid vehicles, such as the Toyota Prius, in that it combines a gasoline engine and electric drivetrain under one hood. There are a few key differences, however. Volt adopts a larger, lithium-ion battery pack which will allow it to drive up to 40 miles on electric power alone. And when it switches to gasoline its small four-cylinder engine will serve only as a generator, providing electricity to run the motor and never directly powering the wheels.

Leaf, on the other hand, is a pure battery-electric vehicle, or BEV, which is expected to get nearly 100 miles of range per charge. At that point, should it run out of power, it could be stuck without a place to plug in. Tony Posawatz, the head of GM's battery program, said Volt “overcomes that range anxiety.”

Whether that’s worth the higher price remains to be seen, but research shows there appear to be plenty of green-minded early adopters who will line up for both vehicles. The question, cautions Phillippi, is, “What happens when it’s time to appeal to the mainstream market?”

Part of the challenge will be educating the public on the advantages of specific battery-based products. GM says its dealers will work with potential customers to make sure Volt is right for them. Battery technology clearly won’t work for everyone. Volt will be best for those who use their vehicles primarily for short to midrange daily commutes or errands. Leaf won’t play well for those who regularly make long trips.

There is, of course, the basic question of whether either model will make financial sense.

Both GM and Nissan note they are working with select utilities around the country to develop reduced-rate charging policies that could yield energy costs of as little as a penny or two a mile, one-tenth the cost of gasoline power. But there could be sharp restrictions on when motorists could plug in their battery cars, most likely to overnight hours when utilities normally have plenty of excess power capacity.

Even at those prices, not everyone will come out ahead by switching to battery power, not at current fuel prices, anyway. But most experts anticipate that a global economic recovery eventually will push gasoline back over the $4 a gallon mark. And the higher it goes, the more charged up consumers are likely to get about electric vehicles.

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Video: Obama plugs EVs

  1. Transcript of: Obama plugs EVs

    CURRY: Good evening. I'm Ann Curry in for Brian Williams , who's on assignment in New Orleans .

    ANN CURRY, anchor: And tonight the economy is front and center. As President Obama spent the day in Michigan talking about his decision to bail out the US auto industry and pointing to GM as an economic comeback story, we got a new measure of just how the economy is doing overall. The gross domestic product, which is the broadest measure of economic growth , weakened in the second quarter to 2.4 percent. And in more unsettling news today, growth figures from 2007 through 2009 revised downwards, which shows that the economic meltdown was even worse than previously thought. NBC White House correspondent Savannah Guthrie now joins us with the White House 's take on where all this puts us. Savannah , good evening.

    SAVANNAH GUTHRIE reporting: Good evening to you, Ann. Well, one senior White House official told me today you got to look at the big picture. Eighteen months ago the economy was falling off a cliff. Today it is growing, but even officials here acknowledge that this recovery is running into some headwinds. The president today in Michigan , taking a short spin in Chevy 's new hybrid electric vehicle.

    President BARACK OBAMA: ...pretty smooth.

    GUTHRIE: In the heart of car country, Mr. Obama hoped to highlight a turnaround story, an American auto industry resurrected from the dead.

    Pres. OBAMA: Today, for the first time since 2004 , all three US automakers are operating at a profit. First time in six years.

    GUTHRIE: The auto industry is poised to pay back more than two-thirds of its $85 billion government bailout, and the administration says its rescue saved one million jobs. But the latest government figures out today show the larger economy in a stall, growing just 2.4 percent last quarter, not near enough to make a dent in unemployment.

    Ms. DIANE SWONK (Mesirow Financial Chief Economist): Given the depth of the recession, the extraordinary losses we endured, we should be seeing growth two to three times that of what we're actually seeing in the US economy .

    GUTHRIE: Part of the problem, consumers, normally two-thirds of the economy, are slowing their spending again. And though business investments have jumped 17 percent, many companies, even those now enjoying profits, aren't spending on new full-time workers, instead hiring temps or wringing more hours out of the employees they have.

    Mr. LAKSHMAN ACHUTHAN (Economic Cycle Research Institute): Fewer people are making a lot more stuff, and the companies are keeping that cash because they remain scared.

    GUTHRIE: In Detroit today, a city with 30 percent unemployment, the president said things are headed in the right direction.

    Pres. OBAMA: We are back on our feet! We are on the move!

    GUTHRIE: While many economists will tell you unemployment is likely to hit double digits again before coming down, officials here do think that that European debt crisis which had so shook the fragile economic recovery has largely passed and worked its way through the system. They don't think we're in for a double-dip recession, Ann.

    CURRY: All right, Savannah Guthrie this evening. Thank you so much , Savannah .


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