Tuesday, July 27, 2010

Some Volt Math

Today's big news is that GM will charge $41,000 MSRP for the Volt. (Question for GM: how will you keep dealers from adding a "market adjustment"?)

Assume you can get the $7,500 tax rebate, so your actual price is $35,000, plus applicable local taxes. And suppose that a comparably equipped vehicle of similar size, in a non-hybrid flavor, can be had for $25,000 (a premium compact like a VW Jetta, Volvo C30, or a Subaru Impreza).

For $8,500 premium, you get a 40mile all electric range. That represents 80% of the 16KWh battery, or about 13kWh. At 12c/kWh, if you can drive all electric, 15,000mi/year will cost you about $585. Very nice.

If your premium compact gas car gets an average of just 30mpg, 15,000mi at $3.00/gal will cost you $1,500.

Under these assumptions, best case (all electric Volt miles), you save $915/year driving the Volt. To gain back your $10,000 price premium, you will have to drive the Volt for 9.3 years, 1.3 year longer than the battery warranty.

Now suppose you can't run your Volt 100% electric, but you need to rely on the gas generator engine for just 33% of your mileage. 10,000 miles electric will cost you $390, and 5,000 miles at 40mpg (assume) will cost you $375. Running a Volt 66/33 electric/gas will cost you $765. The payback time for your $10,000 premium is now over 11.1 years, 3 years longer than the battery warranty.

My point here is that at $41,000 MSRP, the Volt is not a great deal, except for people who are passionate about not using much gasoline. In order to even come close to making sense for the average consumer, the Volt needs to be priced for a payback of about 5 years, or about $29,000 out-the-door, or $36,500 MSRP, with the $7,500 tax credit.

Update: fixed my math error.

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