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Discussion Starter #1 (Edited)
Price/Performance Competitive Analysis:

What is the estimated price at which the Volt can be a popular (within top 4) hybrid ? If we look at the top four hybrids* we see that their average MSRP is about $23,000. What competitive advantages does the Volt offer? This analysis is not for what a Volt enthusiast would pay. It is for the typical buyer.

The other hybrids offer at best only 50mpg mileage. At $5.00/gal, the yearly cost of gas for these vehicles is $1,200 more than the Volt. Studies show that the typical buyer will only pay for 3 years of energy cost saving for a vehicle. That’s a $3600 dollar premium for the Volt.

The typical buyer is not going to appreciate the technology difference between series, parallel, or E-REV hybrids. Competition is a moving target. By 2010 the competition will probably offer a “plug” to make them “plug-ins” and perhaps also Li batteries. The buyers pay an extra $2000 to get the Nissan Altra's 198 hp performance (The Volt has 209 hp).

Conclusion: For the Volt to be competitive with the four most popular hybrids, its cost/performance must be comparable. The price point for the Volt to be popular is $23,000 + $3600 (mpg) + $2000 (performance) = $28,600 (2008 dollars).

*Top Four Hybrids
http://www.NADAguides.com
**The Toyota Prius, the world's most popular hybrid car, $22,000

Hybrid Choices Sorted by MSRP Price (City/Hwy mpg)
Lightning, BEV, $300,000, 2D, 130 mph, City: 220, 700 hp, 0-60mph 4sec.
TESLA Roadster, PEV, $98,000, 2D, City: 220, 183 hp, LiI
Fisker Karma, E-REV, 2010, $80,000, 4D, 125mph, 50miles
Lotus ZAP-X Crossover, BEV, $60,000, 350 miles, 644 hp, Li
Phoenix Electric, $54,000, 4D,
Volt, E-REV, 2010, $40,000, 4D, 120 mph, City 40 miles, ER 320 miles, 200-50 mpg, 209 hp
Miles XS500, BEV, 2010, $35,000, 4D, 80mph, 120 miles, 700lb LiI, Volume:30,000
Aptera, 2009, BEV, $30,000, 2D, max 95 mph
Ford Escape Hybrid, $26,640, 4D, 34/30, Motor 94 hp, 133 hp
Saturn Vue, 2010, PEV, 4D, $26,270, 24/32
Think City, BEV, 2009, $25,000, 2D, 60 mph, 100 miles, 0-60mph-8.5sec
*TOYOTA Camry, H, 4D, $25,900, 40/38, 187 hp, 3680 lbs, NiMH
*Nissan Altra, PEV, 4D, $25,000, 42/36, 198 hp, 2057 lbs, NiMH
Mitsu i-MiEV, BEV, 2009, $24,000, 4D, 86mph max, 100 miles, 63 hp, 2376 lbs, 16 kWhr LiI
*Honda Civic Hybrid, 2008, 4D, $22,600, 40/45, 93 hp
**Toyota Prius II, H, 2008, 4DH, $21,100 – $23,370, 60/51, 76 hp, 2890 lbs, NiMH
HONDA Insight, H, 2D, $20,450, 60/70, 67 hp, 1850 lbs, NiMH
Zenn, 3D, $12,700, max 25 mph, City: 20 miles
Flybo, BEV, 2008, $10,000, 2D, 42 mph max, 70 miles, Lead Acid

VW/Sanyo, 2010, BEV, LiI
Nissan, 2010, E-REV, 4D, 100miles ER 300 miles
Audi’s A1 Metroproject, H, 2D, max: 125 mph, 150 hp, Motor: 41 hp
 

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I agree 100%

You are absolutely right

The Volt must be competitive or it will fail, Bob Lutz's recent comment about the 40,000 price tag is disturbing.
After all this is a small car and it is supposed to be appealing to people who need to save money.

You are right also when you state the obvious difference between the price of the car being well above the fuel savings.

GM needs to look at this and bring the price down even if it means delaying the intro - too high a cost at the beginning makes this car accessible to the wealthy as a novelty item.

After all I am sure the competition is already moving very quickly including Exxon (if you did not know they are on the Lithium battery development trail also - very interesting for an oil company! Plus they are getting out of the gasoline retail bussiness)
 

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After tax credit

OK - lets look at this -

lets say the Government gives a tax credit - this to me would mean that the tax in the car would be lowered -

So @ lets say 40,0000 plus 14% tax (here in Canada) that would come to $5600 - even if the tax credit gave you back the 5600 then the car would still cost $40,000-

I cannot see the Gov. saying - OK the car costs 40K and we will give you $5600 to make the care 34,400.

The only way this could happen is if the Gov gave GM the Tax credit so they could sell the car for lets say 34,400 plus tax = $40,000 which still puts the Volt a long way from a lot of pocket books.
 

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$240/kWh

That's $240/kWh price for the battery pack. That is not going to happen anytime soon. It's going to have to play out like the Prius with early adopters with non-economic reasons (e.g. environmental), people hedging against higher gas prices, or people with a willingness to accept a longer payback period--as well as government incentives--driving initial sales.
 

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Fortunately for GM, most car sales aren't done with a spread sheet and super rational thought. The first time many people test drive a Volt, go on the freeway at 70mph and return without ever hearing the ICE, they'll be sold. First time many people talk to a Volt owner that tells them, "I haven't been to the gas station in 6 months.", they'll be sold. I think you're annallysis leaves out how special and unique this car is. It's not just a regular ol' hybrid. There will be those willing to pay for something so cool. I predict that GM will sell every Volt they make in the first year before they even make it to the lot.
 

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Tom, excellent post. However, I'm not sure that the premiums for fuel economy and performance should "stack." People looking for fuel economy will discount performance and those looking for performance will discount economy. Those that favor one would find the other to be a pleasant bonus but I don't think they'd go full price on it.

However, "At $5.00/gal," might understate what those interested in the Volt are thinking... some will be looking at the Volt because they worry about $6/gallon and a few more will look at the Volt because they fear $7/gallon and a few will be concerned about prices even higher. The premium they are willing to pay will, accordingly, be even higher.
 

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Discussion Starter #8 (Edited)
Observation of Choices and Distributions in Economics, Finance, and Sales

Economics is the study of choices and decisions, i.e. the psychology of financial behavior. In this study, we find that incomes, prices of house, prices of business property, city populations, market prices, oil/gas field discovery statistics, uranium depletion, insurance claims, size of businesses, and *automotive market share are all discribed by log-normal distributions. For example, below is a graph of Assessed Commercial Building Values in Lee County, FL (www.SmartSeg.com).

The outstanding characteristic of these choices is that the selected prices are highly peaked around some lower value. It falls off rapidly from this modal value. We see the same behavior in the prices of the four most popular hybrids. They are on the low end and tightly clumped within +/- $2000. *This tight distribution agrees with the well known economic observation that consumption (market prices) are even more strongly log-normally distributed than income (see below for “the importance of price in determining a product's sales.” The success of Walmart is based on this principle). This is results from the fact that people’s purchasing choices are strongly determined by their assessment of marginal utility.

The historical data shows that based on marginal utility, the majority of buyers would not consider a $40,000 Volt worth 90% more than a $21,000 Prius. The choice of a Volt does not provide 90% more function/utility. Most people would assess the functional utility of a year’s mortgage payment, a new boat, or a second used car, or a down payment on a house far greater than the $19,000 cost of the thrill of the sense of acceleration and sound of a Volt. The value, in terms of other choices, is not that great. This is the historic observed behavior of economic choices.

Yes, there will be 10, 20 or 50,000 enthusiasts, but this defines a niche market, not the mainstream products clustered around $23,000.

*Auto Market Share (http://forum.wolframscience.com/showthread.php?threadid=100)
 

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Discussion Starter #10
Proof that the earth is flat

BestTimesNow,

I appreciate your support of the Volt. The evaluation I did was with data taken about the typical buyer. Polls taken on this website are not valid with regard to the typical buyer. Example: Would I get a typical result if I polled people about whether the earth was flat or not with a poll taken on the Flat Earth Society’s website?
 

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Tom,

I appeciate your post, but as I read, I felt like it was making big assumptions about the "control of the process". Don't get me wrong, my daily work revolves around process control and distribution analyses. I fully understand, ad nauseum, those issues.

But doesn't the assessment of marginal utility assume the process is under control? I could argue the process, peoples' daily life and expenses, is not under control right now. Too much uncertainty in gas costs, mortgage, food, jobs, you name it. Not to mention the fear of national security issues. This seems like a process out of control, as we speak.

Perhaps people will accept a more expensive option, a more "expensive" Volt if it helps to lessen the uncertainty in some of these concerns. They will spend more up front perhaps, and have a higher car payment. But that can be budgeted. The uncertainty of the rising costs of gas are more disturbing to some. I could hear people say, "yeah, I might be paying $300 more a month for the car, but I spend almost nothing on gas, and if it goes to $10/gallon, I won't care." That piece of mind is worth something, I would think.

You wrote, "The choice of a Volt does not provide 90% more function/utility. Most people would assess the functional utility of a year’s mortgage payment, a new boat, or a second used car, or a down payment on a house far greater than the $19,000 cost of the thrill of the sense of acceleration and sound of a Volt. The value, in terms of other choices, is not that great. This is the historic observed behavior of economic choices."

But why then do Mercedes, BMW, Audi, Lexus, Acura, Cadillac, the list goes on......., why do they sell 100's of thousands of vehicles a year? As a matter of fact, why does anyone buy a Prius? Wouldn't a $13000 Aveo or Hyundai make more sense? Why is a Prius worth 90% more than those cars?

I think these types of analyses don't hold up when emotion is a big part of the decision or when the process goes out of control. JMHO
 

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Discussion Starter #12
Competitive Analysis is Moot

MetrologyFirst,

With GM’s announcement of limited production for the first three years, my competitive analysis is moot. For the first year there will be many more potential buyers than available product and you will see Volts being offered for sale on Ebay for $70,000.

Hollywood folk will conspicuously drive their Volts around proclaiming “Green” after they get off their private jets or their 2 gal per mile boats. Oil sheiks will buy hundreds of Volts just to bulldoze then into the desert. Competition for Volts will be keen and they will represent but a few percent of the total hybrid market.
 

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If Chevrolet were hoping to sell a Volt to every household in America, then yeah, they would have to price it at the most right around $20k, but I don't think that is their intent for the near future. This car is going to be limited production for at least the first three years and by limited I mean less than 100k units per year. Maybe if the car is a big success they'll see 170k units total sold by year three. As time goes by, the cost of the battery pack will decline and the tooling for the platform will begin to be amortized, so this will allow them to start selling Volts or other E-Flex variants much cheaper and closer to the $20k mark. In the mean time, I'm sure they will sell all the first Volts.
 

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I think the plug-in Prius will sell for more than $28,600 and I bet they will sell lots of them. My guess is the Volt needs to be priced within $5k of the plug-in Prius, in order to be a big seller.
 

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It can be more expensive than the plug-in Prius - as long as the Volt looks distinctly American and hence has the "cool factor".

If it looks like another Prius or worse, simply like any other econobox, then it'll be bad news.

When does the real Volt (not the concept) get unveiled anyways?
 

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Everyone can say what the Volt must sell for, but the realities of production costs, vendor supplied items and warranty costs will dictate what the MSRP will be. Bob Lutz initially said it would come in around $30k. He has since revised it to $30 to 40K.

The best way to estimate costs is to work from the Prius. The Prius has an MSRP of $25-29K. Let's use $25K as a base. The Volt will essentially be a Prius minus an auto transmission (-$1,200) minus the NiMh 1.3 kwh battery pack (-$800) but plus 10-13 kwh Li Ion battery pack (+$12,000 approx) and a 120 volt, 5.5 hour charging system (+$1,200). I would guess GM will offer a 240 volt (2 hour)charging system for about $800 more, but we'll leave that out.

Using these figures you will be looking at about $36,000 for a base model. This is in line with what Lutz is predicting and in line with the costs. If there is any consolation, Toyota dealers are consistently charging $3K over MSRP for the Prius. But here's what you will be getting.

If you can limit your driving to 40 miles/day, electricity will cost you about a buck a day (at 10 cents/kwh). Gas at $4/gal would cost $4.00/day (assuming 40mpg) so you save about $75 per month from a 40 mpg car driven 6 days/week. If your current car gets 20mpg you will save about $160 a month. But the cost savings aren't what will sell the Volt. Like the Prius, initial Volt buyers will pay a premium to be green, make a statement, or like me, pay almost any price to reduce Hugo Chavez's $90 billion/year take from selling oil to the US.

Eventually Li Ion batteries will cost less. But in the next 3-4 years demand for these batteries will be extremely high. Right now they they are being manufactured in quantities to supply DeWalt and other tool folks. When the auto companies jump in, as they all will, demand will increase a thousand fold. Volume production will eventually mitigate costs.
 

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It doesn't have to be very competitively priced for the first few years. If those newest poduction figures are accurate and they're only producing 10k the first year and 60k the next year, there will be plenty demand for the Volt even if it is over priced, which i don't think it is even at 40k. Hopefully by the time they start really mass producing them the battery and other manufacturing costs will drop to where most people can afford them.
 
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