“The actual cost to build the Volt is estimated to be an additional $20,000 to $32,000 per vehicle (nice range estimate), according to Munro and the other industry consultants.”
So, given that the $1.2 billion $1.0 billion is all in a one-time development cost to begin an entirely new breed of automobile, and will be amortized over whatever the end result of production will be (perhaps in the hundreds of thousands), this figure has nothing to do with the ongoing cost of producing the Volt at all, and their statement that selling new Volts “probably isn’t a good thing for the automaker’s bottom line,” or that GM is “losing as much as $49,000 on each Volt it builds” is total nonsense.
In actual fact according to their experts, GM may be making $7,000 to $19,000 for every new sale the company logs. That is the story they should have wrote.
Good analysis. I find it amusing all of these "conservatives" who are supposed to be so "business minded" but don't even understand basic cost accounting.
I think looking at the article's comparison with the Chevy Cruz, the Volt's gasoline twin is very telling...
From the Reuters hit piece...
Volt's conventional gasoline-engine sister car, which Munro estimates (cost to build) at $12,000 to $15,000 per vehicle.
The Cruze has a starting sales price of $17,925.
So, base model Cruz cost $12k to build and sells for $17,925, a $5,295 margin, (we don't have the price of the top of the line model, so we'll just use base model numbers)
Even the biased author of this POS hit piece tells us that the margin on a Volt is.... wait for it... $7,000 to $19,000!!!!
So, maybe GM should stop making the Cruz, and focus only on the Volt? Since the Volt is by a large margin, a more profitable car to build.
As for the R&D cost... That is a sunk cost. GM either expensed it when it was incurred, or is amortizing it over the life of the intangible asset. If it is being amortized over time, then it would fall below the EBITDA line on the financial statements... For all of you business minded "conservatives", EBITDA is Earnings before Interest, Taxes, Depreciation and Amortization, and is widely used measure of efficiency, profitability and cashflow.