"Please Don't Buy Our Cars, We Are Losing Almost 50K A Pop"
Alright, so how did they come to the conclusion that GM spends “up to $88,000″ per car to build the Volt from this quote?
First, they took Doug Park’s estimate that GM has spend “a little over” 1 billion dollars in developing the car, and then rounded that up to $1.2 billion (with the help of experts).
Then Reuters divided that number by the 21,500 cars GM has sold in the US since it started production in December of 2010 (let’s forget about those pesky Canadian and European Ampera/Volt sales), and assume they won’t sell anymore.
Responsible journalism at its best.
In a related news item, I heard that Ford has delivered the first dozen C-Max hybrids, and it cost the company about $500 million to develop the program, and therefore Ford is losing $41,666,667 on every copy they sell.
Tucked inside this 1,000+ word essay on why their outrageous headline makes sense, is this admission by their experts:
“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.
Now, if you want to talk about if GM makes money on the Volt after they pay for all the advertising and marketing of the vehicle they do, that is another story…but Reuters is out to lunch on this one.