GM Isn't Really Losing All That Cash With Each Volt

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Yesterday we reported on a Reuters story that suggested that GM was losing about $40,000 on every Volt sold. But that number is pretty deceptive, and doesn't take into account the overall picture.

I think Reuters realized this as well, after other sites caught the bad math, because it appears that the original story may have been edited to temper the original claims.


Essentially, it boils down to this: GM did spend a metric crapload of money developing the Volt— somewhere between $1 and $1.2 billion dollars. So, if you divide that big fat number by the 21,500 Volts GM has sold so far, then you get an R&D cost per car of about $55,000. Since the car sells for $39,000, that's an issue, and that's not even factoring in the costs to actually build it (estimated at between $20 grand and $32 grand.) So, that's where they got their ~$40,000 per car figure.

The problem is, all this assumes that 21,500 is all the Volts that will ever sell, and, think whatever you want about the car, that's not the case. The Volt R&D isn't just for one solitary model— it's for several generations of cars that will share and develop the basic Volt underpinnings. GM knows this, and is even quoted in the Reuters article, saying

"It's true, we're not making money yet…[the Volt] eventually will make money. As the volume comes up and we get into the Gen 2 car, we're going to turn (the losses) around."


An article on International Business Times lays the case out very well, and points out that the Reuters numbers also don't include the Volt's Holden and Opel twins in Australia and Europe.

Really, every new car goes through this stage— the companies have to sell enough to cover the development costs. Hell, if we ran an article using this same logic right when the first two Volts were sold, we could have had an awesome head line that read "GM Loses $500 Million Dollars For Every Volt Sold." Which would have been a terrific headline. Oh, I'm kicking myself now!


This isn't something unique to GM, or, for that matter, cars. Everything works like this. You work off the advance for writing a book, movies have to sell enough tickets to cover their development costs, products sell to pay for tooling, and on and on. That's just how it works, unless you have a magic bear that craps watches or something like that.

So, the upshot of all this is, really, nothing is quite as simple as a bold headline wants it to be. The Volt is having its ups and downs sales-wise, absolutely, but it's by no means the colossal money drain these stories would have you believe.


(Sources: International Business Times, Reuters) — and thanks, Wonkette!