Operating on direction from the Obama administration, GM is in the process of re-tooling its line toward more energy efficient products.  The Chevy Volt is supposed to be the signature car of that “new” General Motors.

The way thing look right now the Chevy Volt may turn out to be one of those infamous Harvard Business School case studies where they explain why a product failed.  

In the case of the Volt, the reason is simple, most drivers  don’t want tiny energy efficient cars, especially the electric ones with their limited range between charges and their very high out of pocket costs.

As GM is ramping up production of the volt, sales have not been going well, neither have the sales of Nissan’s battery operated car the Leaf. Piling on the bad sales reports is a new study showing that the limited interest consumers had in the Volt is declining

Through the end of July, Chevy has sold about 3,200 of the plug-in hybrids compared to 4,500 Nissan Leafs. But both makers have begun ramping up production, General Motors forecasting sales of around 16,000 for the year as a whole – including a small number of Volt clone Opel Amperas targeted at markets abroad.

But a new study by CNW marketing shows dark clouds hovering over the GM electric vehicle:

In March, 21% of so-called Early Adapters said they were “very likely” to consider buying a Volt, while 38.1% said they were “likely” to do the same. That slipped to 14.6% saying “very likely” in July, and 31.1% “likely.” Among EV Enthusiasts, reports the CNW study, the number of those likely or very likely to consider Volt fell from a combined 71% to 51% during the same four-month period.

“It’s way too early to tell, but the signs aren’t encouraging,” said CNW’s chief analyst Art Spinella. 

When it comes to mainstream consumers Volt has all but slipped off the radar screen, only about 3% of new car buyers likely to consider the Chevrolet Volt, the analyst added.

The big problem is the plug-in’s price, CNW data indicate. When first introduced, the Volt carried a $41,000 sticker, though it qualified for a $7,500 federal tax credit. For 2012, the Chevy will drop to $39,995, a $1,005 cut, though it is still thousands more than the Leaf – and nearly double the price of a base Chevrolet Cruze compact, which shares the same underpinnings as Volt.

…..GM’s commitment to electric propulsion is, if anything, being charged up. As TheDetroitBureau.com reported last week, the maker has inked a deal with battery supplier A123 that will be used for a range of new battery-electric vehicles that will begin to reach market in 2014.

Don’t forget that much of the electric and hybrid car business is in the US are subsidized by the US Govt.In 2010, one fourth of GM and Ford’s hybrids were purchased by the federal government.  Nissan got a $1.4 billion dollar loan from the feds to develop their electric car, the Leaf.  Several thousands of dollars in tax credits per car have to be shelled out to make these models attractive for sale.

Electric cars are turning out to be a typical example of what happens when the government picks winners in the marketplace rather than let the market pick the winners. We now have government inefficiently using tax dollars to create a limited and declining market. There is a reduced incentive to improve battery technology to increase the cars range and price, as long as the government subsidizes the market.  The government will have to continue to subsidize the hybrid, hybrid electric, and electric car marketplace for the foreseeable future or else it will collapse from the reduced demand. That’s if it doesn’t collapse anyway.

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