I’ve been following the Chevy Volt with interest since it was first announced in January 2007. What caught my attention (other than exploding batteries – which we’ll set aside for now) is that it's the first practical electric car.
One of issues we often help clients address is how to turn new technologies into products that people want to buy. It’s an issue that has plagued electric cars from the outset. Even today, the best an all-electric car can do is go about 100 miles between charges. This makes them impractical as a primary vehicle and relegates them to the category of “expensive toy.”
In contrast, the Volt, a Plug In Hybrid, can be driven up to 40 miles on battery power alone and then indefinitely on gasoline. There is no range limit, making it a practical alternative as a primary car. And, if you drive a Volt and the majority of your trips are less than 40 miles, you’ll get an eye-popping 70 to 80 miles per gallon.
In theory, Chevy has made just the right tradeoff to leapfrog past the current generation of hybrids while sidestepping the limitations of pure electrics.
Unfortunately, sales of the Volt have not lived up to its promise. Through November, only 6,142 Volts had been sold in 2011 (below its modest 2011 target of 10,000 units and way, way below the 119,000 Priuses sold in the same period).
To understand why the Volt has underperformed, we’ll start by revisiting a Topline Strategy report from 2007, Why People Really Buy Hybrids.” That study sought to identify what made the Prius a break out success while other similar hybrids languished.
The reason can be summed up in a single word – Brand. On strict economics, hybrids are essentially break-even. If you buy a Honda Civic Hybrid instead of a plain old Honda Civic, your gas cost savings over the life of the car more or less offset the extra cost of buying the hybrid.
But, because the Prius only comes as a hybrid, people who buy a Prius aren’t choosing between a Prius standard and a Prius hybrid. They are choosing between a Prius and some other car. In the majority of cases, that other car is much more expensive than a Prius – ranging from an Accord or Camry (a few thousand more) to a BMW or Mercedes ($10K to $20K more).
These “trading down” Prius buyers – who don’t include Civics and other economy cars in their purchase set – save a lot of money by choosing a Prius. They save thousands on their upfront purchase, save thousands more on gas over the life of the car, and get to drive a car that expresses, by its appearance, their environmental values.
Now, armed with this understanding of why people by hybrids, let’s go back to the original question, “Can the Chevy Volt be Saved?” The answer: Yes – if Chevy does the following three things:
- Distinguish the Car: How many Volts have you seen on the road? Odds are you’ve passed quite a few, but you wouldn’t know it. While Chevy took a page from the Prius playbook and gave the car its own name, it didn’t distinguish the car visually. It’s hard to tell it apart from other Chevy’s. For the Volt to succeed, it needs to redesign the car so that when you see a Volt, you know you’ve seen a Volt.
- Make it More Practical: If you’ve ever been in a Prius, you’ve probably felt that the car was actually bigger inside than out. The Prius can comfortably seat 5 adults, and with the hatchback, has enough room to easily cart home everything from a Costco trip. In contrast, with 2 bucket seats in the back, the Volt seats 4…period. And if the two in the back are adults, it’ll be a tight squeeze. While it does have a hatchback, because the back seats don’t fold down, the storage room is pretty limited. Part of what makes the Prius an attractive alternative to a Camry, Accord, or other mid-sized car, is that you don’t have to sacrifice space. Again, Chevy needs to pay a little closer attention to the Prius playbook and make the Volt more practical.
- Lower the List Price: Finally, Chevy needs to get the price down so that you can into one for under $30,000. Until the starting MSRP falls below $30,000, it’s going to be difficult to capture the “trade down” market that has been all important to the Prius. Part of the problem is that the $7,500 in government incentives offers on Plug In Hybrids, for which the Volt qualifies, are redeemed as tax credits. If you buy the car in January of 2012, you’ll get $7,500 back 15 months later, in April of 2013, when you pay your 2012 taxes. There is an enormous psychological element to pricing and as a result, there is a big difference between a $39,995 car on which you receive a $7,500 rebate and a car that costs $32,495. There’s an even bigger difference between a $37,495 car with a $7,500 rebate and a $29,995 car. What Chevy needs to do is lobby the government to issue the tax credit at the time of purchase (like they did for the very popular 2009 “Cash for Clunkers” program) and to engineer $2,500 out of the car so that the starting price falls to $29,995.
As the list implies, fixing the Volt will not be easy and will require a redesign. It’s an investment they might not be willing to make, but if they do, and do it right, it would be worth it.