Volt and the free market

December 23, 2010 • Editorial

General Motors has a smoking red-hot winner on its hands with the Chevy Volt. The extended-range electric vehicle is sending shock waves through the car – buying market.

Already, 250,000 potential buyers have expressed interest in the first 10,000 Volts GM plans to build in the next year. Some dealers have so many customers beating on the doors they plan to add a premium on to the sticker price. Last week, a Volt donated by GM to a Detroit Public Schools science program garnered $225,000 at auction. That’s Rolls Royce territory.

Just a few years ago, a previous generation Cadillac failed to recapture its sticker price when auctioned off at a [auth] local charity ball. Ther e’s oppor tuni ty her e for GM beyond the initial sales. It can use the intense demand for the Volt to shake off any r emaining Government Motors threads from its image. Anticipating that the price of such vehicles would be prohibitive because of technology costs, the federal government and many states, including Michigan, offered subsidies to buyers that amount to roughly $7,500.

That takes the Volt’s sticker to the $35,000 range. It’s obvious now that the high price tag isn’ t a deter r ent to sales, and that would-be buyers don’t think $42,000 is out of range. The premiums being tacked on by some dealers bring the out-thedoor cost of the Volt closer to the original price point, and still buyers are lining up.G M has proven it can build an electric car that excites the market. And consumers are showing they are willing to pay a very rich price for the opportunity to drive that vehicle. It’s the law of supply and demand at its finest.

The government can and should step away now and let the market establish the sticker price. With demand outpacing supply by 25 to 1, that’s likely to be a price point very satisfying to GM’s profit prospects. Buyers find the Volt worth the money, and likely believe the savings in fuel costs make the premium sticker still a bargain. Early indications are that GM would have no trouble selling out its inventory at the full $42,000 sticker price. The government subsidy gives the Volt a stigma it doesn’t deserve, and the kickin isn’t necessary to move the product. That money would be better spent, if spent at all, on developing a charging infrastructure for an electric fleet.

General Motors has done a remarkably good job of opening this new era of the automobile industry. With the reception the Volt is receiving, everyone should be confident that the free market can sustain it.

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One Response to Volt and the free market

  1. paulartzer says:

    they have not even sold a 1,000. they do not work in cold weather, and it costs more in energy to charge them and keep them running than a regular car,, it is a joke.. know two people who own them.. the goverment is paying you to buy them..

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