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Tuesday, July 27, 2010

Some Volt Math

Today's big news is that GM will charge $41,000 MSRP for the Volt. (Question for GM: how will you keep dealers from adding a "market adjustment"?)

Assume you can get the $7,500 tax rebate, so your actual price is $35,000, plus applicable local taxes. And suppose that a comparably equipped vehicle of similar size, in a non-hybrid flavor, can be had for $25,000 (a premium compact like a VW Jetta, Volvo C30, or a Subaru Impreza).

For $8,500 premium, you get a 40mile all electric range. That represents 80% of the 16KWh battery, or about 13kWh. At 12c/kWh, if you can drive all electric, 15,000mi/year will cost you about $585. Very nice.

If your premium compact gas car gets an average of just 30mpg, 15,000mi at $3.00/gal will cost you $1,500.

Under these assumptions, best case (all electric Volt miles), you save $915/year driving the Volt. To gain back your $10,000 price premium, you will have to drive the Volt for 9.3 years, 1.3 year longer than the battery warranty.

Now suppose you can't run your Volt 100% electric, but you need to rely on the gas generator engine for just 33% of your mileage. 10,000 miles electric will cost you $390, and 5,000 miles at 40mpg (assume) will cost you $375. Running a Volt 66/33 electric/gas will cost you $765. The payback time for your $10,000 premium is now over 11.1 years, 3 years longer than the battery warranty.

My point here is that at $41,000 MSRP, the Volt is not a great deal, except for people who are passionate about not using much gasoline. In order to even come close to making sense for the average consumer, the Volt needs to be priced for a payback of about 5 years, or about $29,000 out-the-door, or $36,500 MSRP, with the $7,500 tax credit.

Update: fixed my math error.


Jack said...

The difference between the 29,000 it should cost and the 41,000 it does cost (please keep in mind that the buyer is simply letting you and me foot the "incentive.")is the premium cost of the battery. If this doesn't come down then EVs from GM are toast.

Walt said...

Not a problem. The City of Portland, Oregon will buy a bunch -- with our money, from the company that developed this kludge with our money. see, when they talk about, "green", they mean our green.

Michael said...

Don't forget that if you take out a loan to buy the car, you will have to pay interest on the $10,000 price difference. On a 5% loan, annual simple interest would be $500 on the $10,000 difference in loan amount.

Anonymous said...

You still have errors on the net price after credit, which should be $33,500 with delivery charge included, and the battery only allows you to use 8 kWh of the 16 kWh battery in order to make the battery last for at least 8 but probably more than 12 years of 40 miles all electric range. That means your electricity per year would be under $400 which is, admittedly,not a huge difference. I am mad as hell about GM's decision to market this car over $40k, but the fact is that they will sell every one of the 2011's to people who either want off of foreign oil or want to reduce their carbon footprint without buying a car that puts a 40 mile leash on their driving. And GM's pricing makes it harder for the dealers to mark the car up over MSRP. Your analysis doesn't factor in the fact that these early Volt buyers are going to pay for the building of battery plants that will build batteries for less than the $600-$700 a kWh they currently cost. Every year the cost of building Volts and Leafs will drop as the pack prices drop, and it will quickly become obvious that, like the Prius, these cars will hold their values much better than ICE cars.
Do the Volt and the Leaf make financial sense this year? No. Will the 2013 models? Quite likely.

Dash said...

As was said it should be 33,500 after rebate. I believe some states may offer something on top of that too. That said, I agree with your post however GM is already well aware they wont be making a dime off the Volt as evidenced by Bob Lutz saying exactly that over and over. They're in it for the branding apparently. Example:

Jonathan Silber said...

In the absence of the tax credit —a kind of subsidy by the taxpayer—the owner of a Volt appears to save little or nothing.

And the calculations of savings that appear in the article and in some of the comments seem to rest
on improbable assumptions: in the course of the common stop-and-go driving in both the city and on the highway, with the heater or the air conditioning running, the likelihood of going forty miles on electricity alone is small.

The owners of a Volt will be driving on gas most of the time, or searching in vain for a place to recharge.

Anonymous said...

Also, at the end of that 8 years, you can sell the ICE for $1500 or so. But who's going to buy your used Volt that at any time after 8years may require a many thousand dollar new battery before it will budge out of the garage?

How green is it when the Volts get junked entirely years before the ICE car because it's not worth replacing the battery pack?

Then let's look at the environmental damage related to mining, production and disposal of the battery packs.

Greens always go for the "flash" and remain ignorant of the damage behind the scenes.

Anonymous said...

An error and a misconception:

First, the charger isn't nearly 100% efficient, so the actual amount of electricity you use will probably be 10-20% more than this calculation allows.

Second, the idea that this offsets all CO2 output is ludicrous: it's burning over 5 megawatt-hours of electricity per year. Unless your power is 100% renewable or nuclear (highly unlikely), that's going to produce plenty of CO2. If your power is coal (quite likely), well, it's like your car runs on coal now. Good deal.

Anonymous said...

The Volt's price, as listed, prohibits widespread market acceptance. For the Volt to go mainstream, the price will have to drop.

I think we can agree on this, and I'm sure GM knows this; GM is already talking about how to lower their price for Volt 2.0.

Here's an issue that makes this car attractive to the consumer. Because it is powered by two sources of energy, it allows the consumer to trade off one energy source against the other based on price and availability. This, in a sense, is an insurance policy, or a hedge. If the gas market goes though a shock that either causes the price to go up or shortages, the Volt driver is relatively unimpacted. This feature may be more than compensating for other luxuries in cars that people are willing to pay a lot of money for.

-- Noah Nehm

halojones-fan said...

@Silber: "stop and go" driving affects gas-burner mileage just like battery-burner. If anything, the Volt's gas-burner engine, operating at a single speed, will be more efficient than the drivetrain of a gas-only vehicle.

@OP: $3.00/gal forever involves a pretty damn big "if". It wasn't even ten years ago that $2.00/gal was a stratospheric peak and surely it couldn't possibly go any higher. Re-run the math with gas at $6.00/gal and you get 4 years to break even, which is well inside the battery warranty.

Oh, and if we're talking about warranties, remember that the typical powertrain warranty for gas-burners is only three years...

Tim Wohlford said...

AT the end of the day, isn't this just a hybrid car with a different set of software variables?

It's really not an "electric car" just a "hybrid" that runs on battery at first, one that you can plug in. Heck, there are hack kits to do the same thing with a Prius, right?

luagha said...

A standard ICE engine in a car has to run at many different speeds and efficiencies; while the electricity generator in a coal plant is ( except for rare startups and shutdowns ) always run as close to maximum efficiency as possible.

The averages that I have seen state that running a car off of electricity from a coal plant generates about 1/4 the pollution that running the same distances based on ICE and gasoline.

The two methods do emit different types of particles, however. Coal emissions are much more radioactive, for example.

Anonymous said...

Doesn't your math leave out the separate cost of the charger,and installation thereof by an electrician?

And in places like Southern California, where tiered electric rate structures cause electricity for a new item to cost multiples of your base rate if it bumps you into a nigher price tier, I think the electricity cost of EVs is being habitually and almost maliciously undervalued.

Anonymous said...

The cost of ownership for a car is much more than just gasoline usage. The electric drive train and gasoline generator could both provide significant savings in upkeep and longevity.

Anonymous said...

Ok so the "primary" fuel source (which to be perfectly honest is actually coal) gives the car a 40 mile range, whereas the "backup" fuel source is gasoline which gives it a range of another 300+ miles.

Uh huh. So basically we have a massively overpriced gasoline powered car with a coal plant backup. But since we call it an "electric car" we can feel all good about ourselves because we are saving the planet.


Slow Joe said...

I wonder if people can get these batteries and throw them in an old Truck with an electric motor. That's probably a better investment. I realize the battery takes on a strange shape, but you can probably work with it pretty easily.

Still waiting for a hydrogen cell car. That's like a battery you can recharge quickly, at the cost of... money (and energy waste). I think that would work a lot better once it's perfected.

Anonymous said...

Couple points:

The 30 mpg assumption is likely way off. You may get 30 mpg highway, but in most cars that won't happen in city driving. I have a 4 cylinder car, nealy 8 years old that gets easily 30 mpg hwy and closer to 12 mpg in city conditions.

In most places you should assume a sales tax of 7 or 8% to the price premium. In NJ you'd pay an extra grand in sales tax just on the price differential.

Anonymous said...

You price your electric cost at 12cents/KWH but out here in California, for those who use more than the minimum and that is almost everyone, the rates can go over 30 cents/KWH.

Hangtown Bob

Ertdfg said...

"The electric drive train and gasoline generator could both provide significant savings in upkeep and longevity."

So the belief is that adding new "bleeding edge" untested in a real-world situation tech, while keeping all the old tech as well; will lower costs?

Crap, tack on a hydrogen fuel-cell engine and something to run on natural gas as well; lets get the repair costs really down by adding even more stuff... maybe we can add enough that it'll be free to repair?

Anonymous said...

"So the belief is that adding new "bleeding edge" untested in a real-world situation tech, while keeping all the old tech as well; will lower costs?

Crap, tack on a hydrogen fuel-cell engine and something to run on natural gas as well; lets get the repair costs really down by adding even more stuff... maybe we can add enough that it'll be free to repair?"

Wha?? The only thing "bleeding edge" here is the battery. Electric motors have been used in cars for years and require very little maintenance (no oil changes, air filters, etc). The engine used to generate electricty should be run at peak efficiency, which will provide longevity.

This doesn't mean the Volt will be successful, but should be considered. Please leave the strawman arguments out of this.

Anonymous said...

a cash flow analysis of a volt would include...

cash price - i assume this is way higher than for a comparable normal car

finance charges - probably a wash vs normal car, but a smart lender would tack a douchebag premium to the interest rate.

insurance - higher for the volt.

resale value - lower for the volt since the guy at the end of the ownership line will have to pay extra to dispose of the toxic battery.

maintenance costs - maintenance is probably much higher than for a normal car since your volt mechanic will need to be an ivy league phd.

operating costs - there are too many unknowns to even compute the cost to operate a volt. to justify buying one, you have to assume a lot of happy stuff to beat the cost of operating a normal car.

the only people who should buy a volt are those with more money than sense. same goes for who should sell them.

Anonymous said...

So when we all buy electric cars and every garage has one, two, or three, 240 volt recharging stations running every night, what is going to happen to our current electric "off-peak" times? What's going to happen to the price of electricity when we double, treble, quintuple demand? Where is the increasing electric production being ramped up to meet the needs of our new electric car culture?

nates said...

First of all, the Volt is a bad example, it is made by GM after all.

The LEAF is far more economical at 33,000.

The batteries are fully recyclable. There will be a large market for them after their usable life in the car. No one will be avoiding used electric cars to avoid having to deal with the batteries. They will happily buy the car, sell the old battery pack for 2k to a metals reprocessor, throw in a pack that allows the car to go 80 miles(or 200 for the LEAF) and give the car another 10 years of life.

If we include transmission rebuilds, engine repairs and a host other problems that only appear in direct ICE driven cars I think the numbers get quite a bit closer.

Account for at least 4.00 a gallon in the next year and we have parity or better in overall cost.

LeftLibertarian said...

This is yet another example that illustrates why the subsidies are good because people cannot rationally look into the future. HIS CALCULATIONS ASSUME GASOLINE WILL COST $3/GALLON FOR THE NEXT 11 YEARS. It doesn't take a genius to know that is if false. At best, they will go up at the rate of inflation. But if you know much about oil production, you would know that gasoline prices are going to rise SHARPLY over the next 20 years. Thus, this calculation is bogus.

And yes, electricity will cost more too but electricity rates are FAR MORE stable. And the amount of electricity used by an EV is far less than gas used by a gas car so even if they went up by the same rate (which they will not) the effect on the EV is far less.