Chevrolet Volt tops Sierra Club ranking of plug-in hybrids

Actually no, that is not what is being argued.

John has stated that the prius was profitable in the first generation, and that this is what toyota intended, so the volt needs to be profitable right now. GM should make it stand on its own or its a failure.

Unfortunately Johns memory is contradicted by facts. We have a toyota executive explaining it here, after he says the first generation lost money but the second is profitable.

Note this is a Toyota executive saying that they consider that its ok that they don't make money on the prius. The R&D will be used on future vehicles. He also is saying the gen II was covering its costs outside of R&D while the gen I did not.

When someone is spouting incorrect versions of history they should be confronted with facts, so that others are not confused.
The RXh, HiHy did help cover those R&D costs. The toyota strategy of long term investment worked. It was not a short horizon plan that had to pay off in the first generation or even a single product line.

 

Only if you don't want to give the Volt the same fair shake as the Prius got.

The Prius was introduced in Japan in 1997. The second generation came out in 2004. That's 7 years from introduction until it reached mainstream status. 7 Years until Toyota got a return on its investment.

The Volt is only on its third model year. A new car, or any good, becoming an overnight success is a rare thing. Those not willing to give the Volt until its next generation likely wanted the car to fail from the beginning.

 

I specifically remember Toyota saying they were profitable on the 1st gen Prius...but there weren't enough details to know how to compare this. Was it the incremental cost per car, did it include all R&D (doubtful), including an amortized amount of R&D per car (maybe). Do they include the equivalent of US car maker's pensions and health care (doubtful).

By the end of 2002 they had sold, worldwide, about 100K cars. If the R&D was $1B, that would be $10K per car. No way could they have been profitable yet, including ALL R&D. But it they assumed they would sell at least 1M hybrids, they could have allocated $1000 per car and declared it profitable.

Its all about how THEY do the accounting and the assumptions in it. IMO, there is no way to get all the data and all the assumptions from each car maker to do this without a lot of guessing...especially for a new technology like a hybrid, or an EV etc. Lots of the R&D gets spread across other car models, for example.

Mike

 

I posted that arctile with the Toyota clarification. They only were covering variable costs, not even fixed manufacturing costs or marking costs when they announced it was clearing a profit. This meant that at that point making the next car did not lose money, but if they killed the program some of these fixed costs could have been used to make other cars, or retired. There was no corporate overhead etc. The Gen II covered all the fixed and variable costs, and contributed to reducing R&D costs in 2004. It was a leap of faith back then on how these costs were allocated, but by 2006 or 2007 gen II r&d costs were covered by the gen II.

By 2004, when the gen I run was over they had sold about 150,000 prii world wide, I don't know the exact number. It is estimated that these didn't pay off 1 yen worth of the R&D, they most likely sold at a loss that was partially made up by MITI.

No its not!

John's statement is that it was designed to be profitable from the first generation.

Irv miller's statement, and he was a Toyota executive was that it is an investment. If that is the focus, the sure we can talk about future R&D allocation. In 2004, they were guessing the investment would pay off, and they could claim profitability. It was only in 2008, after sales were counted, that that guess of profitability was confirmed.

If we use that same standard for the volt, we need to wait to see what sales do in the future, GM like Toyota did in the past claims it is an investment. If sales go up and costs go down it will pay off. Many are betting that GM is wrong, just as they bet that toyota was wrong, but we won't know the answer until the second generation comes out. Honda failed even to produce a second generation of their insight, until a wholey different car came out recently. We can speculate whether the volt will be like the prius or the insight, but we should not learn the wrong lesson from the prius, and claim it was profitable in the first generation.

If its designed to be profitatable from the first generation, then watanabe, and miller, and every other toyota executive that has talked about it was lying. That doesn't pass the smell test, perhaps the simpiler explanation is toyota executives were telling the truth and the car was an investment that paid off in the second generation. Or we can look at blogs and ignore newspaper articles and statements from executives of toyota. I'm sure I can find a blog that says the prius is not profitable even now.

 

According to the VINs registered at Voltstats.net, GM has now manufactured over 80,000 2011-2013 model year Volts & Amperas (based on adding the highest registered production VIN from each model year).

The most-driven Volt has now racked up about 89,000 miles with almost 50% of those on the battery.

 

Ah that sheds light on John's thinking.. he is saying the purpose of raising doubts is to to make pointless arguments.
And he is also saying without raising doubts the "delay-to-nextgen" excuses fall apart. So he has to make pointless arguments to raise doubts to counteract the discussion that first gen does not have to be profitable.

Thanks austingreen and Trollbait for providing citations about the actual facts that the prius was not profitable.

The only thing I have to add there is that in a larger accounting of value, one must include corporate image, goodwill, and reputation as they impact other sales. We cannot know how well the cruze or other GM cars would be selling without the Volt, but it absolutely help improve the image of the company as a technology leader and overall impression of the quality of company vehicles. For a company that spends 4Billion per year on advertising and branding, how much is the Volt's worth in that part of the enterprise.

 

There are two unmistakeable indicators that a car company is making a very long term gamble/commitment. The two indicators are:

1) Designing and building a complete new production car design from the ground up (vs. modifying an existing design)
2) Building a whole supply infrastructure chain of new manufacturing machinery (e.g. for building batteries, permanent magnet motors)

This is not done to "test" the market, it's done to keep the business from dying from an expected paradigm shift occurring in vehicle buying. It's a discussion occurring in the boardroom based on what needs to be done for the upcoming decades, absolutely not as a "pass/fail test" of the market after just a couple of years of the first model.

The profitability of the first years is rather a moot point. What is vastly more important is long term market success. Both GM and Toyota are not going to let initial prices of the first models in the first few years derail what is a long term plan. You adjust the price based on sales, not profitability in situations like this.

From my first hand experience in production, raw parts cost drops by about 30% per year for the first few years when it's brand new parts being produced. Something like this applies equally to Toyota and GM, so profitability discussion are rather meaningless until this curve flattens out. When it does flatten out, that's when you want car sales to have transitioned from small quantities to large quantities.....but you have to avoid the reputation of the first few years of being a "non-seller".

 

1 Gen Volt has a common Otto cycle ICE under the hood.
I wonder how much money would be necessary for GM to spend to put an efficient engine instead?

 

the 1997 model was replaced with a updated 2000? model or 1999? i forget
anyway then in 2003 the gen 2 came..
so thats 6 years and the first was only sold in japan.
so the updated version from the gen 1 went worlwide making it only 4 years before the profit model gen 2 came. ( i believe the updated gen 1 also did good, first off it was not that expensif!! )
the volt came out in 2010 right? thats more then 3 years now!! ok well with this price point i dont see any real reason to expect something like what happend with the prius sales on newer models.. but you never know ofcourse.

 

Toyota began exporting the Prius to North America and Europe in 2000 this ccame with a model refresh, or replacement as you said. The earliest year it is thought to have paid back gen II r&D costs is 2006. It is thought that the first gen 1997-2003, Toyota not only did not profit, but continued losing money, we know it was losing money in 1997-2000, as I linked the article saying they had just turned the corner and covered variable costs in 2001. That means they had spent over $1B by the time the gen II came out. There were articles that you can easily find that says the prius was too expensive to make, and toyota was losing their shirt even in 2005.

Again, knowing the real history, why would you expect a new car to have paid back its R&D in 3 years. The volt first shipped in December 2010. The prius, and we all agree it was successful, had not even paid back its fixed costs in 6.

In 2000 Toyota shipped 19,000 prius. In 2012 Chevy shipped 30,000 volt and amperas. The prius didn't break 30,000 worldwide sales until the gen II came out. That is despite of the price of the chevy.

 

12 years distance makes a lot of difference...

Prius was alone back then, and still today many people wouldn't be "caught dead" in one...

 

Prius and insight when I first saw them, and the insight looked cooler We still have gen I prius and insights running around here. Toyota invested a lot in a much improved Gen II and it really took off.

I can't imagine that chevy will be able to pull off a redesign as successful and iconic as the Gen II Prius, but its still early in the plug in market. There is lots of competition, and lots of possible designs. One of these car companies is going to get the phev right.

 

Another consideration that is often overlooked is the impact the Volt has had on GM's ability to recruit and retain top engineering talent, especially freshly minted talent graduating from colleges. A recent conversation with a recruiter indicated that the Volt's R&D expense could easily be justified in just the recruiting impacts.

 

And, as I noted recently (in another thread?), the release of the gen 2 happened almost exactly as the Iraq War began driving up oil and gasoline prices for the next several years. The increase in gas prices and the reminder of our dependency on Middle Eastern oil had a big influence on the popularity of the gen 2 Prius.

 

IIRC it takes 3 or 4 years to R&D a new model. Doesn't that mean most of Volt's R&D was paid via bankruptcy? That being the case, any $$ coming in can be considered 'profit'. You get to write off 100's of acres of old manufacturing sites with toxic waste - later to be paid for, by super fund billions ... you write it all off. Sure ... Fed's (we the people) will pay for the banko for decades to come ... but I'd think profit technically starts from day one.

.

 

Good point. However while most of R and some D probably were before bankruptcy, there was still a lot of D, tooling and testing going on after bankruptcy.

I've never seen an estimate of the split or anything that profiles R&D spending from concept to mules to production. Anyone know a source?

 

Mostly right.

If we were to use GAAP (Generally Accepted Accounting Principles), most of the pre-bankrupcy R&D would be discharged. They did talk about killing the volt in bankrupcy, and then that money would have been gone anyway.

GM mainly discharged its other obligations having nothing to do with the volt.

But lets pretend, that the volt line is still responsible for its pre-bankrupcy R&D. We should not gauge sucesss based on discharging obligations from a poor decisions outside the project.

 

Since much of the improved efficiency development is also needed and going on for their straight ICE cars, it probably won't cost much. GM already has much of the valve control technology for a Atkinson cycle. Plus a 3 cylinder engine block. So they have a range of choices to put into the Volt.

 

Still having a 2001 and previously owning a 2007 (my son's car now), I'm not sure that Toyota "invested a lot" just for the 2004 transition. I would say it probably was in line with any car refresh cost of a conventional vehicle. When I go through all the differences, in the HSD and engine area there are a lot of simplifications. Likewise, in the chassis, there were big changes, but almost all were easy steps. Here are some of the more subtile changes:
1) The fabric/foam interior panels were changed to straight ABS plastic.
2) The Aluminum wheels were changed to conventional steel.
3) The unique low resistance tires were changed to standard Goodyear tires
4) Smaller battery
5) Stamped metal replacing cast metal in some things

One of the biggest problems to overcome between the 2001 to 2004 was changing from looking like a "butt-ugly" Echo to a much sleeker hatchback. That did cost something, but surprisingly little costs were added under the hood, they were mostly removed. The one big improvement under the hood was the Electric AC Compressor. I have way too much (FL) experience showing how big of a difference that made (and still makes).

 

Yes, you are right, marketing is dismayed the speed or sales activities with the Volt has not met their goals.The pressure is on from corporate right thru at the dealers' level: must move more Volts.

DBCassidy