The Car of the Future -- but at What Cost?

[JohnWxy]

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/24/AR2008112403211_2.html?
hpid=topnews&sid=ST2008112403295&s_pos=

Eager to reduce U.S. dependence on foreign oil, Obama proposed a $7,500-a-vehicle tax credit for plug-in vehicles during his presidential campaign. Roughly half of Americans don't earn enough to take advantage of such a big tax credit. (A head of household would need to earn almost $50,000 to have a federal tax liability that large.) Many others don't have the cash to purchase an expensive vehicle then wait for a federal refund. To spur sales of new vehicles, the price must be reasonable at the point of sale, say many industry experts.

Womack warned that it takes time to design a new vehicle, change assembly lines and then turn a new product into a profitable one. "For anything that's really new it's still about four years," he said. "To get your money back, you need to make that product for eight to 10 years with only cosmetic changes."

Helping automakers over that hump may take more money and patience than Congress or its taxpaying constituents have.

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I don't think the $50,000 per yr it would take to take full advantage of the tax credit of $7,500 Obama has proposed, is anytha problem. That would still leave many more households than the number of Volts GM could build, initially. The real question is will GM be able to make anough money selling other cars to keep selling Volts at a loss for a few years and stay in business?

IF the Government wants the Big 3 to build more fuel efficient cars the Government must hold up it's end of the bargain and pass a carbon tax on cars to disincentivise purchase of gas guzzlers. The car companies can't force people to buy lighter more efficient cars if large numbers keep wanting SUVs.

[hughee99]

1. Does this "disincentive" help or hurt?

So the Volts won't be profitable yet, but the hope is that GM can make enough money selling it's other cars in the meantime... but many of it's other cars are these gas guzzlers that the government will encourage people not to buy.

If the Volts are more expensive because initial production costs are high, and the other gas guzzlers are expensive because of "government disincentives", won't people who need to buy a car start buying foreign cars that don't have the extra expense of the guzzlers or the Volt? Won't that make it even harder for domestic manufacturers to weather the storm until their fuel efficient cars can be produced at lower costs?

[marketcrazy1]

2. domestic auto manufactures are toast

CHRYSLER is owned by CERBERUS (who can afford to support them ) and ford is better positioned to survive from a cash standpoint (with some help ).. GM on the other hand is finished! bankruptcy is a given, now or 2 years from now. without MASSIVE government support they simply CANNOT survive the coming downturn, the numbers do not lie! the only slim hope they have is chapter 11, they NEED reorganization, full and complete... as much as i would like to believe they could make it ( for the sake of the workers ) their debts are just to high! chapter 11 is the only shot they have. unless you want GM to be the first U.S. national car company...

[gravity]

3. The Volt will be a halo vehicle

Although GM won't make much profit off it initially, it will improve its brand image and get people to buy its other cars. It is like what the Prius did for Toyota.

And the majority of GM's cars are just as fuel efficient as the ones from Japan. They are not at a disadvantage compared to the foreign competitors in this respect.

[hughee99]

4. Will the Volt help the brand image

if initially, it's priced out of the market? If no one buys a car, the perception will be that it's a failure, no matter how good it actually is. And having your new car perceived to be a dud hurts the brand image.

The difference between Toyota and GM is that while the Prius was initially unprofitable and expensive, Toyota had other successful product lines that were able to make up for the $$ lost on the Prius. I'm not aware that GM has this, and therefore the amount of time they can afford to remain unprofitable with the Volt is much shorter.

Yes, GM makes good cars now, but they've done a poor job of changing the public perception of American cars in general over the last 15 years. They are not disadvantaged in the quality of the product, but they are disadvantaged when it comes to the preconceptions of a significant portion of the buying public.

Don't get me wrong, I'm rooting for a big comeback from the American automakers, but no matter what is done in the next year to help them out, I still think it's an up-hill battle.

[gravity]

5. The Volt is a marketing tool

As long as the car is good and enough people knows about it, The Volt will be a success for GM even if it doesn't sell a lot of them initially.

The whole point is to show that GM is on the leading edge of technology for fuel efficient vehicles, which will get them to check their other product lines which can more than offset the losses from the Volt. The technology itself can also be profitable long term as GM can eventually drive down the costs and start using the technology to other vehicles.

[marketcrazy1]

6. the BIG 3 will get their bailout

no question about it, I do not agree with it but it WILL happen. when it does Chrysler should be denied any taxpayer dollars, they are owned by Cerberus capitol, a huge private investment group with hundreds of billions available to prop up Chrysler (if they choose to) if THEY ( the owners of the company ) dont think it`s worth the investment why should WE prop them up!

[GoesTo11]

7. GM had better make the Volt with very high quality

If people are going to visualize a rusting old battery, and it short circuits on the highway and causes garage fires, they may as well skip it. I hope they do it right, instead of trying to rush it out with huge fanfare while there are still lots of bugs in production. They will get one chance if they're lucky to challenge Toyota and Honda for the hybrid / electric market.