Saturday, July 31, 2010

Did GM get the Volt Right?

This week GM announced the price on the 2011 Chevy Volt. Just north of $41,000 with cloth seats and few options and about $45,000 for the car fully loaded. GM has priced the car according to their cost. Unlike Tesla who priced their roadster at one third of their costs and who will likely price their sedan at one quarter of their cost. How can the Volt be priced “right” when Tesla has priced their cars clearly wrong. That is because the Volt has a smaller battery for a limited range and then relies on a gasoline engine to go the rest of the way. The Volt has 16 kilowatt hours of battery storage and the Tesla roadster has 54 kilowatt hours of battery storage. Each kilowatt hour of battery storage costs the battery manufacturer such as A One over a thousand dollars to produce. A one should be announcing their quarterly results in a week or two and I will check what their unit costs are this quarter. Last quarter old A One burned at the stake sauce had unit costs north of $1,200 a kilowatt hour. I doubt their costs this quarter will be much less but let’s see if the Green Machine is correct.

Therefore at $1,000 per kilowatt hour of battery storage GM has a cost of $16,000 per Volt for batteries. The $25,000 remaining per vehicle is plausible as this is a Chevy and GM can possibly make a small profit on each Volt at the stated price of $41,000. GM will subsidize folks who lease the vehicle though. They have stated their monthly lease charge will be $329 plus sales taxes. What they have not revealed is the upfront payment to enter the lease. Given the maximum eight year life of the battery pack and a ten year life for the rest of the vehicle the up front payment to enter the lease should be $10,000 in order for GM not to loose a bunch on the car.

There is a car called the Leaf that Renault / Nissan will begin to market that has a range of 100 miles on electric power and has no gasoline engine. Nissan has priced this car at about $32,000 and by my estimate the batteries in the car cost Nissan almost as much as their full selling price. Renault’s cost accountants must have attended the same business school as Tesla’s cost accountants who in turn attended the same business school as Bernie Made Off with the money. Ajay a close friend a super avid reader of the Green Machine asked me to rename the Volt, the Leaf and the Tesla. For now I will let the Volt keep its name as it is tending to be priced at what it costs. I will not judge if it is priced for what it is worth as there is no economic justification for anyone to buy this car. The Leaf on the other hand will have an advertisement that will be “how do you spell re-leaf?” The answer is of course spelled “Failure”. As for Tesla I got to say that Elon Musk has Big Teslacles to provide pure fiction to investors, and government to fund his tail pipe dream. Those who buy the Tesla must have had the benefit of a large Testacy. Lexus has the IS, GS and LS, the Teslacle just has the BS.


  1. You know Lindsay, when I buy a car, I'm much more interested in simply getting a stylish set of wheels that gets me from Point A to Point B. I don't want to buy batteries, or a gas tank, a starter, or a fuel injection system, for that matter. It's really more about the service and experience.

    I also notice that the internet rarely has traffic jams.

    For that reason, I much like Shai Agassi's A Better Place idea: charge by the mile (as calls are charged by the minute chez cell phones), and let drivers swap out batteries at the fueling station, instead of recharging them. Make the fueling stations solar or wind powered.

    Who wants to own batteries? As technology gets better, I'll be willing to pay more per mile for more range- let there be competition among battery makers to get the highest density battery out and quickly (not waiting for auto re-purchase cycle).

    And, while we're at it, with smart roads, let's charge more per mile during high congestion times or in high congestion areas.

    Let's manage the hardware of our transportation system like cloud computing. And the software of our transportation system like the internet.

  2. TS

    I am so happy you added your comments. I will blog in more detail about Agasi and his project no place. The one difference between cloud computing and vehicle transportation is that cloud computing is not constrained by heats of reaction and the Gibbs Free energy. I will donate my left teslacle to science if batteries are ever so cheap that there can be 1.5 sets of batteries for each vehicle to make Shai's tail pipe dream a reality. May the force of hydrocarbons always be behind you and please pay me for a smart road that is only down hill so that the Teslacle or Leaf gets you from A to B

  3. Hmmm- how do you suppose semiconductors waived the Gibbs Free Energy Law to follow Moore's Law instead?

  4. TS

    Semiconductors were not limited by the heat of reaction they were limited by the line width of the circuit and the size of the wafer being fabricated. I worked on driving Moore's law for twenty years (question did you spend any time in semiconductor fab) I built state of the art fabs from 1989 till 2005. The line width proble was solved by EUV lithography and phase shifting masks. We went from 150 mm wafers to 300 mm wafers. Teslacle will suffer from Demi Moore's law. There will be little of no learning in the fabrication of lithium ion batteries. No phase shifting masks, just a bunch of chemicals that will cost more each year. You are a clever guy but need the guidance of the sage of green The Green Machine

  5. Okay- so Moore's law points to the triumph of design over materials. Smarter and smarter design of relatively cheap materials makes a much much better product. Let's start backwards. What kind of electrochemical properties would make the ideal energy storage device? I guess that requires knowing how much energy you need. Suppose future automobiles required 1/2 as much energy per mile driven. Is there anything on the periodic table that might remotely supply that?