Personal Log #631
August 7, 2013 - August 7, 2013
Last Updated: Weds. 8/28/2013
page #630 page #632 BOOK INDEX
Nicely Under $30,000. The primary reason Volt was labeled as "vaporware" right from the start was its price, range, and efficiency targets didn't make sense. How could so much be delivered in so little time? Having a price of "nicely under $30,000" was absurd for 2010. There's no way a battery that large could have a cost low enough. Then to also deliver a 40-mile range even in Winter along with 50 MPG following depletion, it sounded too good to be true. Some of us took that as a warning. Others celebrated a victory soon to be achieved. Sure enough, it didn't end up being delivered. 2.5 years after rollout, it still hasn't. Yet, there's more celebrating. This morning, I read: "That puts it BELOW the average price paid for a Prius in the US!" It was from one of the most troubling of troublemakers. He just plain doesn't care about production-cost or tax-dependency. It's all about beating Prius. So what if GM losses money on each sale. So what if selling the vehicle requires government assistance. Supporting a product that sustains the automaker isn't his concern. He just wants bragging rights. That's amazing. Think about how unlikely it is that $5,000 could have been dropped already. A cost reduction like that without any visible or operational change to the vehicle, in such a short amount of time, doesn't make sense.
Price Drop. It certainly hit the fan today. Wow! There was flat out denial too. The situation is beyond a disaster. GM announced the price of the 2014 Volt would be $5,000 lower, making it the same price as the clearance price of the 2013. That got those claiming this was only an "early adopter" phase in quite a tizzy. They've done everything possible to forget that GM had once projected sales of 60,000 for year #2 and would have production-capacity of 120,000 by year #3. Seeing sales significantly lower than that without any alternative approach available leaves nothing but the desperate act of selling at a loss. Of course, there were even attempts to make us believe cost could have dropped so dramatically, profit would actually be made. Reminding them that earlier this year the CEO told us money was lost on each sale fell on deaf ears. Fortunately, words of wisdom are emerging all over the place now. The forums have suddenly come to life after the disappearance of Volt. This was my favorite summary of the predicament: "At least as far as the bread and butter market is concerned, the Voltec solution seems to be dead in the water, especially once the government no longer contributes $7,500 per car. There have been plenty of 'moonshot' type of products that were technological marvels, but that ultimately failed because what people were willing to pay for them didn't match what they cost to make. The Volt may turn out to be one of those products." What else can be said? Remember that price target GM set, then subsequently disregarded? Today was a brutal reminder of why delivering that was so important.
New Owners. We routinely get them on the big Prius forum. A few join specifically for the purpose of figuring out why their MPG is so seemingly low. It's pretty obvious too, when a new name with only a single post starts a thread. You can tell, they didn't do much (if any) research about the measure of efficiency prior to their purchase. So, we do what we can to try to help. Here's my contribution to that this time: There are many factors that prevent MPG from what people expect, based on the big numbers on the window-sticker. New owners aren't aware of them until they start driving around with their new Prius, which has a display and begins to point out those factors. Assumptions don't make themselves known until they seek advice online. Efficiency has always been that way. Most people have no idea though. In fact, they usually aren't even aware that the window-sticker also contains small numbers too... specifying a range, trying to highlight the reality that result will vary. Fortunately, even under the worst conditions, Prius still does better than other vehicles at their best. It's too bad that new owners don't have data prior to their purchase available for comparison. Their previous vehicle didn't have a display. They had no idea things like temperature, short-trips, tire-pressure, or winter-formula fuel could make such a difference. So, all we can really do is assure the new owner their Prius is just fine and encourage them to explore the technology. Drive something other than the daily routine. Watch the difference it can make. Also, give the new car some time to break-in too.
Profitable. The question finally got asked: "How
profitable is the Volt now?" It's a very important one.
Sales don't mean much if the vehicle isn't profitable. Losing money on
each means volume will stay low. Automakers cannot afford that for
long. But with such an intense effort to downplay expectations, it's
no surprise that being a "halo" became an acceptable outcome.
Becoming known for selling a premiere fuel-sipper, but selling guzzlers
instead, is a doomed plan. The business cannot remain competitive that
way. Fortunately, many are silently acknowledging that reality now.
For some perspective, take a look at the big GM forum. While those here have
been persistently pointing out reasons for being patient and waiting,
members there have moved on. Volt simply doesn't get attention anymore. The
daily blog has gone the same way. Discussions are now about other topics.
Other plug-in choices, like Tesla, are stirring far more interest... and are
demonstrating the potential for sustained profitable sales. Transforming
engineering success to business success isn't going well for GM. The
pressure of economic realities are forcing choices to be made.
What the outcome will be is anyone's guess. The one thing we know for sure
is that the market is rapidly expanding and the clock is ticking. When the
tax-credits expire, each plug-in must be able to support itself... competing
directly with traditional vehicles.
EV Distance. Morning commutes taking the river route are quite pleasant. The top speed is 55 mph. So driving that way can easily be done using nothing but electricity... which is exactly what I've been doing. After all, the 70 mph has been the route to avoid. With heavy construction on it right now, the traffic is awful. The alternate route is a nice steady flow. That flow stops at the highway entrance to cross the river. It involves a wait at a merging light. That means some days require lots of stop & slow for that short distance to use the bridge. Fortunately, the drive prior to that was only 13 miles. It leaves the Prius with just enough EV range to get through that wait. Having that much further along the way, I could be stuck motionless waiting for the engine to warm-up. Instead, I'm just creeping along using only electricity. It makes that route the preferred... especially since there isn't always a wait. Sometimes, I can just drive right through. For the crossing itself, I fire up the engine. Spending only a minute on that 55 mph section of highway and the following acceleration to merge onto the 50 mph road afterward is perfect for warming. When done, the engine shuts back off and I resume more EV driving. Think about how many don't have anywhere near that pleasant of a morning commute. It works out really well for me.
Looking Forward. It will be very exciting to watch what happens to hybrid popularity as their plug-in counterparts draw more attention. Currently, the plug-in hybrids are so rare, most consumers aren't even aware what's actually available. Seeing charging-stations in parking lots will go a long way toward promoting them. That raising of awareness will instill a sense of normalness for the regular hybrids. Rather than being identified as "green" or "alternative", they'll be looked upon as the obvious next step in automotive standards... like the way we saw front-wheel drive become the norm. We're at that tipping point where changing the mindset of the market won't take much effort. No one is questioning business viability or technology reliability anymore. It's all well proven at this point for the regular hybrids. With each automaker offering high-efficiency choices, the tables will turn. Gas prices will continue to climb. Commutes will continue to get slower and more crowded. It will become harder to justify the purchase of a non-hybrid.
Perspective. Much importance is put on learning from the past. If you don't, you are likely to repeat the same mistakes and face even worse consequences. So about a year ago when the denial about Volt goals grew intense, I was thankful for having the detail available here to refer back to. The biggest issue was the claim that this generation of Volt was only intended to be an "early adopter" model. That perspective seemed reasonable too... if you were unaware of the past. Trouble is, the intentions of selling 60,000 in the second year were well documented as a goal with the production-capacity of building up to 120,000 by the third. That nugget of information angered the enthusiasts; it was a reminder of the struggle the shortcomings were giving them. Then came the start of the third year, this previous January when GM was supposedly going to reveal a collection of upgrades to be rolled out with ELR in the Fall. That didn't happen. Instead, it was just a repackaged Volt with some alterations. 6 months laster, it doesn't take much to imagine how enthusiasts are feeling with the sales remaining flat and the variety of plug-in offerings from other automakers growing. Much opportunity was lost. What's left is slipping away. On top of that, I'm getting what I wanted all along... an ally. I looked to Volt as a player on the team, a vehicle to help out with the other plug-ins to end the dominance of traditional offerings. The enthusiasts wanted a plug-in that was "vastly superior" to all others. That didn't happen either. They are forced to play along. Think about what they'll want a year from now. We know their perspective will be changing. What will it be?
Spin. No matter what happens, there's always a reason to justify it. We've been taught to remain positive, regardless of the circumstances. That's a fundamental part of our culture. Unfortunately, you end up with an endless stream of excuses as a result. In fact, it becomes so bad, you get nothing but spin at some point... which is where we are today. GM just slashed another $1,000 off the price of Volt. The market is saturated and there isn't any other option available. GM bet the farm on an inflexible design. They lost. Supporters are now in dismay. It's not like Ford or Toyota, who both have hybrid platforms capable of delivering a variety of configurations. This is just like Two-Mode. It's falling apart the same way. We all saw the warning signs. Some of us acknowledged them. Others fed what ultimately became spin. Ironically, they will end up accusing you of the very thing they are guilty of. It's quite fascinating. Long story short, Volt is no longer a disruptive force. The barrier it once had been is gone. What a relief. Changing the game was the goal. That didn't happen. It mostly just confused consumers. And it turns out, the efforts of the other automakers the enthusiasts mocked are indeed what is overcoming the true competition... traditional vehicles. No amount of spin can conceal that anymore. Prius rollout can now proceed.
Warm-Up Costs. Each generation of Prius has delivered notable improvement. Augmentation from the plug took it a step further. It's quite fascinating on my commute home to climb out of the base of the river valley, in the on-ramp that turns into a truck-lane due to the steepness, with a cold engine running at just 1500 RPM. I simply get up to flow of traffic, about 60 mph, and merge in. It's this remarkably smooooooth climb. Right before I reach the top, the boost runs out. RPM then ramps up to 2300. What a difference that electricity makes. With the next generation, we are expecting more mitigation. Increased thermal-efficiency should cut down on warm-up time. So when you do have a cold engine start, there's even less of a penalty. Of course, even in that extreme example I have, that initial warm-up efficiency is still over 50 MPG. Seeing that even higher in the future will be great.
Advertising. There isn't much you can actually convey in a 30-second television commercial. Yet, that is still what we learn much about our world from. That medium tantalizes our short attention-span, giving us just enough to want to find out more. That more part is where venues like online forums come into play. Some still don't see the value in that though. Others feel empowered by the wealth of information so readily available. That catch is, you have to be aware of those trying to mislead. After all, that is a basic part of the advertising process. Online, it gets taken to a whole new level. So, there's a very real disconnect. Fortunately, that is fairly well understood... which means we can actually have some relatively constructive discussions about it. What information do consumers really need to know? I got a kick out of this comment: "Toyota ads are 'normalizing' the Prius saying how it is 'for everyone'." Isn't that the point? Once a vehicle achieves mainstream level sales, that's exactly the perspective you want. With all intimidation eliminated, resources no longer need to be spent on special efforts. That label of "normal" is the ultimate goal. Coincidentally, remember what I stated just yesterday? Having choices of "something reasonably competitive" is what we should all be striving for. Sadly though, that's not what gets much attention. The everyday type ads blend into the noise of the daily routine... which is confirmation of it being normal. To think that Prius has come so far, it no longer stirs. That's good. Owners have come from be environmental extremists to just someone living on your street. Yeah!
What Benefit? The topic of why Toyota didn't sell PHV sooner has become a hot one. None of the people arguing take the cost of lithium batteries into account. They just figure the more that are sold, the better off Toyota will be. Waiting for the affordable price-point to be hit is a factor completely oblivious to some. That makes me crazy. There are risks to selling at a loss. When those risks are unnecessary, why take them? I don't see the problem waiting until the 2014 model year for national rollout. It's a sensible business approach. Too bad those arguing online rarely, if ever, consider that aspect of manufacturing. It's all about the engineering. That lack of balance should be obvious. Clearly, it isn't. Anywho, this was my post about the timing: Looking at the big picture, V & C have become well known in the meantime. Heck, the C model has been the top-seller in Japan for awhile now. That established the acceptance of Prius variety. While at the same time, work has been underway to prepare the market for the plug-in model... in other words, educate consumers. Haven't you noticed one of the top complaints about GM's approach with Volt has been the lack understanding, not having taught consumers how it works? What benefit would there have been rolling out this Spring as originally planned? Waiting until Fall doesn't appear to have been a loss. In fact, the success of Tesla & Nissan in the meantime appears to be a gain. The growing popularity of full EVs makes the decision to purchase a Prius with a plug easier. There's no intimidation factor then. In other words, Toyota is positioning itself rather than having just plunged in. That's a sound plan for reaching the mainstream.