Personal Log  #657

February 1, 2014  -  February 9, 2014

Last Updated: Weds. 3/05/2014

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Short vs. Long.  Far too often, we get narrow perspectives.  Today, it was: "But more competition from higher mileage cars really is eating into prius liftback market."  Encountering comments like that is quite typical.  Hopefully, the reaction to my response will be too.  With expectations for Volt having fallen apart, there isn't much arguing anymore.  Taking the next step is quite a bit easier now that there's a good sense of direction & speed.  The chaos before sure didn't provide that.  I'm thinking this new chapter will be much different:  Short term, that's a reasonable assessment.   Long term, more competition is a win for Prius.  Counter intuitively, waiting for the next generation is too.  Other automakers pushing the shift away from traditional vehicles is how penetration deeper into the market will happen.  It's necessary for expansion.  This opportunity for catching up helps all involved.  We obviously find the slow pace annoying.  That's how the mainstream market works though.  The high-end niche can move rapidly.  But with the majority in the middle, speed of change is glacial.  Paradigm shifts means someone will lose.  That means fighting for survival, even though the inevitable cannot be avoided... only delayed.  That's why Toyota's effort to offer an affordable plug-in option is so important.  They are well aware of how long it takes to refine a design and not incur increase cost as a consequence.  Being able to share improvements with the regular model makes competing with the wide variety of competitors, including their own traditional vehicles, is a major benefit.  Notice how much of a non-issue the switch to lithium has been so far.  Both the 7-seat Prius wagon and the PHV work well with it.  Although still expensive compared to NiMH, the new battery type has proven resilient in addition to being more efficient.  Increased competition will help drive down the battery cost.  Toyota is positioning to take advantage of that.


Audience Search.  Not being able to agree who the target market is for a vehicle dooms it to fail.  The meaning of "success" is not shared among all involved.  Conflict with a group of enthusiasts should be a red flag, a warning of mixed messages.  Sadly, that's been easily overlooked or dismissed. Instead, focus is still being diverted.  This quote from yesterday provided a great example: "There are 3 reasons I see for people buying Prius. 1) Ignorance. 2) Brand Loyalty. 3) Snobbery. There is no possible way that someone who does genuine research of the Hybrid Market in 2014 could come to the Prius."  That's hardly a ringing endorsement for Volt on a Volt forum on a thread deciding between the choice of a Prius C or Volt.  The very fact that the smaller model of Prius could even be compared directly should highlight the internal struggle taking place.  We left the previous chapter with a "niche" status.  This new chapter is off to an interesting start.  It's quickly becoming a search for an audience.


Ugly Mess.  This was my follow-up post on what's left of that daily blog, which features many topics outside of Volt now:  Unfortunately, looking back, we see that constructive criticism about GM wasn't welcome either.  The topic of non-traditional vehicles had already become a polarized topic by the time Volt was revealed.  GM's reputation for "over promise, under deliver" had already been freshly reinforced by the struggles with Two-Mode.  It fell short on several goals.  Volt was the ultimate diversion from that. Tesla's competition made it all better.  Having been burned so bad by Toyota, none of that rhetoric was any surprise.  Lutz had embarked on a major anti-hybrid campaign and lost.  Then he set out to trump hybrids with a superior design and lost again.  Third time had to be the charm.  So right from the very beginning, we got lots of cheerleading.  Pointing out the past wasn't allowed.  Questioning claims wasn't allowed.  You had to support the effort.  Period.  Red flags kept popping up.  Those warnings were disregarded.  Touting the "vastly superior" design of Volt served to quiet comparisons to Tesla and served as entertainment for mocking Toyota.  Cheerleading turned into hype.  The situation degraded as details were learned.  Many who had labeled those asking questions as "trolls" vanished from discussions.  They figured out the promises wouldn't be delivered.  Rollout confirmed that.  It turned into an ugly mess.  3 years later, we find ourselves wondering what comes next for GM.  Tesla has done surprisingly well and other automakers are quietly attempting to emulate Toyota.  What does GM hope to achieve?


Success.  The inevitable summary came today...  It boils down to how success is defined.  We saw the problem right from the very beginning with "vaporware" arguments.  Most of the enthusiasts claimed that simply meant proving the technology, demonstrating it was a viable option.  But when pressed for detail, there was an obvious effort to avoid providing any.  They didn't see how it mattered and declared the requests for clarification attempts to undermine.  That gave GM free reign to do whatever would draw attention.  Warnings of the past were not heeded.  Lessons from the failure of Two-Mode to appeal to the masses were outright dismissed.  The motto of "no plug, no sale" emerged, making a bad situation worse.  Heavy emphasis was placed on the purity of electric-only driving and series-hybrid operation following depletion.  The thought of anything but electricity providing thrust to the wheels was deemed an attack on Volt.  Bringing up the issue of needing heat in the winter for both cabin & battery resulted in hostile replies.  MPG would be outstanding.  Price would be easily justified.  They didn’t see how there could be any resistance.  The thought of actually defining success measured by sales was laughed at.  That brought about the "vastly superior" claims.  It was an indication of history repeating.  Enthusiasts just plain didn’t care; instead, they mocked & belittled other automaker offerings.  They truly believed the technology alone would be enough to stimulate purchases in high-volume.  Why would anyone doubt strong demand?  Pointing out concerns was assumed to be support for another automaker.  Remember how GM told us development would include "transparency" of unprecedented level?  Yet, whenever there were certain questions from enthusiasts, like CS-mode efficiency, the answer was vague at best.  Why didn’t those responses raise any red flags?  How come no one wanted to state who the target buyers were?  What should have been done when well-known contributors became disenchanted?  When was it clear that executives leaving the project indicated trouble matching market need?  Now, over 3 years after rollout, there are a few still making excuses and defending the failure to understand the business of selling vehicles.  We routinely see examples of innovative technology failing in other industries.  That's why manufacturers don't bet the farm on a single product and strive to offer diverse choices.  GM decided to risk it all on an inflexible design, one requiring a large & affordable battery-pack.  That has proven unwise.  Sales, even with a generous tax-credit, have been well under expectations and nowhere near mainstream levels.  Achieving success isn’t as easy as earning engineering trophies.  Enthusiasts learned that lesson the hard way.  A few still refuse to accept that reality.  The business of appealing to ordinary consumers not interested in anything but transportation with a good price is a substantial challenge… like it or not.


Lease Replacements.  Seeing some former foes turn in their Volt after the lease expires and purchasing something else to replace it comes as quite a vindication.  Some were down right cruel.  Now, they have abandoned the very thing they had so passionately defended.  A few have even sighted the same reasons I stated others would find unappealing.  Price and legroom in back have overwhelming been the most common.  They didn’t want to admit mainstream need was such a big deal.  They truly believe the performance aspect would justify the shortcomings.  Being well-balanced, like Prius, was uninspired & boring… or so they thought.  It was a group-think trap they fell into… and surprisingly admitted to the mistake afterward.  That's why we can now so solidly declare a new chapter having started.  hey now understand the tradeoffs required to appeal to the masses.  Being extreme earns trophies.  Being seemingly ordinary results in lots of sales and sustained profit.  Lease deals designed for short-term gain have consequences… which are quite obvious to see now.


Growing Pressure.  It looks like the sting of price (more importantly, cost) is becoming apparent.  More and more posts are focusing on that now with the topic of plug-in sales.  This is what I chimed in about today: "GM will face more price pressure from more plug-in offerings as well. Hyundai-Kia will be bringing plug-in versions of the Sonata-Optima in 2015.  The hybrids are $25,900. I could see the plug-ins below the magical $30k number."  Volt supporters are well aware of how that "nicely under $30,000" goal fell short.  My way of stating that fact now is:  All automakers knew the importance of price and how big of a gamble it was waiting for battery cost to come down, while hoping gas prices would remain relatively low in the meantime.  They also knew the true competition was traditional vehicles, not other plug-in vehicles.  That's why the PHV model of Prius was designed with cost being a very high priority... so it could be in sold in high-volume for a profit.  Toyota worked really hard to squeeze as much as it could out of a battery-pack that would still deliver ample cargo space, hybrid efficiency following depletion efficiency, and hit that magic price-point.  The fact that sales for it have remained relatively flat (rather than dropping) and the fact that rollout beyond the initial states hasn't happened yet means there's potential for this generation, no waiting.  Pressure will continue to grow.  Look at how strong of a hold traditional markets still have on the market.  They will keep pushing. It's not other plug-in offerings you should be worried about.


Plug-In Sales.  The month-end results for the auto industry were revealed today.  January is always a rough one.  Cold weather certainly doesn’t promote sales.  It's uncomfortable looking in dealer lots and no one wants to have to deal with snow & ice right away.  So naturally, the weather was the number one reason for blame of low sales.  Most everything was down.  The few vehicles doing well were flat.  In other words, those results were quite predictable.  It's been a challenging Winter so far.  Looking at the plug-in market, the three big players stirred online chatter. Leaf managed along just fine.  I'd personally say that’s extra impressive due to impact the heater makes on range, reducing rather significantly.  1,252 wasn't too bad.  Of course, the 2,529 sales from last month (stimulated heavily by end-of-year tax-credit incentives) was obviously better.  Volt dipped to 918, making it a larger percentage & numeric drop from last month's 2,392 than Leaf.  Both marketing & inventory were to blame for that.  I'd say there was more at play, but supporters disagree. Prius PHV, which is still only available in the 15 initial rollout states, dropped from 919 last month to 803 in January.  That lack of major change was interesting.  I'm not sure what the reason for that was. Perhaps buyers really do understand how well the plug-in Prius copes with the cold.  They may know that since the engine has to run anyway, it's much more efficient then when the one in Volt runs.  I honestly don't know.  But it sure is nice seeing MPG averaging above 50 even in the dead of Winter.  Hopefully, February will start steady growth.  Expansion into other states sure would be nice too.


Better Understanding.  We're moving away from struggles of the past caused by misconceptions.  Some of that comes from no longer having to deal with greenwashing, the intentional misleading certain groups of people spread.  Back then, people were innocent victims, unaware they weren't being provided with correct information.  Now, it's more a matter of providing clarification.  There's enough real-world data at this point to make the greenwashing efforts suspicious.  Phew!  What a relief.  This was the response to one such situation today: "That's good to know, thanks!  Pretty darn clever."  It came as a results of several Prius PHV owners providing detail about how the battery-pack capacity is managed when the engine starts.  Mine was:  If you get an aftermarket gauge, you'll be see that RPM is held to 1500 during warm-up.  That's done to help reduce emissions.  It's achieved by drawing from the battery-pack at a higher rate than in HV mode, hence EV range being burned during that time.  We call that EV-BOOST, since you aren't really in HV mode yet.  It automatically switches over once warm-up is complete, then works to restore the electricity it consumed during that time.


Favorite Example.  Looking way back over the years of chaos, the reoccurring theme Prius antagonists posted (yes, Volt enthusiasts) was that technology had become "obsolete".  There was a deep denial to acknowledge it was actually "mature".  That was a dead giveaway they weren't concerned about mainstream offerings.  When pressed about the needs of middle-market, they'd reply with how electric purity will win people over.  They sincerely believed ordinary consumers were find a way of justifying the extra expense.  That level of differentiation is why there's been luxury brands for decades.  The majority of people are unwilling or unable to pay more, regardless of how desirable the drive is.  That's the way the real-world works.  Not wanting to accept that has resulted in serious disappointment... on their part, anyway.  I'm simply pleased that's over and can now reflect back upon their refusal to face facts.  What a waste.  We shouldn't have had to go through that nonsense.  Sadly, the warning signs we got from the Two-Mode failure to sell well should have been enough.  It too failed to address the needs of the masses.  I'm always amazed by hard the loss of perspective can cause such a mess.  Oh well.  At least some of us know better.


Looking Back.  That chaos a week ago was nuts.  Volt enthusiasts got so angry.  Some were absolutely furious.  They lashed out at the only scapegoats they could find.  I was quite amused by the senseless reaction.  What did that accomplish?  Getting accused of being a troll, even though my content posted was totally on-topic, confirmed their responses.  There are so many opportunities to do off-topic other times, but I resist.  Today provided an excellent example.  There was a review of Cadillac ELR.  It overwhelming confirmed GM's stance on niche vehicles.  It was pointed out how Toyota's battery production (enough to deliver 1,000,000 hybrids in 9 months, which they recently did) grossly outweighs GM's effort to achieve cost reduction.  The economy-of-scale benefit should be obvious; yet, some argue anyway.  Some are dead-set against smaller battery-packs.  It's more evidence of how focus on engineering alone has harmed mainstream penetration.  Being business realistic isn't exciting.  They always wanted a vehicle that was exciting.  Failure to recognize that would inevitably lead to the outcome we now all see didn't matter.  They kept contributing to their own demise, hoping it wouldn't happen.  Looking back, I was drawn by the opportunity to witness such self-deprecation... again.  Looking forward, I wonder how that failure to recognize will change.  Third time's a charm?


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