GM, learning from the accomplishments and mistakes of predecessors in the hybrid vehicle market, recently announced its Chevrolet Volt, their newest and most anticipated "green" vehicle which happens to be electric. The Volt, which will go on sale later this year, is priced at $41,000, a price tag that has been a central focus of discussion surrounding the announcement. Priced $8,000 more than the car’s closest competitor, the hybrid Nissan Leaf, many are left wondering what makes the Volt stand apart and worth the extra investment.
Just like any other company, GM clearly put a tremendous amount of time and thought into the price tag for this vehicle. As a recent article in the Wall Street Journal points out, formulating pricing for vehicles, especially those that are hybrid, is a very difficult process. Because the costs associated with building and developing a hybrid automobile are so high, the price tag must reflect these costs if the manufacturer wishes to be profitable. As an example, the article mentioned the fact that Toyota lost a significant amount of money by selling their premier hybrid, the Prius, at too low of a price. However, at the same time, it is imperative that hybrid vehicles are not too expensive or they will not appeal to the average consumer.
Although I am not an expert in this sector, it seems that the Volt is more expensive than its rival, the Nissan Leaf, for legitimate reasons. It’s worth noting that Chevy is a more trusted brand than Nissan, especially when considering American consumers who have driven Chevys their whole lives. When most people think of Chevy they think “strong”, “durable”, “meant to last” (or famously “like a rock”). I’m not sure the average person could come out with three words to describe Nissan as a company. Although you could argue that this hinges entirely upon branding and marketing efforts, that’s not to say that this type of sentiment doesn’t go a long way. There is also no denying that Chevy is known for its durability, and this, along with the various competitive advantages the Volt offers, including a gasoline “range extender" of 300+ miles after the 40 mile all-electric battery range, justifies the pricing of the vehicle.
At the same time (although I just argued a side myself), I’m hoping that this intense focus and close scrutinizing of the Volt and hybrid pricing starts to die down in order to make room for other topics of discussion. It is understandable why such a subject would be of interest to companies, consumers, journalists, and just about anyone. However, I think there are so many other very important “thinking ahead” topics that we must start discussing. The Wall Street Journal article began to delve into one of these areas by bringing up the fact that many companies, such as utilities, must start preparing for the growth of the electric vehicle market, as more and more automobile companies hop on board. The article cited the fact that some utility companies are already strengthening transformers in areas where they expect to see a significant increase in electric car ownership. It’s worth noting that charging batteries for these vehicles can use the same amount of energy (on circuits) as adding new homes.
The effect that electric automobiles has on utility companies is just one example of the many shifts they will inevitably create across industries. From a green perspective, this transition to electric, environmentally-friendly vehicles is clearly very positive and encouraging; the key is to be prepared for it. We finally can be confident that hybrid vehicles are here to stay, so let’s stop debating price and start thinking about the many ways in which we will all be affected so we can take full advantage of this much-needed industry shift.
-Contributed by Jessica Boardman. Follow her @jboards.