Rick Wagoner Answered Questions On Several Topics
In an hour sit down with online journalists during the North American International Auto Show (NAIAS[/ta), GM’s Chairman Rick Wagoner answered questions on several topics from the joint partnership announcement the day before with Coskata, to Tata Motors Nano, recently unveiled for the Indian auto market. Participating int he breakfast meeting were journalists including (but not limited to) Brian Dooley at HummerGuy.net, Lyle Dennis of GM-Volt.com, Joe LaMuraglia – Gaywheels.com, Paul Stamatiou, Gear Diary’s David Goodspeed, Hybridcarblog’s Chad Snyder, Hank Green of Ecogeek.org, Joel Williams of Lifegoggles.com, Alphamom’s Isabel Kallman, Autowriter Matthew Keegan, Philippe Daix of TopSpeed.com, PSP-Themes.org, Clayton Cornell of Green Options, and Autopia’sMarty Jerome.
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I saw the blogger press conference with Rick Waggoner. You broached the subject of risks (market et al.) with him but I found that his response was a bit dismissive of the risks and how they will deal with them. I would like him to address these risks and GM’s risk mitigation plan. He glossed over the technical risks and, more importantly the substantial marketing risks, with the major one being price. Specifically, the Volt may be a technical tour de force but people will be reluctant to pay much of a premium over a similarly equipped conventional auto even if it can be shown that the life cycle cost of a Volt is much less than its conventional equivalent. For example, look at the market acceptance of compact fluorescent light-bulbs (CFLs) versus incandescent bulbs.
Ten years ago, with power at 8¢ per kWh, it could be shown that a 15-watt CFL at $15 represented about a $25 savings over its 10,000 hour life compared to ten 60-watt incandescent bulbs at $0.50 a pop with a 1,000 hour life. Despite these demonstrable savings and the added benefit of fewer bulb replacements, CFLs did not fly off the shelves. Yes, the form factor was nerdy and the light was a bit stark but CFLs did not even take the basement or garage lighting market by storm. Even now with better quality of light, improved form factor, a price under $3 and higher power rates, CFLs have not displaced incandescent bulbs to the degree that logic says they should. It seems that the higher price is the sticking point. Will the Volt premium price have a similar effect on its market acceptance?
A key difference between a light bulb purchase and an automobile purchase is the four orders of magnitude difference in price. An auto motive purchase entails a detailed examination of choices (color, style, etc.) and affordability, which should include some life cycle cost considerations that will work in the favor of a Volt versus a conventional equivalent – for example, a calculation of the monthly cost (lease payments, fuel expenses, maintenance, insurance) of the possible choices. Sales people are sure to present the Volt in the most favorable light, e.g., fewer trips to the gas station, since its premium price translates to premium commission. For the customer, the premium price will lead to the demand for strong guarantees, particularly on the battery, to provide assurance that the Volt’s useful life is sufficient to recoup the premium price differential in the form of lower fuel and maintenance costs, e.g., fewer brake jobs. These strong guarantees will increase the carmakers risk which they can mitigate. I am thinking of other stakeholders in PHEV development that should be shouldering some of this risk. These stakeholders include environmentalists, government and the power companies.
The power companies would be major beneficiaries of market acceptance of the Volt. It is estimated that the current US power system has sufficient capacity to recharge 80 million PHEVs nightly with NO additional infrastructure. At 8 to 10 kWh per PHEV per night, we are talking additional annual revenue of about $300 per PHEV. Accessory and parts companies will also benefot hugely from a new era of components and even getting access to high quality tires at good cheap prices using coupons like these from tire rack will be possible in time . The power companies recognize this potential windfall and have conducted studies that support the economics of PHEVs and better yet (for the power companies) EVs. As major beneficiaries, the power companies should be able to help in decreasing the risks of PHEV development. For example, Austin (TX) Power has talked about providing a $1,000 grant to PHEV purchasers in its serving area. Here is a link to a 2004 Electric Power Research Institute (EPRI) studies on PHEV and EV economics.
So, the question that I would like you to forward to GM is, “What are you doing to involve any of the other PHEV stakeholders in your Volt development?”