And the Volt is not the only all-electric car selling for far less than their makers hoped for. The Nissan Leaf and the Fit EV from Honda Motor Co. Ltd. (NYSE: HMC) have both been sharply discounted. The all-electrics from Ford Motor Co. (NYSE: F) are too new to have a track record yet, but even the Prius Plug-in from Toyota Motor Co. (NYSE: TM) costs about 7% less now than it did last year.
The only all-electric bucking the trend is the Model S sedan from Tesla Motors Inc. (NASDAQ: TSLA). And there is a simple reason for that: the automakers are selling cars; Tesla is selling a gadget, albeit a spendy one.
When a mainstream carmaker introduces a new model, it needs to sell in large numbers in order to recover the multi-year investment in designing and building the car. The majority of car buyers will not pay more than they have to for a new vehicle.
When a gadget company (think Apple) introduces a new piece of hardware, it can price the gadget at a premium, provided that the gadget offers something unique for buyers with money to spend on the newest gadgets.
Will cutting the Volt’s price help sell more cars? GM sold fewer than 24,000 Volts in 2013, about 10% the total number of Toyota Prius models, most of which are hybrids. Hybrids can be priced much more modestly and drivers are not afraid that they will be stranded somewhere when the batteries die. For mainstream buyers who want to cut their gasoline costs, hybrids are a better value than any all-electric car.
According to Kelley Blue Book, the average price of an all-electric car dropped about 10% between 2012 and 2013. If GM’s move is any indication of things to come, look for an even bigger drop this year.
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