High gas prices: Good or bad for GM, the Volt?

Are higher gas prices good for the Chevy Volt, but bad for GM? Can higher gas prices be good for both GM and the Chevy Volt?

Success dependent upon gas prices?

Chevy Volt sales and GM's success

Will Chevy Volt sales be dependent upon gas prices? That's the question StraightLine asked yesterday.

While I have an answer to that question, that's not the question I would ask. Instead, I'd ask, are higher gas prices good or bad for GM, regardless of the Volt?

Back in 2008 I was helping a friend shop for a Toyota Camry hybrid. One July summer morning we stopped by a Toyota dealership that actually had 2 Camry hybrids on the lot at the same time – quite a feat in those days, as hybrids were selling as soon as they hit the lot, even with dealer markups as high as $5000. While that morning seemed a normal morning at Toyota, just next store the GM dealership was a very different scene, as high gas prices squashed any interest in most new GM vehicles.

The next time gas prices spike, however, GM will be different. GM will have a new, high profile sale's tool and marketing weapon for fighting high gas prices: the Chevy Volt. So, back to the question that got us here, are Volt sales dependent upon gas prices?

Probably, but does that matter?

Volt sales for the first few years won't be limited by gas prices, but by limited production capabilities. It could easily be several years – even a decade – before GM is producing 100,000 Volts per year for the US market. Moreover, it might take well into the 2020's before GM actually recoups its production costs and starts achieving real profits via Volt sales – at least that was the opinion of Obama's Auto Task Force.

Thus, will low gas prices hurt Chevy Volt – excuse me, Chevrolet Volt – sales? Probably if gas prices stay around $3.00 through the next five years, but does that really matter? Is the Volt really about sales?

For instance, if gas prices spiked and GM started making 150,000 Volts per year to meet increasing demand, but the same gas prices crushed sales on GM trucks and SUVs, would that be good or bad for GM?

My guess is that it would be very bad for GM.

For the next several years, probably at least the next decade, GM's future is not dependent upon Volt sales, but it is probably dependent upon gas prices remaining relatively stable. For now, the Volt just needs to perform safely, and as planned. While the Volt might be a great sale's tool for selling other GM vehicles, the Volt itself will be far more about marketing than sales for some time.

Thus, I doubt GM will be praying for much higher gas prices any time soon.


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