Chevy May Kill the Volt

Slumping US car sales have prompted the United Auto Workers union to initiate talks with General Motors about possibly discontinuing select models and replacing them with more popular crossovers. Among the models under review is the Chevrolet Volt plug-in hybrid, once touted as a game changer for the industry.

It is no secret that car sales have been decreasing steadily for a while as consumers flock to SUVs and trucks. Sales of GM passenger cars dropped 17 percent in the first half of 2017 and 36 percent in June. As sale volume decreases, inventories rise. On July 1, GM car inventories skyrocketed to 126 days from 96 days one month ago. That equates to as much as six months of supply on hand. The plants that build these cars have cancelled several shifts putting hundreds of jobs at risk.

Senior Vice President of LMC Automotive Jeff Schuster sees room for consolidation among GM's array of passenger cars. "GM doesn't need all the sedans it has today. They should look at reducing the number of sedan offerings and replacing some with SUVs or crossovers." The models singled out include the Buick LaCrosse, Cadillac CT6, Cadillac XTS, Chevrolet Impala, Chevrolet Sonic, and Chevrolet Volt.

Commentators are putting pressure on GM to create innovative new products, which was exactly what the Volt was when it debuted in 2010. Plug-in hybrid technology allowed for electric driving without worrying about depleting the batteries' power. The first generation model featured an electric driving range of 38 miles while the second generation could go up to 53 miles before the gas engine turned on. It received awards from multiple organizations including Green Car Journal, the American Council for an Energy-Efficient Economy, Consumer Reports, and a number of automotive publications.

I believe factors hurting Volt sales include cheap gasoline and a nonexistent marketing campaign. Obviously, no one is going to purchase a hybrid vehicle if the payback period for the increased fuel efficiency is too long. That is where marketing comes in. GM and Chevrolet need to position the Volt as a smart investment which is a better buy over the long run. Can you recall the last time you saw an advertisement on TV for the Volt? The only Chevrolet ads I see are for the Silverado and the Equinox with an occasional Malibu thrown in. People buy what they see, and not having a vibrant campaign for the Volt almost certainly dooms it to failure.

As for the other models on the list, the older demographic who purchased cars like the LaCrosse and the Impala are instead turning to crossovers and the perceived safety that comes from a higher ride height and all wheel drive. Cadillac is finding that customers are not lining the streets to buy their line of rear wheel drive luxury cars including the CT6, CTS, and ATS, otherwise the XTS would have been discontinued long ago. The XTS continues to be popular among livery services due to its quiet and comfortable ride. If Chevrolet decides to cancel the Sonic, it does so at its own peril. We live in volatile times, and all car makers should be prepared for economic downturns or rising gas prices. Killing off the Sonic puts Chevy in a position without a cheap and efficient compact car to weather the storm.

It will be interesting to see what happens in the next few years as these models come up for renewal. Some such as the Impala and the Sonic could be discontinued while others such as the Volt and the Cadillacs could be replaced with crossovers with similar missions.