News Story

The Electric Car Future That Never Happened

Chevy sells more Corvettes than Volts

Not long ago, many experts were projecting gas prices above $5 per gallon for the U.S. President Barack Obama said “with more research and incentives” there would soon be 1 million electric plug-in cars on the road. The top executive at General Motors claimed the company could sell 120,000 Chevy Volts in a year.

That was in 2011, when GM’s electric plug-in car was still in its infancy. Former Michigan Gov. Jennifer Granholm very publicly bought her own Chevy Volt after telling the media that electric car batteries represented the “beginning of new Michigan.”

That didn't happen, despite massive spending on taxpayer-funded production and subsidies for buyers. Today Chevrolet sells more $55,000-plus Corvette sports cars than Volts.

Annual sales of the $40,000 Volt peaked at 23,461 in 2012. Sales remain stagnant even though buyers get up to a $7,500 federal subsidy. Federal and state governments have given billions of dollars to promoters and corporations to build battery plants and other infrastructure for electric cars, leaving a line of bankrupt companies.

“It hasn’t lived up to the political expectations,” said Nicolas Loris, an economist with The Heritage Foundation. “It speaks to the government's inability to predict markets. The broader point is government can’t usher in new technologies with subsidies, targeted tax credits and those type of funding mechanisms. Time and time again politicians try to outsmart the market. The market will bear what the market bears.”

In his 2011 State of the Union address, the president predicted there would be 1 million electric plug-in cars on the road in the U.S. by 2015.

Then-General Motors CEO Dan Akerson followed by saying production of the Volt could reach 120,000 in 2012, double the company’s earlier estimate of 60,000.

According to media reports, Akerson’s projections presumed that high oil prices would persist and spur consumer demand for alternatives, including electric cars.

But something happened that Washington D.C. didn't see coming. Innovations in an existing oil extraction technique called hydraulic fracturing, or “fracking,” converted oil shortages to a worldwide glut that helped drive the price of gas below $2.00 per gallon in some places.

Just 9,808 Volts were sold during the first six months of 2016, putting the Volt on track toward annual sales below 20,000. In June, GM sold 1,937 Volts. By comparison, Chevrolet sold 49,662 Silverado SUVs and 2,483 Corvettes in the same month. Ford sold 70,937 F-Series pickups, America’s best-selling vehicle.

An early version of the Chevy Volt made its debut in Detroit on Sept. 16, 2008. The average U.S. gas price then was $3.87 per gallon. Just two months earlier, gasoline had topped $4.00 per gallon for the first time.

The Volt was on the market by December 2010. The price of gas declined during the Great Recession, but by May 2011 it was back up to $3.96 per gallon on average. It reached as high as $5 per gallon in some cities, and some oil experts speculated that $5 gas was coming to stay.

Except it didn't. With domestic oil production skyrocketing, prices plummeted, and U.S. gas prices have been below $3.00 per gallon since October 2014. As of July 25, 2016, gas was selling for $2.18 per gallon on average. In many places, a gallon can be had for less than $2.00.

Industry experts estimate there were 400,000 electric cars in the U.S. in 2015, far short of Obama's goal.

Henry Payne, the auto critic for The Detroit News, said the Volt has never come close to its predicted sales.

“Contrary to government predictions, battery-powered cars are a niche market (like muscle cars, for example) for green buyers,” Payne said in an email. “They make up just three percent of the market (and Prius sales are half of that). … With gas prices well below $3 a gallon, it only makes sense to green buyers to purchase a Chevy Volt — which is essentially a $35,000 version of the already fuel-efficient, $20,000 Chevy Cruze.”

Payne said the Volt is essential to GM if the company wants to meet federal electric vehicle and miles-per-gallon mandates.

“The Volt gains GM enormous federal credits which allows Chevy, for example, to continue to sell vehicles consumers want, like SUVs and Camaros,” Payne said. “Ultimately, California will require 10 percent of sales be zero-emission cars by 2020 — which the Volt will help GM make.”

In spite of cheap gas and stagnant sales, General Motors continues to promote its battery-powered car. Spokesman Fred Ligouri wrote in an email:

“We are very proud of the Chevrolet Volt. The Volt established an entirely new market segment for both Chevrolet and the industry when it was first introduced and we’re pleased to see that the segment has grown over the past six years."

"We continue to innovate with regard to the Chevrolet Volt, having recently introduced a second generation [2016/2017 model year] that’s sleeker, sportier and delivers greater range, greater efficiency and stronger acceleration," Ligouri said. "In fact, through June, sales of the Chevrolet Volt are up 57 percent year over year. And we continue to build on our history of electrification innovation as we prepare to introduce the industry’s first affordable, long-range electric car, the Chevrolet Bolt EV, later this year."

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.