Hybrid sales at GM looking slightly less barren in April
A month ago during GM's monthly sales conference call, it was revealed that the company had sold a measly 843 hybrid vehicles in the first three months of 2008. Although I don't partake in the most recent sales call, one of the readers over at TTAC did listen in this month and someone specifically posed the question of how many hybrids GM managed to move off dealer lots in April. As usual GM didn't break out hybrid sales in the overall numbers but when questioned, Marketing boss Mark LaNeve did acknowledge "over 1,100" sales with over 500 being the Tahoe and Yukon hybrids. The remainder were assorted mild hybrids of the Malibu, Aura and Vue varieties. That's still nothing to get particularly excited about, but it's a move in the right direction - unless, of course, profitability is the desired outcome. GM is undoubtedly loosing a significant number of dollars on every two-mode hybrid and selling more will only make things worse financially. It will be interesting to see if GM actually makes more of a push to sell the two-modes when the Escalade hybrid launches later this year at a significantly higher price.
[Source: The Truth About Cars]
Reader Comments (Page 1 of 2)
Dad 4:57PM (5/03/2008)
"outcome. GM is undoubtedly loosing a significant number of dollars on every two-mode hybrid "
How do you know this ? Do you have a source other than your opinion to back up this claim?
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Sam Abuelsamid 5:04PM (5/03/2008)
Yes I do.
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Dad 5:16PM (5/03/2008)
Sam said "2. Yes I do."
Odd, why not share it? The details.
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stevefazek 5:19PM (5/03/2008)
yeah come one selling now what 900 hybrid SUVs at a $5,000 premium they most certainly losing money with the development costs.
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Sam Abuelsamid 5:30PM (5/03/2008)
Manufacturers don't like to share the details of how much their products actually cost to manufacture. It's proprietary information that they feel could give other companies a competitive advantage. No one at GM will talk on the record about how much the two-mode system actually costs although all the estimates I've heard range well beyond the actual retail cost premium on the Tahoe and Yukon. Also I used to work for a supplier that provides parts for the hybrid trucks and I worked on them prior to leaving the company. As such I'm not at liberty to share any information I might have anyway that isn't officially disclosed by the company.
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mike 5:37PM (5/03/2008)
When will GM Break Even on development of the 650 hp Corvette? NEVER. Why are they still selling this loser?
Hybrids are the Future. That development isn't wasted.
The Corvette on the other hand, only makes sense if there's an Oil Kickback involved.
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Tim 6:03PM (5/03/2008)
"Hybrids are the Future" WRONG!
Electric Cars are the future. Some of them will be range-extended at least until the general public gets over their range anxiety.
Look at what's happened to battery, ultracapacitor and Solar technology in the last 24 months. Now that the whole world is focused on renewable electricity, I can't wait to see what the next 10 years will bring. If necessity is the mother of invention, what will ever increasing oil prices bring? Alternatives!
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Wave54 6:48PM (5/03/2008)
* "Hybrids are the Future" WRONG! *
Hybrids are most likely the interim solution until an electric infrastructure is in place for the majority to "refuel" their vehicles.
1/3 of all American households are renters, usually apartments, the overwhelming majority of which have no outside plugs for the tenants. Many have no off-street parking at all.
That figure doubles to 2/3 of all households under 30 years old and is even higher for those under 20.
And your familiar refrain that you can drive 40 miles one-way and there's a plug at the other end to charge up for the return trip is pure fantasy. This only works (in today's world) if you're driving from a single-family home to another single-family home and you can park right next to the house/garage.
Mind you, I'm hoping for major advances in this regard, but right now, most of us are left in the cold even if viable EVs were available.
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Throwback 9:24PM (5/03/2008)
GM is definitely making money on the Corvettes, including the ZR-1. that car will cost 100K.
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Wise Golden 9:52PM (5/03/2008)
So in other words, Sam, by "yes I do," you mean "no I don't.
Dad called you out and you replied with a factual "yes I do." Then when pressed, you admitted it was based on your opinion.
There is no evidence that GM is loosing money on the duel-mode hybrid. Why not just admit to that and let it go.
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Sam Abuelsamid 10:05PM (5/03/2008)
No Wise, I never acknowledged this as an opinion. GM is selling the Tahoe/Yukon hybrid at a loss. The only question is how much of a loss. The fact that GM officials won't say anything on the record doesn't mean they don't say anything at all.
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FrankBank 11:20PM (5/03/2008)
Sam -
I'll bet that GM is making money on each Tahoe/Yukon. Okay, we get it, the retail prices of the 2-Mode hybrid premium for the SUV is less than GM's total cost for the 2-Mode hybrid treatment. You know that from your work on the brakes for one of the GM hybrids. Got it.
But it takes a deeper analysis and some accounting details that we don't exactly know about to come to the conclusion that GM makes (or loses) money on a 2-Mode:
1) The actual transaction prices. What else is bundled with the 2-Mode hybrid on an average transaction? For the factory configured dealer ordered cars, a bunch of other high margin stuff, thats what.
2) How large of an incentive does it take to move a Tahoe or Yukon off the lot? How big of an incentive is on the hybrid? Last I checked there was a $2000 customer incentive to move a base SUV, but $0 customer incentive on the 2-Mode. Also, what we don't know is any dealer incentives that are out there. I am sure that GM is paying retailers plenty to move the base SUVs in this market. No need for extra juice on the hybrid.
3) Is the contribution margin (net revenue per sale minus the variable cost) on a Tahoe/Yukon 2-Mode positive? You would need to understand the fixed vs variable costs of the SUV to answer. The Tahoe/Yukon is probably a high contribution margin vehicle.
If, after all the actual revenue is added up and all the variable costs (parts an labor) are subtracted, then the contribution margin is positive. This means that every additional incremental sale will add to the GM coffers, since the fixed costs of engineering and tooling the 2-mode are at this time sunk and so only the variable costs matter.
You could argue that GM would be better off selling a non-hybrid SUV vs the 2-Mode, but you have to prove that someone who purchased a 2-Mode would have otherwise entered the showroom and bought a non-hybrid Tahoe/Yukon if there was no 2-Mode available. Slim chance - these hybrid buyers were more likely looking at Oddeseys and Highlanders, but realized that they could have more utilty, better mileage and some enviro-cred with the 2 Mode.
Working on a high margin vehicle for a full hybrid is a good idea for GM from the accounting standpoint, since it gives them the best chance to still make money, despite the high costs of the system.
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s10 2:17AM (5/04/2008)
Anyone knows how long it took Toyota to recoup the development costs of the Prius? How many Prius were sold with a loss?
Of course these early GM hybrids are sold at a loss, no doubt about it.
If they sold 3000 in total, at $ 10.000 more than the normal GM they would have an extra $ 30 million.. it is rather unrealistic to think that this will cover the development costs.
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Chris M 3:23AM (5/04/2008)
For the manufacturer, there are 3 parts to their cost of any vehicle: The development cost, the materials cost, and the construction labor cost.
The material cost and construction labor cost is always proportionate to the number built - the more built, the higher the cost. The development costs are upfront and fixed, and are not affected by the number built. It would be foolish to sell the vehicles for less than the material and labor costs, but the development costs can be spread out over many years and lots of vehicles.
Toyota sold the Prius at a price higher than the material and construction labor cost, and it took 6 years of sales - 1997 to 2003 - to pay off the development cost. Now, Toyota is making record hybrid sales and record profits as well.
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Chris M 3:31AM (5/04/2008)
Sam, I really doubt that GM would be selling their 2 mode hybrids for less than the cost of building them. Now, GM would loose money if they can't sell enough to cover development costs before the hybrids are discontinued, but it is far too early to assume that will be the case.
Admit it - even the most brilliant bloggers sometimes make missteakes.
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LaughingTooHard 4:46AM (5/04/2008)
You have to love it when omissions, half truths and hear-say are the best we can hope for from the professional media. How dare we expect anything more from the internet bloggers? Not knowing the source of a “truth” is so much more exciting, isn't it?
Gee Double Yah knows a well informed mass is dangerous mass. Thanks for the keeping up the facade Sam...
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ecd4me 10:19AM (5/04/2008)
Loos? its spelled "lose"
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Dad 11:16AM (5/04/2008)
Sam said: 5."As such I'm not at liberty to share any information I might have anyway that isn't officially disclosed by the company. "
Yet you share it anyway, but in such a way that it sounds like opinion, not fact. Sounds like you get it both ways.
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dan 8:26PM (5/04/2008)
Talking about electric vehicles here is a very innovative electric vehicle conversion I happened to see. It didnt receive a lot of publicity but I think it has big promise since its being commercialised soon.A normal car that goes 30 miles to a charge and only costs $6-8000 to convert....I think that suits my needs:
Here's the link:
http://www.nj.com/morristown/news/index.ssf/2008/05/fdu_student_makes_his_chrysler.html
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Jared 10:14AM (5/05/2008)
"GM is undoubtedly loosing a significant number of dollars on every two-mode hybrid"
You wanted to use "losing", not "loosing".
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