The Chevy Volt Is Dead ... Long Live the Electric Car?

News that General Motors (NYS: GM) is idling its Chevy Volt plant shouldn't come as much of a surprise. In the short run, the electric car hasn't lived up to the high expectations that have bubbled up over the past few years. That doesn't mean electric cars are failures. In fact, despite the idling -- a temporary five-week shutdown -- GM's Volt sales improved markedly in February after a disappointing January.

The cars aren't perfect, and the technology isn't fully mature. But the Volt is only one early entry in what's likely to soon become a crowded field. The last thing the electric car needs is more hype, but that's something every transformative technology succumbs to in its early adoption phase. In the long run, cautious optimism is the best attitude to adopt while waiting for the electric car to take off.

Counting your plug-ins before they're charged
The sad truth is that any technology attempting to move us away from fossil fuel becomes a political football to be punted around. Plug-in electric cars are one glaring example, but hybrid vehicles were no exception. Here are a few comments that could apply to either the Volt today or the Toyota (NYS: TM) Prius a decade ago. Try to figure out which quote is referring to which car.

  1. "With most subsidies, the government pays someone to produce something that no one wants to buy. But what happens when the government pays people to buy something that no one wants to produce?"
  2. "Taxpayers are rightly grumpy about ponying up a ... subsidy on a car that is generally priced around [no clues!]. People who will spend [that much] for a small four-passenger car don't need a subsidy."
  3. "It is not, repeat, not the wave of the future. It's just too impractical for a large number of everyday drivers."
  4. "Obviously, these cars can't achieve profitability under any reasonable sales projections."
  5. "News stories about the popularity of these vehicles simply aren't true. There's a waiting list ... but that's because [Car Company] will only ship 12,000."
  6. "Taxpayers and corporations can't prop up this flop forever. ... management should end the misery before being told off by the voters, the markets and its own technology."

Stumped? The first, fourth, and fifth comments were all from a Cato Institute op-ed slamming the Prius back in 2001. The rest are from... the Cato Institute, which has published multiple op-eds slamming the Volt over the past few months.

This comes despite the Prius' ensuing great success for Toyota, as it's now sold more than 2 million units and moved 400,000 worldwide last year. That puts the lie to the claim that no one wanted to produce the cars, and also makes a mockery of the assumption that no one wanted to buy them. The Cato Institute's 2011 article claimed that Toyota was losing $17,000 per Prius; today, the company's gross profit per Prius is estimated to be about $3,000, though that number may have gone down since first being posited.

A failure of long-term thinking
Is the Cato Institute wrong on the Volt? It's early yet, but they might be proven right on the particulars while still being very wrong on the bigger picture. The Volt could be the plug-in electric spiritual successor to Honda's (NYS: HMC) hybrid Insight, which never matched up to Toyota's hybrid standard-bearer. The Insight's sales tailed off substantially after 2001, and Honda even halted sales for two years before reintroducing the model to moderate success in 2009. By then it had long since been eclipsed by a proliferation of other hybrids:


Source: U.S. Department of Energy.

I've pointed out in the past that plug-in electric cars have already pushed ahead of the hybrid adoption curve. This year alone, the Volt and the Nissan Leaf will be joined by a roster of attractive options, including Tesla's (NAS: TSLA) long-awaited Model S (sold out pre-production), Toyota's RAV4 (jointly developed with Tesla) and plug-in Volt-like Prius, and a hotly anticipated Ford (NYS: F) Focus electric. But most automakers are now doing conservative rollouts, perhaps wiser in the wake of mediocre Volt and Leaf sales to date.

There are problems on both sides of the aisle when it comes to electric cars. These cars -- with ranges that generally max out at 100 miles, and price tags beyond the reach of many consumers -- aren't going to significantly change American driving habits. Not yet. There hasn't been a national effort to change driving habits on the scale of the national highway system since, well, the national highway system. Giving out subsidies isn't remotely comparable in scope. Even hybrids are a rounding error in America's annual auto sales figures.

That doesn't mean plug-in electrics will be money-losers and subsidy hogs forever, or that their development won't bring about something even better. Long-term thinking and technological optimism are good traits to have, whether your goal is to go to the moon or wean a country off imported fuel. And both sides need to be willing to accept the costs of progress. A Democrat pointed to the moon and promised we'd get there, but a Republican congratulated the men who made it.

No, the Chevy Volt isn't close to a moon-shot. But the first rockets only had to reach orbit. There needs to be some perspective on the march toward better technology.

At the time this article was published Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights. The Motley Fool owns shares of Ford Motor. Motley Fool newsletter services have recommended buying shares of Tesla Motors, Ford Motor, and General Motors. Motley Fool newsletter services have recommended creating a synthetic long position in Ford Motor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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