The latest volley in the electric vehicle price war was fired by General Motors earlier this week when they announced a $5,000 price cut for the 2014 Chevy Volt. This dropped the price of the car by 12.5% to just $34,995.
GM’s decision to lower the price of the Volt comes in the wake of lagging sales for the vehicle and price reductions by its competitors. Pure electrics and plug-ins occupy an incredibly small part of the market at around 3% but manufacturers are aggressively courting those buyers.
Ford lowered the price of the Focus EV by $4,000 last month while Honda improved terms on the Fit EV from $389 to $259 a month for a three year lease in June. Nissan beat them all to the punch, lowering the price of the Leaf by $6,400 way back in January. You could call that the shot heard round the world in the electric vehicle price war.
Why all the price reductions? Because they work.
When Nissan lowered the price of the Leaf, the vehicle’s lagging sales staged an impressive turnaround. Leaf sales are currently at about 2,000 units a month which is quadruple the volume from a year ago.
It’s selling so well, in fact, that dealers can’t keep enough of them on their lots. Nissan has ramped up production but still doesn’t expect to meet the increased demand until sometime this Fall.
The high cost of electric vehicles has long been a roadblock for buyers. It takes a lot of savings at the pump to make up for the cost of getting into an electric vehicle no matter how much someone might want one. If they can’t afford that initial cost, they’re simply not buying the car.
Unfortunately for manufacturers, there’s also a high cost for investment when producing electrics. They don’t really have much of a margin to begin with and GM was losing money on every Volt even before the most recent reduction.
The continued price reductions may be a boon for those looking to jump into electric vehicle ownership, but until development costs come down enough to increase those margins, electrics will continue to be a challenge for manufacturers.
Nicole Wakelin fell in love with cars as a teenager when she got to go for a ride in a Ferrari. It was red and it was fast and that was all that mattered. Game over. She considers things a bit more carefully now, but still has a weakness for fast, beautiful cars. Nicole also writes for NerdApproved and GeekMom.
