Shocker: Hybrid Cars Stalled

First Shocker: General Motors has announced it will idle production of its Chevrolet Volt plug-in hybrid for five weeks because of slow sales, in spite of efforts to boost the vehicle's consumer appeal. The shutdown begins March 19th and ends April 23. Approximately 1,300 workers at the Hamtramck, Michigan factory will be out of work for that period.

The Volt was launched with great fanfare last year, but has suffered a rocky start with sales far below projections. Its primary purpose has been to serve as a lightning rod for critics of the Obama administration's auto-industry bailout and concurrent emphasis on alternative energy. It's also a fine example of crony capitalism at its best.

The company currently has an inventory of more than 6,000 Volts on hand. At current sales volumes, that represents almost a six month's supply.

The world's No. 1 automaker sold just 7,671 Volts last year. Some 1,203 Volts were sold last month, about double the number for January, but well below December's total of 1,529.

Reality has failed to live up to expectations. Sales of the Volt were projected by GM at 45,000 for the year, or about 3,750 vehicles per month. But buyers are staying away in droves. Of course, at $40,000 a pop, it seems a bit pricey for what is essentially a compact Chevrolet. Even with a $7,500 tax credit (which you and I are paying for, naturally) the Volt strikes few people as a good deal, and apparently the number of people willing to shell out big bucks to reduce their gasoline consumption has been grossly overestimated. Those self-centered bastids. That's a real shocker, isn't it?

But let's move on, from the Chevrolet Volt to Fisker Automotive and their Karma. Consumer Reports purchased a Fisker Karma, the first model from Fisker Automotive, for $107,850. The high-tech hybrid broke down during speedometer calibration runs on the Consumer Report test track with less than 200 miles on the odometer. After several attempts to get it moving again, they called the dealer, who sent a flatbed truck to haul the Karma away. Consumer Reports also mentioned problems with a Karma press car that visited, problems at other press events, and problems reported by private owners. It looks like Fisker Automotive is suffering from bad Karma. Are you shocked? I'm shocked.

The Karma is another strike for the Obama administration, as Fisker Automotive was the recipient of $529 million in Department of Energy loans in 2010. Fisker Automotive is faring no better than Consumer Reports' Karma. They halted work last month on a new factory in Wilmington, Delaware where they had eventually planned to start US production.

Here's another shocker. All the cars built so far came from their factory in Finland. Yes, that's right. Finland. Did I mention that this was a completely new car company, with no track record, and that this is their first model? Oh, and did I mention the half-billion dollars in taxpayer money they borrowed? To build expensive hybrid cars? In Finland? Although to be perfectly fair, I guess we should give them credit for starting a factory in the US.

Wisely, the DOE cut off access to additional loan funding last May because Fisker missed sales targets. Apparently they overestimated the number of people willing to pay over $100,000 for a four-seat car that's supposed to get terrific gas mileage. Who would have suspected that energy efficiency isn't a major selling point to customers shelling out over $100k for a car? That's probably a good thing, though, since the EPA rated the Karma at only 20 miles per gallon for its gasoline engine, although that increased to 52 mpg for full hybrid mode. It's range in full-electric mode is a whopping 35 miles, but with a tank of gas that's extended to 230 miles. And Fisker's story has never been better. Literally.

Meanwhile, back in Finland, Fisker was having a little trouble meeting its Karma production schedules. Although promised for 2009, the first models did not roll off the assembly line until July 2011. Instead of the 1,300 supposedly already under wraps, the first delivery to the United States consisted of 239 cars. Six months later, when a leak in the cooling system that might cause battery fires prompted a recall, an inventory discovered fewer than 50 cars sold. The rest were still sitting on the lots. To compensate for poor sales, Fisker upped the price to $116,000.

If your product isn't selling, the best way to solve the problem is to increase the price. I'm shocked to learn that, aren't you?

Oh, and here's one more shocker. Obama’s 2013 budget would increase the tax credit from $7,500 to $10,000 per vehicle for both the Volt and the Karma, among others, and turn it into an instant credit, just like a manufacturer's rebate.

Had enough shocks?

In that case, I'll share some positive news about the hybrid market. The Honda Civic hybrid ($23,800), CR-Z hybrid ($20,000) and the Toyota Prius ($22,800) are selling well. Perhaps that's the biggest shock of all.

Of course, there's no $7,500 $10,000 federal tax credit being paid for by other taxpayers, no salvation of the American auto industry to brag about, (American Honda and Toyota Motor North America are doing just fine, thank you) and no half-billion dollar investment (read: money poured down a rat hole) for the Obama administration and our other wise leaders in Washington to leverage into campaign contributions. But I guess we can't have everything.

...and that's all I have to say about that.