Reuters derived its loss-per-unit estimate by dividing the total development cost for the Volt (between $1 billion and $1.2 billion) by the number of Volts sold to date (about 21,500 so far), then adding in the estimated production cost per car (“between $20,000 and $32,000, a wide margin to be sure”) and subtracting the price for which each Volt sells (base price $39,145), which gave them that $49,000 loss figure.

Unfortunately, Reuters screwed the mathematical pooch in that first bit of ciphering:

The issue with Reuters’ math, though, is that it only takes into account the 21,500 Volts sold so far, as if GM would never sell another one. If that is taken to be true, then each Volt sold has cost GM around $55,000 in development costs. However, each Volt sold spreads out the development costs incrementally, pushing down the R&D cost per unit. GM has acknowledged that it has not yet sold enough Volts to break even, but it suspects that it will reach the break-even point by the time the second- generation Volt is introduced onto the market in about three years’ time.

# No, GM Is Not Losing $49K On Every Volt; Reuters Just Fails at Basic Business Math

Current Status: Blessed (1)

Seeded on Tue Sep 11, 2012 2:02 PM

keyboard shortcuts: **V** vote up article **J** next comment **K** previous comment