DETROIT — General Motors rolled out the Chevrolet Volt two years ago with lofty sales goals and the promise of a new technology that someday would help end America's dependence on oil.
So it seemed like a good thing in August when sales of the $40,000 car set a monthly record of 2,800. But a closer look shows that things aren't what they seem for the cutting-edge car.
Sales rose mostly because of discounts of almost $10,000, or 25 percent of the Volt's sticker price, according to figures from TrueCar.com, an auto-pricing website. Other pricing services gave similar numbers, and dealers confirmed that steeply discounted Volts are selling better than a few months ago.
GM's discounts on the Volt are more than four times the industry's per-vehicle average, according to TrueCar estimates. Edmunds.com and J.D. Power and Associates say they're about three times the average. Discounts include low-interest financing, cash discounts to buyers, sales bonuses to dealers, and subsidized leases.
Americans have been slow to embrace electric cars. But the Volt's August sales show they are willing to buy if prices are low enough. Even so, electric cars have a long way to go before they enter the mainstream and make money for car companies. Electrics and gas-electric hybrids account for just 3.5 percent of U.S. auto sales this year. GM is losing thousands of dollars on every Volt, raising the question of how long it can keep absorbing the steep losses.
GM executives have conceded from the start that they were losing money on the Volt, and that was before the big discounts.
Now the losses could be even higher. It costs $60,000 to $75,000 to build a Volt, including development, manufacturing and raw materials, estimates Sandy Munro, president of Munro & Associates, a Troy, Mich., a company that analyzes vehicle production expenses for automakers. Much of the cost comes from an expensive combination of two power systems -- electric and gasoline. With a sticker price of $40,000, minus the $10,000 the company pays in incentives, GM gets roughly $30,000 for every Volt. So it could be losing at least $30,000 per car.
GM confirmed there are incentives on the Volt and that the company loses money on the car. But the automaker declined to give figures for the discounts or the losses. The figures exclude a federal tax credit that goes to buyers.
GM spokesman Jim Cain said most of the Volt discounts come in the form of lease deals, which account for about two-thirds of sales. In some markets, Volts can be leased for $249 per month with $2,400 down.
"We're trying to create a market for a brand-new technology," Mr. Cain said.
The Volt, a four-seat compact, was rolled out in a few states in December 2010 with a starting price of $41,000.
GM had high hopes. The car's features stacked up well against the Nissan Leaf, a pure electric car that debuted about the same time and is the Volt's closest competitor. The Volt goes about 35 miles on battery power, then a gasoline-powered generator can take over, giving it the same range as a car with a gasoline engine. And the battery can be recharged in 10 hours from a standard home electrical outlet for about $1.50.
But the timing of the launch was poor. The pricey car hit showrooms when many buyers were reeling from the bad economy and turned off by the government's $50 billion bailout of GM.
U.S. Volt sales totaled just 7,700 in 2011, short of GM's goal of 10,000 and a fraction of the 136,000 for the Prius hybrid, the world's best-selling alternative fuel vehicle. Volt sales have climbed to more than 13,000 this year. But at their current pace, sales will still miss the company's 2012 target of 60,000 worldwide.
Faced with disappointing sales, GM began toying with discounts. In June of 2011, the company knocked $1,000 off the Volt's starting price, but it didn't help. So early this year, GM started offering many more discounts, which soared to $10,000 per car in August.
The Volt is now the top-selling electric car in the U.S. -- 7,400 ahead of the Prius Plug-in. Nissan's Leaf is a distant third, and analysts say Volt sales could reach 20,000 this year.
While the Volt isn't helping GM's bottom line, it's not in danger of being canceled anytime soon.
GM can subsidize the Volt's cost from profits on other cars, but eventually GM will have to get closer to break even or make money. GM earned almost $2.5 billion overall in the first half of this year.