Chevy Volt PHEV20? It’s more likely than you think…

There has been talk in the last several weeks about GM’s goal to reduce the cost of the Volt by $10,000, from the current $41,000 MSRP. The means by which they reduce the cost are kind of fuzzy. General terms have been mentioned – redoing the interior, making standard features into optional items, mass production, and possibly even cutting the battery to a 20-mile range instead of 40. The goal would be to deliver a car, that after incentives, would be approximately $27,000 MSRP*.

The first seem entirtely plausable, but probably don’t contribue significantly to the bottom line. Redoing the interior can be done in such a way that it does cut costs – replacing the capacitive touch interior with buttons like every normal car out there, shrink the center stack display (keep the width but switch it to 16:10 widescreen instead of 4:3), looking for off-the-shelf parts and adapting designs to them instead of having to order any semi-custom or custom parts (re-using parts from other cars). But I would estimate they probably couldn’t save more than a thousand dollars this way. Moving some of the more expensive features to options (like the Bose audio system) helps too, but its rearranging the deck chairs, its not fundamentally making the technology any cheaper. Moving to mass production helps – when you factor in overhead and capital costs (the machines, training, supervisors, QA, etc), mass production does help spread those costs out over more vehicles, reducing per-unit costs.

That last option – cutting the battery in half – might seem like killing the main purpose behind the vehicle, but it seems a lot more plausible when you consider the use of plug-in stations at people’s offices. Even in the summer, energy usage in the morning hours (before 10A) are still considered off-peak, so you could recharge the entire, smaller, battery before on-peak charges started. Going to a smaller battery would mean that GM would need to alter the characteristics of the battery – more power and less energy storage per kg of battery material. There are two main issues with shrinking the battery pack in this way – the power output of the battery pack and the cycle life. Power output is governed by the rating of the individual cells as well as the number of cells in the pack. The cycle life would have to compensate for the batteries being recharged twice or even three times per day instead of once at night.

Reducing the battery pack would also reduce the federal rebate – from $7,500 to $4,600 ($2500 + $417 for each kWh above 4kWh). If you’re cutting the price by total vehicle price by $10,000 but losing $2,900 of the rebate, your effective cost reduction is only $7,100. However, this would still push the after-rebate price down from $33,500 to $26,400, or the price of a nicely equipped Toyota Prius. The 2012 plug-in Prius is expected to have a price in that rage, but it is unknown if that included the $3,000 rebate or not (its likely it did – I’d estimate the full price of a Prius plug-in at around $30,000).

The sticking point appears to be the battery. GM would need a batter that is more capable that what is available today, but only by a little. By the end of 2012 or sometime in 2013, such batteries will be available and probably have markedly decreased cost over batteries of today (mostly due to the large quantities in which they will be produced – Toyota will likely be using a similar type of battery, but with less stringent requirements since batteries only provide partial power in the plug-in Prius – up to 62mph and normal acceleration).

The success of a 20-mile range model is highly dependent on building a charging infrastructure outside of people’s garages. Offices and shopping centers will need to build the necessary infrastructure to handle vehicle charging, as well as utilities monitoring and managing the charging using the smart grid. But if the infrastructure materializes, why not use it to it’s fullest while accelerating the use of electric vehicles and reducing oil consumption until batteries are cheap and plentiful.

And it’s definitely better than filling up once a week at $4/gal!

* MSRP is only a suggestion – some dealers have tacked on $5,000 or more onto Volt sticker prices because of their limited quantity and uniqueness