Channel Stuffing for Fun & Electoral Profit
“Channel stuffing” is an age-old practice for Detroit, and other industries, too. Manufacturers ship more widgets than consumers want, then try to generate Widget Excitement! by announcing how many widgets they’ve shipped. Never mind that widgets are stacking up, unsold, on store shelves, in shipping containers, rented parking lots, wherever. The important thing is to keep churning out product in the hopes that someone, somewhere can sell it all.
Example: Apple touts how many iPads and iPhones they sell to consumers, because they sell as many as they can make. Everybody else talks about how many phones and tablets they’ve shipped to retailers, and wait for the inevitable deep discounts to clear the shelves.
Keep that in mind when you read this:
Some Chevrolet dealers are turning down Volts that General Motors wants to ship to them, a potential stumbling block as GM looks to accelerate sales of the plug-in hybrid.
For example, consider the New York City market. Last month, GM allocated 104 Volts to 14 dealerships in the area, according to a person familiar with the matter.
Dealers took just 31 of them, the lowest take rate for any Chevy model in that market last month.
The story hastens to add that
many dealers have been waiting for resolution of the National Highway Traffic Safety Administration’s investigation into the risk of fires in the car’s battery pack. Last year three packs caught fire in the days or weeks following government test crashes.
But let’s be honest. If Volts were selling, dealers would take them — investigation or no investigation. (Oops: No investigation! Move along; nothing to see here.)
Fact is, Government Motors has to keep producing Volts, or risk severe embarrassment to its major shareholder: The Obama Administration. But you can stuff the channels only so deep. Eventually, GM will have to offer huge incentives to move Volts off the dealer lots — incentives, I imagine, that will make the existing $7,500 tax incentive (paid for by you and me) look small.
A politically-friendly electric motor allows GM to sell a $13,000 three-banger for about $33,000 (shoddily-equipped). Generous subsidies allow them to first mark up to price to $40,000. Somewhere between $13,000 and $33,000 is the real market-clearing price of this car.
Does $20,000 sound about right for an undersized family sedan that runs mostly on coal? The current hot car in the full-size family segment is the Hyundai Sonata, which has a base price just under $20k. If there’s a lesson in all this, I suppose it’s that GM sold about 7,500 Volts in the US last year, while Hyundai sold 225,961 Sonatas.
And, oh year: Korean taxpayers didn’t lose tens of billions (and counting) for the privilege of channel-stuffing overpriced cars nobody wants to buy.
But that’s how crony capitalism works: Robbing Peter to pay Paul while keeping up the appearance that Peter is the one getting the benefit. (Jobs! We saved GM jobs!) Eventually it all comes crashing down, since consumers won’t take even for free things they don’t like.
The Administration must have been hoping that there was no possible way for a low-volume, halo vehicle could overstuff the channels so quickly. But here you have it: Still more than nine months away from the election, and one simple story illustrates what an expensive flop GM has made of the Volt.
There’s political hay to be made here, and lots of it.
FTFY. I think.
Yes. Thanks. Fixed!
Whats the difference between the Chevy Volt and the Chevy Vega?
Vega cost far less.
Vega got better gas mileage.
Vega was more popular(no, really! think about that!).
Vega didn’t catch fire(Not that it didn’t try)
Just to be clear, I am not saying Vega was a great car. What Im saying is that there is a new entry for “Chevys that mark the bottom”.
On the other hand, there’s this to consider. Whats the best selling car in the Chevy lineup? The Chevy Camaro – That’s right, a Muscle car. ( 88,249 Units Sold FY 2011 )
…and I would drive a Vega.
Of course, I’d be more likely to be able to afford a Vega these days, even when you take into account that the sheer rarity of finding one that still
runsresembles an automobile instead of a mound of rust means they’ll likely be priced higher now than when they first came out.A few years back I saw one offered for sale on a local corner. ISTR the asking price was about ten times what I paid for mine (used and fire-damaged, admittedly) back in the late ’70s.
1. The Volt launched nationally on 11/1/2011. Is it fair to judge the sales on the first 83 days (only 61 of which have been reported so far)? Of course not.
But the talking-point-is-that-EVs-must-be-a-failure-so-find-some-pseudo-facts-and-twist-them-to-fit-the-talking-point crowd gleefully declares “dismal failure”.
2. There are 0 accounts of new Volts being deeply discounted now, or even in the near future. The actual fact is that we have no idea what the demand is for Volts, because the car literally just launched nationally.
3. Most people do not know that they can get a lease on a Volt that basically offsets the higher payment. Easy way to end addiction to foreign oil. The Volt lease offer is an excellent deal, regardless of the seemingly high $40K price. The reality is the car or even the deal are not the issue, it is simply messaging and getting people in the car.
4. I have had well over 100 people in my Volt. The overwhelming majority came away very impressed. I am quite confident that this is still a supply not demand issue.
5. The actual stock of Volts is perhaps 5000-6000. Assuming 3000 dealers… we are talking about 1-2 Volts/dealer. Contrast to dozens of Cruze and Malibus in a typical dealer. A car is not an iPod, you need stock to sell the car, because no one buys cars without test drives. We are just now getting to the point at which dealers can offer test drives to shoppers nationally.
Maybe I’m a little slow, but what part of “GM needed to sell 33% more cars to meet their meager sales goal, but then dealers started refusing inventory” makes the Volt worth my tax dollars and/or a success?
Exactly! Why, just look at the runaway success Nissan is having with the leaf! Oh. Wait. Nobody wants those either. But surely Tesla, the golden boy of the EV crowd, must be doing well! After all, they hoovered up $500 million of our money so they could change the world! And.. have sold around a thousand cars. Yeah.
Nope, no trends here. Move along.
The basic metric of any business venture is “How much did you spend to generate how much profit”. Show me any data, real or imagined that shows the Volt generating profit for General Motors. I know that “Profit” is a dirty word in some circles but it matters a lot to some of us.
If you are doing something in business that doesn’t generate a profit then its a charity or a hobby but most importantly its not a good business practice.
Oh, and be sure to note that if you buy a Volt, your neighbors are helping you pay for it, you should thank them as I’m sure they will thank you for spending their money in such a prudent way. Oh, and be sure to note as well, that most of the sales of Volts to date have not allowed the buyers to get the tax credits and other benefits. Why? because dealers are swapping the volts, taking the tax credits themselves and selling the volts as “used”. Used Chevy Volts don’t qualify for the tax treatments necessary to bring the Volt down to just the “appallingly overpriced” level.
Just about every article linked by google (“nissan leaf sales”) mentions a Leaf vs. Volt matchup, and every one of them conflates “sales” with “cars shipped.”
Don’t have a lot of time right now to dig deeper, but it would be nice to get actual sales numbers for both cars.
(my emphasis)
“How dare you diss my fave new ride!?”
It’s nice that you like your new car. Now please let’s return to the factual part of the article; Chevy dealers are refusing to take deliveries…
I found your entire comment pretty amusing, but what sent me into cascades of laughter was this:
“The Volt lease offer is an excellent deal, regardless of the seemingly high $40K price. ”
Leasing is an extraordinarily stupid way to obtain a car. That you think it makes the Volt more attractive is just the most hilarious thing I’ve heard.
Just another example of our ‘do good’ government really fouling up a good concept – a cleaner emissions vehicle – with half baked technology that is basically still born. At least it appears the American consumers are voting with their wallets with respect to the Volt…
Wonder how much of the Volt’s lackluster sales is due to consumer antipathy to GM (including cast off antipathy from its sponsor, Obama), how much is due to the Volt itself (fires, high-price tag, whatever) and how much is dislike for electric cars in general? Even though the Volt is basically a hybird that is pretending it isn’t, the other hybirds seem to be doing well. The Leaf and Tesla also aren’t doing well but the Leaf has its own limitations (Leaf is electric only so it’s good only for short range trips, the Tesla just costs a mint.) I have to think that a lot of the Volt’s lack of sales so far stem from factors peculiar to it, whatever those may be.
The apple fanboyism is getting old.
Translation: “I don’t like the facts you cited in passing, so I’ll call you a ‘fanboy’ to make myself feel better.”
Hey, I often make fun of Stephen for his Apple allegiance. But I do it to his face and I try to be funny about it.
You, not so much.
Oh, and topic fail. Wrong thread.
I seem to recall that the automakers stuff the channels in part because that moves taxable inventory off of their books and onto the books of their dealers, allowing manufacturers to declare a sale merely for parking the vehicle on a dealer’s lot instead of in a warehouse.
The Volt is a kludge of a car. It is a sign that environmentalism is a luxury of the 1 percenters. Only someone with ample to spare on their eco-consciousness versus their budget can afford such a high priced bobble. Hence the reason the President is so enamored with it. Anybody that makes just enough to afford a $35,000 car and actually buys a Volt just fails at basic math. You can get a Jetta diesel TDi for $23,000 and get over 500 miles per tank. People that hypermile their TDi say they can hit nearly 60mpg. It would take you 10 years of owning a Volt to just break even on the cost savings of buying a Jetta diesel instead.
I’m a charter member of Glenn Reynolds’ “syphilitic camel” brigade, so don’t take this as a defense of Oh-boy!, but the Volt design and manufacturing decisions were made long before General became Government Motors.
The only thing I can fault the Ob group for is not pricing for the curve. If the Volt was priced in the $25K-30K bracket, it would do a hell of a lot better.
Or maybe it really costs 30K+ to manufacture, even at quantity.
In all this talk of cars not powered by foreign oil and break-even points and returns on contract, I’m still pretty fuzzy on why the hell the government’s subsidizing a car company to build anything – lightsabers, toasters, an automatic taco machine. Anything. Why? Why is corn subsidized to the gills, which in effect keeps the price of a wildly abundant crop even higher than it should be?
Why? The answer is simple: To keep politicians in office. Once we remove their ability to sell votes, we remove the incentive and capability for government to show up at manufacturing sites, telling people what cars to build today, how many, and what color to paint them in – and then to turn around and go out to tell the proles, er, the “people” that they need to cut a check to the local Volt Dealer for the privilege of buying a shiny new AmericCar ™!
Because otherwise we’re setting fire to our homes here, and there’s a large list of people in DC who would be happy to charge us for more gasoline to immolate ourselves with. And then lecture us that we’re not appreciating them for their efforts enough along the way.
Nauseating.