Volt vs. Prius: What's the better deal?
It'll take higher gas prices, or a big subsidy from GM, for the new
plug-in Volt to be cheaper to drive than the Toyota. But that doesn't
mean it won't find buyers.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: August 14, 2009: 11:05 AM ET
NEW YORK (CNNMoney.com) -- The Volt may get 230 miles per gallon, and GM
says it will cost only 40 cents to charge up the car from a regular
household outlet. But guess what...it still might not be worth it to buy
The problem: You might not save enough on fuel costs to compensate for
the likely higher sticker price.
The Volt is designed to go 40 miles on battery power alone. Since most
people drive 40 miles or less a day, according to the Transportation
Department, most Volt owners wouldn't need a drop of gas for daily driving.
But even if GM is able to live up to that promise, a couple of things
have to happen for the Volt to beat out traditional gas-powered vehicles
on cost, let alone other fuel efficient vehicles, such as the hybrid
First, GM will have to price the car far less than it costs to build it,
a subsidy that the still financially troubled automaker could have
Second, gasoline prices will need to go higher and stay higher.
The Prius, with its own price premium, doesn't always make economic
sense compared to some cheap gas-only models. That price difference
hasn't stopped it from becoming a sales success.
Concerns about where gas prices might go in the future, and the desire
of a growing number of consumers to drive a "green" vehicle will likely
support demand for the Volt, especially given GM's modest initial sales
goals. But it's likely most Volt buyers aren't likely to save moneyby
kicking the gasoline habit.
How the Volt stacks up against the Prius
Here's how the math works out.
The Transportation Department says three out of four drivers drive 40
miles a day or less, most drivers wouldn't use the gasoline engine at
all, and could get by on electricity only.
The Volt will use normal household outlets and would charge overnight.
GM's CEO Fritz Henderson said it might cost consumers in Detroit paying
off-peak rates only 40 cents to recharge the vehicle. But relatively few
utilities offer off-peak residential rates. The battery needs about 8
kilowatts hours to recharge, and most consumers would pay about 11 cents
a kilowatt hour, or 88 cents. During the course of year, that means a
typical Volt owners' electrical bill would increase by $321.
In contrast, the hybrid Prius' electric motor is charged from the excess
energy thrown off by the gasoline engine, as well as the energy
generated from braking the vehicle.
The electric motor powers the car at low speeds. The gas engine
generally takes over on the highway and during fast acceleration or
uphill driving. That allows it to get an average of 50 miles to the gallon.
Driving a typical 14,000 miles a year, or 38 miles a day, the Prius
would use about 280 gallons of gasoline.
With gas at its current price of about $2.65 a gallon, that would come
to about $742 a year in gas, or $421 more than the Volt owners would pay
if they can stick with electricity.
Even if gas goes back to the record high of $4.11 and stays there,
gassing up a Prius would cost about $1,150 a year, giving the Volt an
$830 a year cost savings.
But a Prius costs $25,428, on average, according to sales data from
Edmunds.com, while GM will probably have to spend $40,000 or more to
build each Volt.
While Volt buyers will get a $7,500 tax credit that reduces the still
undisclosed purchase price by that amount, the fact is that GM will have
to subsidize much of the remaining $7,000 difference in cost to make it
competitive with the Prius.
At current gas prices, the $421 a year savings over a period of six
years that a new car is typically owned, would mean that a Volt would
only be cost competitive with a Prius if was about $34,500 before the
That means GM would have to take about a $5,500 loss on each Volt if it
is to be strictly competitive.
If you assume modest sales of 20,000 Volts the first year, that would
mean about $110 million in additional losses for the cash-strapped
Even if you assume a worst case scenario of $5 average price for a
gallon of gas over those eight years, it's only worth it to pay a $4,300
premium for a Volt after the tax credit. But that would reduce the loss
that GM would need to take on each vehicle by $2,600 to be competitive.
But the Prius itself, and many other hybrids, aren't cost competitive
with many gas powered cars. The Prius costs about $6,000 more than the
average compact car, according to Edmunds data. If you compare the cost
of operating a Prius to a 25 mpg compact car, which is on the low side
of that class, you find a savings of about $750 a year for the Prius
over the gas burner. And that would mean it only makes sense to spend
about $3,500 more for a Prius, not $6,000.
Of course higher gas prices can make the Prius more cost competitive
with its cheaper gas-only competitors. Driving more city miles can also
increase the cost advantage for a Prius.That's a cost advantage that
doesn't necessarily work for the Volt because the additional miles for
the Volt use gasoline, not electricity, to fuel the car.
But the Prius has become a sales success, with U.S. sales reaching a
record 181,221 in 2007, before slipping 12% last year as auto sales
overall plunged. So it's not impossible that the Volt could become a
sales success, even if the strict dollar analysis does not work out for
it. To top of page
First Published: August 14, 2009: 5:24 AM ET