After foreswearing the deep discounts that helped plunge the auto industry into lost profits and disaster during the recession, they are now entering into a price war over the smallest segment of the industry.
While recent reports show that the auto industry across the board has rebounded and every company is posting record sales, the primary profits are coming from the sale of light and heavy duty trucks as well as family cars that are all based on the internal combustion engine. This is to be expected as the technology is well proven, however, auto makers are now attempting to spur buyers into their alternative energy vehicles by slashing prices.
Earlier this week, General Motors announced it was knocking $5,000 of the price of its Chevrolet Volt, which is a plug in electric car. Part of the reason for the price cut is in response to sagging sales following a public relations problem the company faced last year after it was revealed that the Volt’s batteries could catch fire even while the vehicle was sitting idle. It was later revealed that the federal government knew about the problem for several months before the problem became public.
GM is also reducing the Volt’s price as part of an overall trend across the auto industry to offer discounts on electric cars this year to help increase sales, which has resulted in a price war.
Nissan Motor Co. was the first to offer a discount when it announced in January it was slashing $6,400 off the sticker price of the Leaf electric car. Following Nissan’s move, price cuts were subsequently offered by Ford Motor Co. and Honda Motor Co. on their electric vehicles.
After Nissan, Ford and Honda offered their price reductions, GM remained the lone holdout in the discount wars until this week. Prior to GM’s price cut, the other discount offered by the other company’s meant that the Volt was the priciest electric car on the market.
GM’s failure to match the other auto maker’s discounts earlier appeared to have an effect on its sales. Volt sales sagged 3 percent last month and with many buyers now using the internet to gather price information on vehicles before making a purchase, the Volt’s $40,000 sticker price left a bad taste in the mouth compared to the more palatable $25,010 price for the Toyota Prius.
With this in mind, GM cut the price of the Volt to $34,995 despite the electric car already costing the car money.
“It’s a competitive nightmare out there, so you have to play within the realm of what others are doing,” said Jeff Schuster, a Troy, Mich.-based analyst with researcher LMC Automotive told Auto News. “The industry has gotten away from price wars in mass use, but in this area, it’s alive and well. You have to play the game.”
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