Beware, Chevy, the lessons of Sony.
When the Chevy Volt was first shown off as a concept car in 2006, it was hailed as the future of the American auto industry. The combination of high technology, lower gas consumption and a price of around $20K looked to be the perfect storm to take on Toyota and the Prius.
Fast-forward a few years later and that $20K has doubled to around $43,000 for a Chevy Volt. From Ad Age: {link no longer active}
The Volt’s retail base price will be about $40,000, the person familiar with the program said, because “dealers need a couple thousand reasons to pick up the phone and order one.” That means that GM will sell the Volt – at a loss – to dealers for somewhere in the mid- to upper $30,000s. Transaction prices, the source said, are projected to average about $43,000.
For those in the video game industry with a keen eye at this generation s console wars, the story can’t help but remind people of the PlayStation 3 launch.
High technology also came at a tremendous cost to Sony, with some estimates pegging the actual cost of each PS3 at $800, far below the MSRP Sony placed on the PS3 of $599. Sony wouldn’t make a profit on any hardware sales for quite some time.
Let’s continue with the parallels.
GM needs to do more than cross its fingers on warranty costs, though. At $40,000-plus, the Volt will be a tough sell in a Chevrolet showroom. By comparison, the Prius starts at $21,750, including shipping — putting it in a similar price range to other Toyota cars shoppers may be considering.
Unfortunately, the original PS3 price of $599, even with Sony taking a loss, was absurdly high for most consumers. Sony’s main competition, the Xbox 360 and Nintendo Wii, both came in at a couple hundred dollars less.
So what s GM to do Looking to the future…
That leaves GM with an urgent need to cut costs on the Volt. Dave Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., estimates that in five to 10 years, technological advances could cut the cost of the pack in half, to about $4,000 to $5,000. With those and other savings, GM might get the base price down to $30,000, Mr. Cole said.
Chevy can take solace in recent reports showing Sony has managed to reduce PlayStation 3 costs by about 70 percent. The estimated cost of each unit is $260, a far cry from the bath Sony was taking on the $800 cost just a couple of years ago.
Unfortunately for Sony, those couple of years have been enough to see one competitor bolster its Xbox Live online offering in very engaging ways that will (by our account) lead to unprecedented consumer loyalty in gaming, and the other competitor come back from the dead to be the market leader with the Nintendo Wii.
No amount of marketing dollars has helped Sony make any clear run at either competitor, so at the end of the day, more often than not, it’ll come down to the product and its price when looking for success stories. Those are the foundations that marketing can then take advantage of, but if they re not there, can marketers really do their jobs effectively?