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Setting it Straight: Chevy Volt vs. the Government

Stocks in this article: GM

NEW YORK ( TheStreet) -- A recent report circulated in the media in the last couple of days, claiming that each Chevrolet Volt was attached to approximately $250,000 in government subsidies. There is a fundamental flaw behind the math in this "report" that discredits the entire report straight down to zero, in my view.

"This is a matter of simple math," said James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy. "I added the known state and federal incentives that have been offered and divided by the number of Volts sold."

About 6,000 Chevrolet Volts were sold until about a month or so ago. That would imply a total subsidy amount of 6,000 x $250,000 = $1.5 billion.

Let's first ignore whether the $1.5 billion is an accurate number or not. Furthermore, the author of the study says that the number can actually be as high as $3 billion if certain production goals are met -- or as low as $300 million. It really doesn't matter much for the purpose of the argument at hand.

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Here is the point: Why divide whatever amount -- $1.5 billion or otherwise -- by the number of Chevrolet Volts sold to date? If he had done this study one year from now, when we could be looking at 60,000 Volts made, as GM repeatedly has promised, the headline number would be $25,000 per car -- not $250,000. You would divide the $1.5 billion by 60,000 instead of 6,000.

But why stop at a year from now? This investment in automotive propulsion technology is meant to be refined and influence generations of cars for decades. Some part of GM's Voltec architecture and techniques will drive sales of approximately 60 million cars over the next 25 years or so, in any reasonable estimation.

Thus, if you divide this $1.5 billion "investment" over 60 million cars over the next 25+ years instead of the 6,000 made over the last year, or the 60,000 to be made next year, the alleged government subsidy comes to $25 per car, or what you will pay for two movie tickets in Manhattan, popcorn excluded. That's very different from the nasty $250,000 per Volt headline floating all over the Internet in the last couple of days.

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