Why Isn't the Chevy Volt Selling Better?

NEW YORK (TheStreet) -- The California government's discrimination against the Volt led to weak demand in early 2012.

In 2011, the Chevrolet Volt sold 7,621 units, moderately short of the 10,000 goal. For 2012, Chevrolet's goal is to sell 45,000 Volts in the U.S., and 15,000 internationally.

Various media reports are now suggesting that U.S. sales have stalled at a relatively low level near 1,000 units per month, manifesting itself in dealers being asked to take more Volts than they believe they will be able to sell in early 2012. These reports sound at least somewhat credible and must be explained.

The first thing we need to observe is that the problem does not appear to be with plug-in electric cars in general. The other major plug-in electric in the U.S. market right now is the Nissan LEAF, and it is selling at approximately the same pace as the Chevrolet Volt. Here are the nuances, though:

The Volt was severely production-capacity-constrained until at least the end of July 2011, so the pace of Volt deliveries increased a lot especially in the last four months of 2011. In the last three months of 2011, Volt sales matched or exceeded Nissan LEAF sales, although not by very much. Basically, at some point in the fourth quarter of 2011, the backlog of the initial batch of Volt enthusiast demand was fulfilled.

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If you live in California, however -- where the largest percentage of plug-in electric cars are sold -- you would not believe these relative sales numbers. Anyone living in the three larger metropolitan areas -- San Francisco Bay Area, Los Angeles and San Diego -- who spends any meaningful amount of time in the streets observing traffic, will quickly notice that the ratio of Nissan LEAF to Chevrolet Volt is close to 10:1 in the LEAF's favor.

Stop right here! Let's connect the dots for a second: Nationwide sales of LEAF vs. Volt are basically similar, but the ratio appears to be close to 10:1 in the three major metropolitan areas of the state where most plug-in electric cars are sold. What on Earth gives?

California Treatment

The reason is simple: If you live in California, the most attractive incentive to buy a Nissan LEAF or any other fully electric car is that you are eligible to drive in the carpool lane. It used to be the case until 2011 that if you bought one of the earliest hybrid cars, such as the Toyota Prius, in the early years until perhaps 2006, you would be eligible for the carpool lane.