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TheStreet Open House

Think GM's Volt Is Failing? Think Again

Stocks in this article: GMHMCNSANYTMC

DETROIT -- ( TheStreet) -- October ought to have been a bad month for Volt. Gas prices were falling. Auto industry wisdom had it that with so many conventional cars closing in on 40 miles per gallon, why would anyone spend $30,000 for a compact? Also, the last month of the presidential campaign reinvigorated advocates of the political construct that anything government does -- particularly saving GM (GM) -- is bad.

Nevertheless, Volt had its best month ever in October, selling 2,961 units. This broke the record, set in September, of 2,851 units sold. That broke the August record of 2,831 units. In fact, Volt sales have increased for six consecutive months. For the first 10 months of 2012, sales totaled 19,309. Sales totaled 7,671 in 2011 and 326 in 2010.

The trend is good, especially for a car with a $40,000 list price and incentives worth around $10,000, although full-year sales will not be close to GM's one-time goal of 45,000 sales in 2012.

"I don't think Volt is where GM and Chevrolet want it to be," said Polk analyst Tom Libby. "They sold about 3,000 units in October, while the industry sold 1.1 million. They are getting volume up from where it was, but the number is very low relative to what it needs to be accepted and to meet GM production goals. Also, as a footnote, even if the number were to double to 6,000 a month, GM is still losing a lot of money."

Still, for GM, Volt is an important car becoming more important. "Volt took GM in the opposite direction from where Hummer took it," Libby said. "In terms of image, it was a positive step." Moreover, image equates with economic necessity. A 2011 agreement between the Obama administration and 13 large automakers increases the federally-mandated Corporate Average Fuel Economy (CAFE) standard to 54.5 miles per gallon for cars and light duty trucks by 2025. The high standard "will require electrification on a very large scale," said GM spokesman James Cain.

Last week, GM said it will have up to 500,000 vehicles on the road with some form of electrification by 2017, with a focus on plug-in technology.

"The unique propulsion technology pioneered in the Volt -- the same technology that will be featured in the Cadillac ELR -- will be a core piece of our electrification strategy going forward," the automaker said.

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