The Chevy Volt 2.0 Nears Production -- Long Live the Electric Car King!

NEW YORK (TheStreet) -- General Motors (GM) took the unusual step this week of acknowledging a future model, in this case the Chevrolet Volt 2.0. This was done in the context of announcing two factory expansions costing $449 million.

If I had been in GM's shoes, I would have waited to announce the Chevrolet Volt 2.0 -- or for that matter any new model -- until the last possible moment, perhaps a month or two before the car arrived in dealerships. Now consumers may choose to hold off buying the current Volt 1.0, expecting the production of the 2.0 to start possibly a year from now.

In any case, the development of the Volt 2.0 started most likely near the beginning of 2011, and the final body design was probably frozen near the end of 2012. That is assuming the Volt 2.0 will come in only one body style.

This is indeed one of the two major variables regarding the Volt 2.0: Will it come in only one body style or two or even more?

GM knows that a top request from real and prospective plug-in car buyers is that there is a void in the market for a larger car -- something in the SUV or minivan direction. This kind of car would be much taller, fit at least five people and have ample luggage space.

One could even envision two separate larger models: one that fits five people and another that fits seven. These types of cars might mimic the Ford (F) C-Max, which is available only as a five-seater in the U.S. but also comes in an additional longer body available in Europe.

One advantage of such a much taller body -- whether in five-seat or seven-seat form -- is that you now have the ability to use a flat battery in the floor. This is different from today's T-shaped battery, which is suitable for a much lower car although it makes it harder to fit a third person in the back.

Obviously it is entirely possible that GM keeps the current body configuration of a low-slung car and T-shaped battery. The battery could be reconfigured to make space for a third person in the back seat.

My personal opinion is GM is better served with the minivan approach. Too many plug-in cars in the market today are simply too small, too low. Why not offer something different, creating a new segment of the market where there is less competition?

The market consensus right now is the Volt 2.0 will be the more simple and straightforward approach of the current low-slung body with a T-shaped battery, albeit making way for a fifth seat. I think the probability of the mini-minivan approach is a lot closer to 50% than the market's current near-0% probability.

The basic Volt 1.0 performance concept is unlikely to change, and for good reason: GM got it exactly right the first time. The Volt delivers the first 38 miles on full electric power. I emphasize the word "full" here because in other plug-in hybrids, electric drive isn't delivered for the full performance envelope of the car.

This makes a huge difference. There is a world of difference between being able to floor the accelerator 100% until the car hits its 100 miles per hour top speed and the gasoline engine not kicking in -- as opposed to it kicking in. There is just no comparison. One car -- the Volt -- is fun to drive; the other plug-in hybrids are not. The one exception is the BMW i3 with range-extender.

If GM doesn't get this, it will lose its buyer loyalty and the second-hand value of the Volt 1.0 may actually increase. I think GM gets it. Let's see.

GM will obviously try to improve the Volt's efficiencies all around. Depending on the size and weight of the new Volt 2.0, electric range may or may not be longer than the current 38 miles. The efficiency after the electric miles run out, when the car goes on gasoline, will likely improve from the current 38 MPG to perhaps 44 MPG.

The interior of the Volt 2.0 is likely going to see three major improvements from the 1.0:

1. Better center stack controls. Let's bring back conventional buttons and knobs, please? Something that is neither confusing nor difficult to operate with thick gloves in the winter. The Volt team should consult its sibling development team in charge of the full-size Silverado pickup.

2. More advanced digital displays. Above the buttons and knobs, two displays are found. In the big scheme of things, the Volt 1.0 has some of the better displays in the business. However, one would like to see more customization so these displays can show the data set the driver wants. Basically, many drivers want to configure the displays just like a spreadsheet, suitable for engineers.

3. A better seating experience. The Volt needs a steering wheel that telescopes more, accommodating taller drivers with longer legs. The driver needs to be able to lean back more, not sitting so upright because the steering wheel is too close to the pedals.

Speaking of the steering wheel, it needs to be made of richer leather that lasts better over time. After three years it has become extremely slippery and cheap-feeling.

The old-fashioned gear selector is also overdue for retirement. It takes up a lot of space and feels like an old relic. What should be the model for the future? Look no further than the all-new, 2015 Chrysler 200, which has the best gear selector in the business: A round knob!

I talked a bit above about one of the two biggest objectives with the Volt 2.0 that inhibited sales of the Volt 1.0: the lack of a third seat in the back. I suspect GM lost 50% of potential Volt sales on that point alone.

The second issue plaguing not so much the consumer but GM itself is the cost to build the car. I think we can safely assume that considering all development expenses for the Volt 1.0, it is sold at a discount, currently starting at $35,000. GM may not be losing a lot of money on a variable cost basis but when counting all the development overhead, it likely isn't collecting a standard profit margin.

For this reason, cost reduction is the other major goal of the Volt 2.0. I'm not talking about $4,000. It has to be more. Chances are GM will be taking out over $6,000 in variable cost for each Volt.

The sources of cost reduction will be:

1. By far, the battery. LG Chem supplies the Volt 1.0, but not all plug-in GM cars. There is no information on which company will supply the Volt 2.0. LG Chem sounds like the low-risk choice. Either way, the cost will be a lot lower for this battery, by thousands.

2. Less expensive engine/motor. Everything you see under the hood will be smaller, lighter, consist of fewer parts and be less expensive to make. This is a reduction in variable cost of probably over $1,000 per car.

3. Fewer body parts. Inside and outside the Volt 1.0 you will see way too many body creases and overlaid materials and parts. This could be reduced and simplified. It may not take out much more than $500 per car but it will be something.

The Volt 2.0 should be in U.S. dealerships probably around the middle of 2015 as a 2016 model. Some 12 to 18 months after that, I expect GM to launch its 250- to 300-mile pure EV cars, priced a bit higher than the Volt 2.0. More about them in a future article.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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