ICWES15 - Emerging Technologies: Will the Chevy Volt Succeed or Fail? Presented by Suzanna Cottrell Olsen, Arizona, USA
Suzanna Cottrell OlsenMasters of Science Global Technology and Development Arizona State University July 21, 2011
Overview Discussion of emerging technology and disruptive technology. Applying topic to a case study: the Chevy Volt. Discussion of US legislation and economic events impact on the Volt. Exploring the disruptiveness of the Volt in hybrid automotive technology. Analyzing General Motors’ management strategy and its impact on the Volt. Summary– will the Volt succeed or fail based on the above discussions?Photo Curtsy of IFCAR. 2010.
Emerging and DisruptiveTechnology Technological change is inevitable. Technological change is usually a refinement of existing technology– sustaining technologies. Technological change is occasionally revolutionary or “disruptive” in nature– disruptive technology.Wilson, David. OMT 598 Forecasting and Evolution of Technology. Arizona State University. 2010.
Emerging and DisruptiveTechnology Continued An emerging technology that displaces an established technology and becomes the new standard is a disruptive technology. An established technology is one that has been on the market long enough to become recognized as a standard. Examples ○ Vacuum tubes were the established technology of all electronic devices for years before being displaced by transistors. ○ Internet Shopping disruptive to In-Store Shopping.Wilson, David. OMT 598 Forecasting and Evolution of Technology. Arizona State University. 2010.
Emerging and DisruptiveTechnology Continued Forecasting Methods: Subjective and Objective Subjective Forecasting Methods These methods rely upon logic, insight, vision, and educated opinion for predicting the future of technology. Subjective methods are aimed at consensus generation include brain storming, focus groups, the Delphi Method and expert systems. Objective Forecasting Methods Objective method rely on mathematics. Such methods include: statistical methods (time series analysis, growth curves, regression analysis, and econometric modeling), computer simulation (discrete even methods and continuous event methods, like systems dynamics), and probability theory.Wilson, David. OMT 598 Forecasting and Evolution of Technology. Arizona State University. 2010.
Emerging Technology CaseStudy: The Chevy Volt Asked to apply what was learned in class by picking an emerging technology and predicting whether it will succeed or fail. Chose the Chevy Volt. Paper written in March 2010. Chevy Volt’s limited release date in the United States was December 2010. Method for analysis in paper was a subjective analysis, using Delphi Method/literature review (consensus of experts) and examining the external forces, like government regulations and management practices, that could either hinder or help in the success of the Volt.
US Legislation and EconomicEvents In 1990, California enacted the CARB Low-Emission Vehicle (LEV-1) program, which required all vehicles sold beyond 2004 emit zero tail pipe emissions, forcing companies to explore alternative fuels and electric cars. Although the original law has been modified, allowing hybrid to fill the quota, the environmental restrictions, will help increase consumer demand for the Volt in California.1 Environmental air quality laws have been changing in other states and countries, and couple that with public opinion in favor of hybrid and electrical vehicles, the Volt could be successful.1. Taylor, M. (2005, April 24). Owners charged up over electric cars, but manufacturers have pulled the plug. San Francisco Chronicle Online .
US Legislation and EconomicEvents Continued However, GM’s bankruptcy may hinder the success of the Volt. Production costs of the Volt are significantly higher than other products GM currently offers, and this higher cost is likely to limit production capacity. 2 The US government’s bailout of GM may cause GM to focus on more profitable products in order to repay its debt, further limiting GM’s ability to invest capital in the Volt.2. Ross, P. E. (January 2010). Discharged. IEEE Spectrum , 36-37.
The Technology Behind the Volt The Volt is disruptive to current hybrid technology. The current hybrid technology in the industry is a “power-split,” using a battery to store 1 to 2 kilowatt hours of energy to help assist a gasoline engineer and store energy generated while braking. Current hybrid cars can only travel at most a couple of miles on pure electric energy. 33. Voelcker, J. (August 2008). Battery Czar. IEEE Spectrum , 32-37.
Technology Behind the VoltContinued By contrast, the Volt is an “extended range electric” car, using a lithium-ion batter pack that stores 16 kilowatt hours, giving the car a range of 40 miles on pure electric energy. 3 In most scenarios, the Volt’s gasoline engine does not drive the wheels directly. The gas engine serves as an electric generator that recharges the batteries, which drive the electric motor that spins the wheels. The Volt also has a plug that will let the batteries be charged from any outlet which is not standard on the current hybrids (although after market plug-in conversion kits are available for current hybrids).3. Voelcker, J. (August 2008). Battery Czar. IEEE Spectrum , 32-37.
The Technology Behind the VoltContinued One hurdle for the Volt is the need to overhaul the standard auto manufacturing process, requiring not just new body panels, but also new powertrains. The company will need to retool an existing manufacturing plant in order to build the car, increasing capital cost.4 Another challenge is the battery itself. The new large format lithium-ion batteries (small lithium- ion batteries already exist commercially in cell phones and laptops) are just now entering the market and have not been extensively tested, so there is doubt whether or not these batteries can meet the expectations of range and durability. The raw material needs and manufacturing of the batteries are also a concern.54. GM to Open Retooled Flint Engine Plant by Late 2010. (2009, October 13). USA Today Online .5. Sherman, D. (2008, September 11). Chevy at 100: Is it Futures Realistic? NY Times Online .
General Motors’ ManagementStrategy When it comes to the management and marketing strategy of disruptive technologies, GM has historically failed. One example of GM’s failure to capitalize on disruptive technologies is Saturn. In the early 1980s, GM was having a hard time competing with the disruptive, smaller cars that the Japanese introduced to the auto market. To respond, GM created the Saturn car line.
General Motor’s ManagementStrategy Continued GM went with a new business model for Saturn, giving the development team free reign and a huge budget of 5 billion US dollars.6 The Saturn car was popular, the new production system and dealer network even more so: by 1992, there were waiting lists for the Saturn cars. 66. Rauch, J. (2008, July/August). Electro-Shock Therapy. Atlantic Magazine.
General Motor’s ManagementStrategy Continued The car sold well, but struggled to break even, and GM’s union and bureaucracy pushed back against the division’s (Saturn’s) organizational privileges. 6 Instead of nurturing and growing Saturn, GM merged it into the larger organizational blob and then neglected. By reverting back to old management practices, Saturn turned into a failure, and by 2010, the Saturn brand had be shuttered and eliminated.6. Rauch, J. (2008, July/August). Electro-Shock Therapy. Atlantic Magazine.
General Motor’s ManagementStrategy Continued Saturn is not the only example of where corporate policy at GM has limited the success of a product. GM pulled the plug on the EV1 (its first foray in electric vehicles) in 1999. “After spending over 1 billion dollars over a four year time frame, we were only able to lease 800 EV1s. That does not a business make. As great as the vehicle is and as much passion there is, there simply wasn’t enough at any give time to make a viable long term business proposition for General Motors,” Dave Barthmuss, spokesman for General Motors. 1 It was GM’s decision to only lease a limited amount of the EV1 in only two states, so it should be no surprise that the profit potential was as limited as the availability of the car. 11. Taylor, M. (2005, April 24). Owners charged up over electric cars, but manufacturers have pulled the plug. San Francisco Chronicle Online .
Prediction If the history of GM is any indication, the outlook for the Chevy Volt is not as rosy as GM would lead the public to believe. A $40,000 (US) price point for a vehicle that will be compared to imported vehicles at half the cost (i.e. Toyota Corolla at $20,000 US) will be difficult for most consumers to swallow.2 The estimated cost savings on fuel (fuel cost in USA around early 2010) is just under $3,000 (US) over 5 yrs, making it even harder to justify the $40,000 price tag.87. Chevy Volt: GMs 230 mpg Moon Shot. (2010). US News and World Reports: Rankings and Reviews .2. Ross, P. E. (January 2010). Discharged. IEEE Spectrum , 36-37.
Prediction Continued Also a limited production run of only 10,000 Volts during the first year will severely limit the profitability of the vehicle, as industry analysts have projected that GM will need to manufacture 100,000 units to make the car a success.2 As with the EV1, limited production of the Volt is the same old GM policy of under producing to feel out the market.2. Ross, P. E. (January 2010). Discharged. IEEE Spectrum , 36-37.
Prediction Continued There are many signs pointing to the Volt being a technological success, but limited supply and a fickle consumer demand could lead to market failure. Like many innovative leaders before the Chevrolet Volt may simply set the stage for success to other vehicles, much in the same way as the first generation Honda Insight (the 2000 model) paved the path for the very success Toyota Prius.
Summary A year later, how did my prediction of the Volt do? Prediction was great technology, but not great market success General Motors has only sold 1,703 units of the Chevrolet Volt through April (2011) but the automaker plans to crank up the volume for the 2012 model year. GM Spokesman Rob Peterson about why sales so far are low: "We have limited supply of Volts…supply is very thin (especially when you consider we have nearly 600 dealers in launch markets). Volt sales have leveled off in April, May and June. July will be low as the plant is now shut down and the pipeline will dry up. However, when production begins again in mid-July, the line will be running nearly three-fold.”http://green.autoblog.com/2011/06/03/chevy-volt-sales-whats-going-on/
Future of the Volt GM is retooling Hammtrack Facility 4-wk process vs typical 2-wk Increasing production from 16,000 units to 60,000 units Expanding market to entire US for 2012 Expanding sales to Europe/Asia with Ampera Only 1,703 units sold from December 2010 to April 2011, the outlook is not that promising Will demand for 60,000 units be there?