Green...With Envy? Chevy Volt and Nissan Leaf Struggling

Business strategists sometimes claim that being a 'fast follower' is better than being the first to market. The reasoning is that it permits the follower to learn from the innovator's mistakes and better survey the market. This is not, however, a universal truth. Recent data suggest that newer entrants into the 'green' auto market are struggling. Given the rising price of gas and consumer cost-consciousness, this would appear to have been an opportune time to launch these products. The culprit may well be pricing (sticker prices are well above 'economy' car levels) and suspicions that the new technologies are not yet proven.

Megan McArdle explains in The Atlantic:

"Autoblog reports that the Chevy Volt sold 281 units in February, down from 321 in February. Meanwhile, sales of the Nissan Leaf dropped from 87 to 67. The trend seems pretty dismal:

. . . here's the big scorecard for all sales of these vehicles thus far:

Volt: 928

Leaf: 173

Ouch.

It's going to take a long time at this rate to hit their sales target.

On the eve of the market debut of the Nissan Leaf electric car, Carlos Ghosn, chief executive of the Renault-Nissan alliance, said the only constraint on sales for the next three years will be how many battery packs the factories could churn out.

Deliveries of the Leaf are scheduled to start next month. Mr. Ghosn, speaking to reporters in Washington on Monday afternoon, did not say just how many he expected to sell in the first three years. He said, however, that the Leaf would hit 500,000 units a year in three years. Mass production, he explained, would lower costs enough to make the car a sales success without subsidies sooner than once expected. He said he once thought that number was a million cars a year, but now believed it was from 500,000 to 1 million.

173 down, 499,827 to go.

The planning for the Volt has been similarly optimistic flights of fancy:

Production of Chevrolet's Volt was supposed to be limited to 10k units this year, a target GM has already set its sights on surpassing. With 2012 volume projections now reaching 25k units, the next step in The General's quest to prove that the Volt is a viable vehicle is a staggering goal: doubling its 2013 production target from 60k to 120k units of production. According to Bloomberg, GM has not officially announced the 120k volume goal and may not build that many Volts in 2013 at all, if energy prices and supplier challenges don't allow it. And though supplier issues could well leave the goal out of reach, even if GM is able to ramp up production to fulfill its 120k unit goal by next year, there are no signs yet that the market will support those production levels. After all, GM is essentially banking on the kind of volume-to-price niche that BMW has taken years to cultivate with its 3 Series... which starts at prices slightly below the Volt's $41k, and still moved fewer than 110k units last year.

As Autoblog says, the question is: "Why?" Is this just the slow ramp-up of new production? Are the dealers falling down on the job? Did weather and the short month keep buyers off the lots? Did we simply need to see higher gas prices to goose demand, meaning that sales will now take off? Or did two major auto manufacturers dump huge sums of money into a technology that is struggling to get its sales volumes into the four figures?

It certainly wouldn't be the first time that companies have made this sort of colossal misjudgment. It wouldn't even be the first time an auto company has done so. (Remember the Edsel)? March and April sales volumes should be telling: gas prices are high, and the Leaf is supposed to hit 4,000 production units this month. If volumes remain low, we may be looking at green elephants.