Cheap gas prices make the Chevy Volt look like a horrible investment

GM recently unveiled the price tag of the upcoming 2010 Chevy Volt and it’ll cost $32,000 after a $7,500 tax credit. The average consumer in the U.S. will think that’s far too expensive, but largely that perception is enabled by low gas prices in the country that hover around $3 per gallon. The rest of the world pays the equivalent of $5 or $6.

What does that mean for the Chevy Volt? It likely won’t see widespread adoption until gas prices rise to about double their current rates in the U.S. -- at least that’s what GM’s Vice Chairman Bob Lutz thinks. But how does the logic work out with some simple math?

Take a driver who puts 12,000 miles on their car per year. In a car that gets 25 miles per gallon, that’s 480 gallons of gasoline at $3 per gallon. A total of $1440 per year. Comparing the starting cost of a Chevy Volt ($32,000) to a 2010 Toyota Prius ($22,000), it would take just under 7 years to make up the cost difference if the Chevy Volt never used one drop of gasoline the entire time. That doesn’t take the electrical cost of charging the Chevy Volt into account.

Doubling the price of gasoline shortens the time it takes to make up that price difference, but it still would take 3 years or so to start realizing an economic savings. Of course people who are looking for a different driving experience, never stopping at a gas station for example, won’t put all of their decision making in the economics basket. There’s also a green aspect to the Chevy Volt because of its super low emissions.

A bright spot for the Chevy Volt may be scaling up production though, because  if GM can convince a large group of early adopters with deep pockets to make a purchase then its overall price could come down. The likelihood of that happening is uncertain right now though, because GM isn’t making much profit on the $32,000 price tag (so it says).