With a pricing announcement for the Chevy Volt expected by the end of the summer, General Motors needs to weigh many factors in determining how much it will ask consumers to pay for its first-generation plug-in hybrid sedan. Sunk costs, low volume and still-expensive production mean that making a profit on the first model year of the car is very unlikely. Nissan said that its LEAF will also lose money for at least two years.

GM-Volt.com today raised the issue of the "wow factor" in an interview with Volt marketing director Tony DiSalle. Mr. DiSalle refused to comment on any specific pricing strategies, but the question remains: Does GM need to make waves by taking a bigger loss on its introductory model, and get the price significantly below $40,000, or should it save the "wow" for the future, once production costs fall far enough to justify a big price drop?

A Question of Faith

When the Volt was first conceived, Chevy decided that extended-range plug-ins were more practical and market-ready than pure electric cars, and would therefore command a higher price. It was a deliberate decision that General Motors's electrified vehicle program may someday live or die by—and it will soon meet its first test. If having extended range capability truly is a make-or-break point for early plug-ins, G.M. shouldn't have to worry about the Volt competing with cars like the Nissan LEAF by knocking a few hundred extra dollars off its sticker price.

Both cars are likely to be hugely successful in the first year, with the LEAF appealing to more urban markets where range is less of an issue, and the Volt winning over a more mainstream audience inclined to take the car on family road trips.

But if extended range isn't as much of a draw as G.M. had envisioned, the Volt might be just another electric car—with the benefit of unlimited range but the drawback of only having 40 miles of pure electric power. In that scenario, it's possible that the Volt might get caught in a perpetual bind—caught between a need to lower the price while sweating out meager margins.

With just 10,000 Volts scheduled for production and a small but passionate legion of fans who have been awaiting its release for years, the 2011 Chevy Volt will sell out regardless of cost. But once production is increased and the market begins to tighten, GM will learn how important the "wow" price could be to the success of its high-stakes extended-range gamble.

Reprinted with permission from PluginCars