Is Chevy's Cruze Dulling the Spark of its Volt?

The Chevrolet Volt plug-in hybrid is about to get a relaunch from General Motors Co., after skidding halfway to Flop City over the past several months.

The problem with the Volt—touted as the future of the automobile—isn't just the recent scare over battery fires. It is competition from right across the dealer's lot.

The Chevy Volt plug-in hybrid - once touted as the future of the automobile - is skidding toward Flop City. The problem isn't just the recent scare over battery fires. It's cars like the Chevy Cruze. Joseph White has details on Lunch Break

The Volt and the similarly sized Chevy Cruze may not appear to be rivals, considering the hybrid costs around twice as much. But they are, and the success of the conventional Cruze, and other cars like it, compared to the advanced Volt illuminates important trends in the auto market.

One is that most car buyers have specific demands for relevant, fuel-saving technology. What sells is better mileage and performance for, at most, a modest price premium to older technology. Barring a huge run-up in fuel prices, it could take 20 years, or more, for a Volt buyer to earn back through fuel savings the roughly $20,000 extra cost compared with a Cruze. That math matters to consumers who put cost concerns ahead of emotions and self-image.

Advanced cars that offer marginal fuel savings for a lot more money up front aren't selling yet in significant volumes. The seven months' worth of unsold Volts tallied by Autodata Corp. as of Jan. 31 attest to the challenge. The all-electric Nissan Leaf isn't a big seller, either, with customers buying just 676 of them in January.

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GM is relaunching the Chevy Volt after sales of the roughly $40,000 plug-in hybrid fell short of its targets, partly because of concerns about battery safety

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The Volt's interior

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The Chevy Cruze is the most competitive compact GM has produced in decades, with efficiency and performance that can lure prospective buyers away from the Volt.

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The Cruze RS's interior

The Volt's sales performance is a sensitive subject for GM. Because of the billions in public money pumped into saving GM from liquidation in 2009-2010, the car has become, in GM Chief Executive Dan Akerson's phrase, a "political football."

GM will respond to the Volt's anemic sales—just 603 sold in January—in several ways.

This week, Chevy is rolling out new advertising, including an ad called "Just the Facts," aimed at reminding consumers that the Volt has been heralded as a "game changer," that it won Motor Trend magazine's "Car of the Year" award and that owners love the vehicle. Another key message: The Volt is safe.

"It's really a relaunch," says Chris Perry, GM's vice president for U.S. marketing. In March, GM will start shipping Volts that run clean enough in gasoline mode to allow owners to ride alone in the carpool lanes on California freeways, a significant selling point. "It's still a technological marvel," Mr. Perry says. "We need to remind people of that."

Mr. Perry also says GM is also going to more closely match production to demand and work down high inventories. That could mean more temporary layoffs at the Volt plant in Hamtramck, Mich.

January sales reflected the damage done by the federal investigation of potential fire risks, he says. Now that the Volt has been declared safe, he expects sales will increase. But the one-time goal of selling 45,000 Volts this year is no longer driving GM's strategy, he says.

GM isn't planning a big sticker-price cut, but the company will focus on leasing, such as a current $350 a month, 36-month deal, to lower the price hurdle, Mr. Perry says.

The Volt has a promising concept. It can run for between 25 and 50 miles on electricity from its lithium-ion battery pack and electric motors, rated at 149 horsepower. The car keeps going for another 344 miles as a 63-horsepower gasoline engine kicks in to recharge the batteries. This attacks the biggest fear for electric-car drivers—getting stranded far from a recharger.

The government rates the Volt at 95 miles per gallon city, 93 highway, in all-electric mode. But once you've drained the battery, mileage drops to a more conventional 37 mpg—and that's with the recommended premium fuel. The EPA combined rating for both modes is 60 miles per gallon.

The list price is $39,995, down from about $41,000 last year. Dealers tend to stock Volts with options pushing asking prices above $40,000.

For roughly half the price of the Volt, you can get the Cruze, a car that promises better gas mileage on long highway trips, when both are running on petroleum. And it takes regular gas.

The Cruze represents the new breed of conventional compact and midsize sedans that brands are launching to raise average new-car efficiency to 35 mpg by 2016, and to 54.5 mpg by 2025, as required by federal rules. Ford Motor Co.'s Focus compact, Hyundai Motor Co.'s Elantra and Veloster, and Volkswagen AG's diesel Jetta and Passat are other non-hybrids rated at over 40 mpg highway.

The most efficient Cruze model, the Eco, uses a 138-horsepower, turbocharged, four-cylinder engine and a manual, six-speed transmission to achieve an EPA rating of 28 mpg city, 42 highway.

The turbos, smaller engine blocks and advanced fuel-management systems available on the Cruze and others may not be as sexy as lithium-ion batteries. But they deliver improved performance and mileage at reasonable costs. The Cruze's starting prices range from $16,800 for the cheapest LS, to $23,190 for the top-of-the-line LTZ.

The Environmental Protection Agency calculates a Volt will consume $1,508 worth of gasoline in a year, while the Cruze burns up $1,779. The EPA estimates running the Volt on electricity alone would cost about $648 a year.

This may explain why the Cruze is No. 4 on a list of cars compared against the Volt by people shopping for the plug-in model on Edmunds.com. The three higher-ranked cars in December were the all-electric Nissan Leaf, and two versions of the Toyota Prius.

I spent this past weekend driving a well-loaded Cruze outfitted with the sporty "RS" package, featuring a rear spoiler, fog lamps, racy-looking moldings, a navigation system and a well-tailored fabric insert on the dashboard where fake wood or plasti-chrome would have been in years past. The Cruze could pack more punch under the hood, but it handles well, and cuts an attractive figure.

The Cruze is the most competitive compact Chevy GM has fielded in decades, last year outselling the Focus and the Honda Civic, once the king of the small-sedan segment.

The Volt, meanwhile, has suffered a series of setbacks. The uproar during the past two months over the federal probe of fire risks involving the car's batteries—closed with no finding of a safety fault after GM said it would install more crash protection for the battery pack—clearly hurt. Last month's sales were less than half of December's.

What GM does to revive the Volt for the long haul will be watched closely by rivals, as they all face demands from the Obama administration and the state of California to offer significant numbers of plug-in and all-electric vehicles by 2025.

California late last month issued rules requiring that one in seven cars for sale in the state in 2025 be zero-emission or a plug-in hybrid. That implies huge market-share growth for cars like the Volt and Leaf.

If they don't sell, that's the industry's problem.

Write to Joseph B. White at joseph.white@wsj.com

Corrections & Amplifications
Current Ford Focus models sold in the U.S. don't use turbochargers to improve performance and mileage. An earlier version of this article incorrectly said the Focus has a turbocharged engine.