Congress is looking at expanding the current $7,500 tax credit for advanced propulsion vehicles, like the Chevy Volt.

Even the latest news about Egypt got bumped to the back page as a “historic” blizzard bore down on the Eastern half of the U.S. yesterday, but one story made it through in many outlets: an equally breathless report that General Motors was developing a lower-cost version of the Chevrolet Volt.

The 4-seat plug-in hybrid has generated plenty of its own headlines, in recent months, capturing a series of kudos, including the much-sought honor of being named North American Car of the Year.  Still, at a base price of $41,000, the Chevy Volt is playing in rarified luxury car territory, rather than in the mainstream, like the similar, if conventionally-powered Chevrolet Cruze.  So, the idea of getting a significantly cheaper battery car would understandably make the evening news.

Problem is, no such lower-priced version of the Volt is in the works, GM officials stressed to TheDetroitBureau.com. – even though they admit to aggressively trying to trim production costs.  And, eventually, the underlying technology could be shared with lower-priced model – with the emphasis on longer-term.

“We’re not recreating the Volt,” assured Rob Peterson, spokesman for GM’s electrification program.  “There’s no separate development process underway to develop a lower-cost Volt (though) there s an effort to reduce costs in time for the second-generation Volt.”

That’s no surprise, several industry observers familiar with battery technology confirmed.  Toyota has made cost reduction a major goal with each new generation of its hybrid products, notably the Prius, the world’s most popular gasoline-electric model.

While the Japanese maker won’t publicly admit it, numerous company sources have confirmed that Toyota lost a significant amount of money on every Prius it built during the early days of its hybrid program – by some estimates, the first generation cost twice what Toyota was able to sell it for.

GM officials don’t deny the Volt is in the red on a “P&L,” or profit-and-loss, basis, though the automaker, struggling to rebuild its image after the 2009 bankruptcy, puts tremendous value on the image boost Volt has given to both General Motors, and Chevy, in particular.

Numerous GM officials, notably including program chief Tony Posawatz, have expressed bullish goals of sharply reducing the production cost of the Volt.  That’s no surprise, especially considering the anticipated improvements in the underlying battery-based powertrain technology.

As recently as 2008, when the Volt project was given the green light for production, lithium-ion batteries were running about $1,000 per kilowatt-hour – a substantial sum on a vehicle that requires 16 kWh of the batteries.  Insiders suggest that is already down closer to $600 to $800 as GM’s battery partner, Korea’s LG Chem, ramps up production.  And it will dip even lower when the maker’s new LIon plant, in western Michigan, goes into operation in 2012.

A well-placed Nissan source told TheDetroitBureau.com that it expects to be down to as little as $350 per kWh during the life of its new Nissan Leaf battery-electric vehicle, or BEV, which requires 24 kWh.  Getting there from $1,000 would yield a savings of almost $16,000, about half of the Leaf’s list price, and help put the green car program into the black.

For GM, getting to just $400, which is generally considered quite do-able by the time a full Volt redesign would be ready, could trim production costs by close to $10,000.

And the maker should be able to find other ways to trim costs on other driveline systems, from the big electronic controls to motors and other mechanical bits.

(Meanwhile, batteries are expected to get decidedly smaller and yet more powerful.  Battery car maker Tesla Motors is forecasting a 30% increase in so-called energy density – the amount of power a given mass of battery can store – for the high-range battery it plans to offer as an option on its upcoming Model S sedan.)

Simply boosting volumes will help enhance so-called economies of scale.  Officially, GM plans to build just 10,000 Volts in 2011, though CEO Dan Akerson suggested, last month, that he’d like to push that up to somewhere closer to 20,000, perhaps even 25,000.  The maker has authorized a speed-up of the nationwide Volt roll-out, and should be offering the vehicle in most or all of the country by year-end.

Which gets back to price.  The battery car market is sparsely populated, right now.  Volt and Leaf are the only advanced-propulsion models offered by major automakers – for now.  But Ford, Honda, Toyota, indeed, virtually every maker you can name, will be entering the fray by 2013 or ’14, at the latest.  And competition, along with cost-cutting, has a definite way of driving down prices.

“We fall into that camp, longer-term,” concedes GM spokesman Peterson – echoing what a number of GM officials have privately expressed.

So, don’t expect to see a major price cut on the Chevy Volt – or a second, cheaper model – in the next year or two.  But prices will almost certainly come down for those willing to wait.