In January 2021, General Motors made a stunning announcement. It
aspires to eliminate tailpipe emissions from new light duty
vehicles by 2035, meaning that GM intends to stop selling gas
burning cars. GM executives have made announcements over the past
several years touting the carmakers commitment to an all
electric future. Of course, rivals such as Tesla, the
world's most valuable automaker by a longshot sell nothing but
electric cars, GM plans to introduce 30 EVs by 2025.
They can't just sit back and wait for the market to come.
They are going to have to push the market forward because if
they don't do it, there are others who will.
GM executives emphasize the company's plan to be completely
emission free is a goal and not a guarantee. But even with the
walk back GM's plan has skeptics concerns linger among auto
industry insiders that consumers are still skittish about buying
EVs.
We really want to hear from both customers because we think we
can address all of that skeptic.
Vehicle ranges are improving. But charging an EV still takes a
lot longer than filling a gas tank, and many areas don't have
a lot of charging stations, especially when compared with
the number of gas stations. GM is not the only one that has
made a big commitment to electric vehicles. But some
other automakers are spreading their bets out among electric
They have permitted to going all electric not doing hybrids, not
doing plug in hybrids. It's a huge risk. It's very ambitious,
and can they do it especially in light of range, cost, and
infrastructure issues.
GM is expected to spend $27 billion on electric and
autonomous vehicles through 2025. The automaker has since
increased that investment to $35 billion.
They dramatically reduced the number of engineers and
resources they're putting into traditional power trains and
diverted that over to electric development both battery
development as well as motors and power electronics as and
also the software that controls all this.
The automaker is planning crossovers, cars, SUVs, and
trucks from all four of its US brands. Details on several of
them are sparse, but a few are expected soon. As of August 2021
, the Chevrolet Bolt EV and Bolt EUV are the only pure EVs GM
sells in the US. As of August 27, GM was undergoing a $1.8
billion recall of all Chevrolet Bolt vehicles over a risk of
battery fires. GM has confirmed several such fires have already
occurred. Other EV makers have also had problems with battery
fires. GM is expected to soon begin releasing some highly
anticipated vehicles, including a sleek crossover from its high
end Cadillac brand, and an all electric sport utility truck
with a six figure price tag bearing the resurrected Hummer
brand name. Underpinning most of these new electric vehicles will
be GM's Ultium battery cells. A newly designed battery made in
partnership with LG Chem. GM has said it has been able to
dramatically reduce battery costs while improving capacity,
thus solving two of the biggest concerns around EV adoption. The
two companies will produce the batteries through a $2.3 billion
partnership. GM is also including plans for electric
commercial vehicles.
It is going to be really important for GM to get
themselves established in this market to have a viable electric
delivery van cargo van that can be used for a range of different
applications, and also to have the services to back that up.
GM's Bright Drop venture will include vehicles equipment and
services for electric commercial fleets. FedEx is the project's
first customer.
General Motors leased the EV1 from 1996 to 1999, making it the
first automaker to release a mass produced electric car.
Despite customer satisfaction, the company could not make the
business case for EVs and ended up scrapping the project and
crushing most of the cars. An April report from Bank of
America Merrill Lynch forecast that by 2035 battery electric
vehicles will make up about 31.6% of total light vehicle
sales worldwide and about 28.5% in North America. Another report
from Boston Consulting Group forecast that pure electric
vehicles will comprise 45% of light vehicle sales worldwide by
2035.
So this is the trouble with gms all electric aspiration
according to Jon Gabrielsen an auto industry economist, GM had
about 8.7% of the world's automotive market in 2020. EVs
are only expected to be somewhere from 31.6% to 45% of
all light vehicle sales around the world in 2035. If it
exclusively sells electric vehicles around the world, GM
risks dramatically shrinking its total global market share unless
it grabs a massive share of total EV sales. And there's a
lot of competition coming. GM's market share has shrunk since
2008 in the US, North America, and around the world. Part of
this is due to the automaker paring back operations. It sold
off its entire European business in 2017 and exited some other
markets such as India. GM's international retreat has left
it heavily dependent on North America, especially the United
States and the Chinese market where it has 10 partnerships
with Chinese automakers. Even in the US it is lost share dropping
from 22.1% in 2008 to 17.1% in 2020. Then there is the question
of how many customers actually want EVs to which the answer is
seems to so far be not that many. Battery electric vehicles
comprised just 2% of new car sales in 2020.
One of the reasons we haven't seen more electric vehicles is
there hasn't been that many to buy. We certainly anticipate
that sales will increase as more models come on to market.
China is a bright spot. Almost half the total number of EVs in
the world are in China.
Having experience in China, where electric vehicles are much
more common is also very helpful. I think will probably
see more GM electric vehicles in China than we will actually here
in the US.
GM's business in China is done strictly through joint
partnerships with Chinese firms so it has less control over its
business there than it does in North America. Competition in
China is also steep with many domestic EV manufacturers in the
marketplace. Demand for EVs spiked in Europe in 2020. The
region's surpassed China for the first time in EV sales. This is
not expected to continue but it is anticipated that Europe will
contribute a lot to global EV market share. Those who follow
the industry say there are some potential hurdles to ownership,
EVs still tend to cost more than a comparable internal combustion
engine. It varies from model to model, but it takes a long time
to fully charge an EV battery. The fastest charging technology,
DC fast charging or level three charging, takes about 30 minutes
to charge a battery for about 125 miles of driving. Slower
connections can take up to several hours.
When we talk to consumers, barriers to EV adoption for them
are availability of charging, reliability, and affordability
of the EVs. Manufacturers are working on the affordability,
new battery technology that's going to be cheaper. But
charging is still a major issue.
As of August 24, 2021, there were 5,325 DC fast charging
stations in the United States compared with roughly 150,000
gas stations. It's true that customers can charge elsewhere
such as at home or in the office parking lot. But this requires a
reliable connection. Many Americans don't have garages or
a convenient way to plug in their cars.
GM's big risk is they put all the chips on one spot. And it
strikes me that a lot of things have to come together. One of
the biggest is are we going to get an infrastructure package
that vastly increases the EV charging infrastructure. Because
that's key, I think for every automaker.
Many of the world's automakers are taking a cautious approach
to electrification by offering several different power trains
across their lineups, internal combustion, hybrids electrics,
and others.
Bob Carter, an executive at Toyota, said we want to be the
Macy's department store of propulsion systems. So they're
going to have gas, hybrid, plug in hybrid, fuel cell, and
they're even playing with hydrogen running through regular
engines and Japan.
GM's Detroit rival Ford is pursuing a somewhat similar
strategy. The F-150, for example, is available with a
range of internal combustion engines as well as a hybrid
power train and an electric variant is expected in 2022. GM
says it is addressing some of those concerns. For example, the
automaker added an energy assist feature to its My Chevrolet app.
If you're taking a trip, it'll tell you where to charge. It'll
make your trip much more pleasant for you as you go down
with that, but we want to make sure that we keep you to answer
all those questions.
With its challenges in mind, GM does have some strengths. First,
it has its own battery technology, albeit one that it
has produced in partnership with LG Chem. One of the key points
about GM's Ultium batteries is that they can be produced for
less than $100 per kilowatt hour a kind of barrier in pricing
that once crossed will make EVs price competitive with internal
combustion engines.
That's a pretty great number. And we're not done yet, we don't
know the bottom of the cost curve.
Ultium batteries can be produced cheaply due to the reduced
content of certain metals, especially cobalt.
Some of this innovation is happening where not only are you
using less critical metals, you know, we use nickel and cobalt,
manganese, and aluminum. But we're dropping the expensive
parts of the batteries down by like 70% to get all the
performance and all the cost reduction to make this happen
for our customers.
Ultium batteries also have a design comprised of what GM
calls pouch cells. These are distinct from the cylindrical
designs seen on other vehicles such as Tesla's. This design
which GM says is unique in the industry allows the cells to be
stacked in different configurations that can
accommodate different needs and different vehicles. It for
example, allows for designs that lower the floor of the cabin in
a car and give more interior room.
GM has also brought battery cell development in house which is a
break from the past when it and most other automakers were
relying on suppliers.
A lot of the big OEMs are se ein that as something that they nee
to be doing both to make sur that they have enough suppl
because if they're going to b making this transition t
completely electric, they'r going to need a lot mor
batteries then we have th capacity to produce right now
GM is also beginning this EV onslaught in segments where it
competes extremely well, such as in crossovers, SUVs, and full
size pickup trucks. The three best selling models in the US
are all full size pickup trucks. Ford's F-Series is usually the
top selling line of pickups, but GM is the biggest seller of full
size and midsize trucks combined, and it surpassed Ford
and full size pickup sales in 2020. The pickups popularity is
not lost on upstart EV makers such as Tesla, Rivian,
Lordstown, and Bollinger. Tesla, the most valuable automaker in
the world by market capitalization debuted its
futuristic looking Cybertruck in 2019. Ford debuted its fully
electric F-150 lightning in 2021. It has also borrowed the
Mustang name for its first fully electric SUV, the Mustang Mach
E.
GM is also reaching into its archives and it has chosen to
revive the Hummer name. The original lineup was a gas
guzzling family of SUVs modeled on military vehicles. It was
beloved by celebrities but hated by those who saw the vehicles as
cardinal symbols of excess. GM killed the Hummer brand during
its reorganization after declaring bankruptcy in 2009.
Only to watch sport utility vehicle sales skyrocket in the
recovery that followed the recession. GM will first release
the Hummer as a pickup and SUV will follow in 2023. The
electric Hummer pickup has 1000 horsepower 11,500 pound feet of
torque and can go 0 to 60 in about three seconds, which is
faster than many iconic high end sports cars. The electric Hummer
has attracted a lot of attention, including among
buyers who are not the typical electric vehicle customer. Bob
Dykes runs an oil and gas company out of Colorado and has
a reservation for the first electric Hummer pickup truck. He
said he is not terribly interested in Tesla but used to
own some of the original Hummer vehicles and wants to try out
the new version.
My main purchase reason was I thought it was cool. I liked it.
And it would be unique to have for a while and see what it's
like.
Dykes thinks it will be a while before EVs take over.
The electric vehicles, there's going to be quite a few in the
future. But I just I think don't take 20-30 years to get enough
infrastructure to really put this in the marketplace.
Part of GM's plan includes new models from its struggling
luxury brand Cadillac. The Lyriq crossover is due out in 2022.
The Celestiq will be hand built and likely carry a very steep
price tag. General Motors does have a strong legacy of
innovation. GM was the first company to put catalytic
converters on cars to filter out pollutants. It was the first
company to offer engines the deactivated cylinders to save
money on gas. It was the first company to offer widespread
connectivity in its vehicles through its OnStar service. But
not all of GM's innovations were successful.
In some cases, some of those technologies came to market
maybe a little prematurely like cylinder deactivation in 1980 on
the Cadillacs, you know before it was really ready.
In the same way, its early attempts to introduce electric
cars struggled.
I remember driving the first EV1. Well, that wasn't a sales
success by any stretch, but it certainly was a learning
experience, which allowed them to move on to the Bolt. So all
of those things are learning experiences that give them some
institutional knowledge. I think it's probably really helpful,
Despite all the challenges that come with electrification,
committingto electric gives GM a shot at self reinvention while n
dding to its history and p rhaps even vindicating earlier e
gineers and executives who t ok chances.