MEMPHIS REISEN

Opinion: A Window Of Opportunity Is Opening For General Motors  – CleanTechnica

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There’s no other way to put it: GM has struggled badly in its transition to EVs. But recent developments have led me to believe that GM may be better positioned than it appears to be: if I’m right, and if GM does not mess up, it may well be one of the winners in this transition and recover lost ground by the latter part of this decade. Let’s look at the factors that prompt me to say this.

#1. “Production Hell” seems to be over

As far as I remember, the term “Production Hell” was popularized by Elon Musk back in 2017. Those were the days when the future of EVs was being fraught in the over-automatized production lines for the Tesla Model 3. If this car had failed (and many expected that to be the case), no doubt the EV transition would’ve been delayed for a few more years, though it’s hard to say exactly how many.

Regardless, the truth is that one way or another most automakers have struggled with “Production Hell,” so I’m taking the liberty to use that term beyond Tesla’s specific experience with the Model 3. Many of us still remember how Volkswagen struggled to ramp up ID.3 and ID.4 production (mainly because of software issues), Renault — despite considerable experience with the Zoe — also managed to butcher the arrival of the Megane E-Tech, and even mighty BYD had a hard couple of years back in 2019–2020 when a large reduction in Chinese subsidies combined with difficulties bringing online the upcoming Blade Battery.

In GM’s case, Production Hell was related to the difficulties in ramping up Ultium production, and, later, solving software issues for the Blazer EV. And, to be clear, it messed up badly: Ultium was presented roughly at the same time as the Blade Battery, yet BYD managed to solve its issues a full three years before GM — apparently — got the hang of it.

But it seems like GM is finally getting it, and the current lineup makes me think the company may have more than one ace up its sleeve.

#2. GM’s current proposition is price competitive

Back in 2020 GM presented “Ultium,” a modular skateboard able to fit in an array of different vehicles. This adds complexity and weight when compared to the more modern and popular “Cell-to-pack” and “Cell-to-chassis” arrangements, but it makes sense when you want to focus on economies of scale and serve many segments with only one design.

Two things have led me to believe GM’s bet may pay off. First of all: after having its very own “production hell” with Lyriq production in Spring Hill (Tennesse) as well as Blazer and Equinox EV production in Ramoz Arispe (Coahuila), it seems that Ultium production is finally ramping up:

If we’re to believe Mary Barra’s comment on Ultium production, this is only the first phase of the ramp-up, and higher production levels are coming in the following months. Recent data on sales (over 9,000 Ultium vehicles were sold in May in the US) supports this assertion, but we’ll have to wait for Q2 and Q3 numbers to be sure.

The second reason I have high hopes in GM’s bet is that its prices seem to be on point. The Blazer EV is starting at $50,000, while the Equinox is currently starting at $41,000, with an upcoming version for $35,000. This means both models are currently some $14,000 more than their ICE equivalents … but once the cheaper Equinox EV arrives, the difference will shrink to $8,000, and once we factor in the EV Tax Rebate in the US, it basically turns to zero. Because of its price, lower than the Tesla Model Y and the Ford Mustang Mach-E, it’s the Equinox EV that appears as the possible champion in the upcoming ramp-up.

And herein lies the issue: if the Equinox successfully ramps up, economies of scale will help all models in the lineup, including the upcoming Ultium Bolt and perhaps even more affordable ones in the future.

But wait. Haven’t we seen this already? Chevy Bolt production ramped from 0 to some 3,000 units a month already in 2017, while the Ford Mustang Mach-E did much better, ramping from nearly zero units in September 2020 to nearly 7,000 in May 2021, yet in both cases production stagnated there and came down later. But there is something that makes me hopeful this will not be the case with Ultium:

#3. The “Latin American Barometer” presents an optimistic picture

EVs are commonly sold at low profits or even at a loss, either to ramp up and get economies of scale going, or in the most egregious cases to comply with emissions quotas and avoid fines (hence the term “compliance car” for a vehicle never meant to be produced profitably). Because of this, in the US and Europe, many affordable EVs through the last decade have been discontinued after selling only a token number of units, as they were never meant for mass production.

However, when these vehicles are exported into developing markets, the reasons to sell them at a loss are no longer valid and more realistic prices appear. In the case of North American manufacturers, Latin America is the prime land for exports and the first place where we can see this difference, which is why I believe we can use the markets south of the Río Bravo as a “barometer” to evaluate what prices EVs really need to have to bring a profit to the manufacturer.

In the case of the Bolt and the Mach-E, this “barometer” indicates both are sold at a loss or perhaps at very low profits. In 2023, the Bolt EUV arrived in Latin America at a price of around $50,000 (in Mexico, Colombia, Brazil, and Chile), coming down to around $40,000 in 2024, well over the ~$32,000 it costs in the US once we include taxes. As for the Mach-E, its Premium trim stands at $62,200 in Mexico, over $10,000 more than the price in the US including taxes … and this is a vehicle built in Mexico, so no tariffs or transport fees enter this equation. Worse even, the more affordable Mach-E trims are not available in the region.

But Ultium vehicles have a different story. GM has so far only announced one of them outside the US: the Chevy Equinox EV, which has presented in Mexico in its “RS” Trim (I’m yet to find out if it’s the 2RS or the 3RS). Pricing starts at $45,000 in Mexico, which is practically the same as the US price before taxes! Better even, there’s a special offer of $43,400 for pre-orders! This means that the Equinox EV is actually cheaper in Mexico than in the US!

We still have to wait for this model to arrive in other Latin American countries, but if this trend maintains, our “barometer” may be indicating that GM is actually capable of selling this car at relatively low prices while making a profit on it, something that neither the old Bolt nor the Mach-E seem to be capable of. And this means that unlike Ford, GM will not be worried about scaling loses and instead will focus in producing as many of these vehicles as it can sell.

This information fits GM’s narrative, which is that it will sell some 200 to 250,000 EVs this year, making a profit even in the cheapest trims by the end of it thanks to the high volume.

The window opening for GM

So, in summary:

GM seems to be able to produce Ultium cars at a profit, even for the cheapest trims. In this case, this means an 85kWh car for under $42,000 and perhaps by the end of the year for under $35,000.

GM seems (finally) capable of ramping up production.

GM has a platform capable of fitting different models and can leverage it in more affordable models.

As far as the US market goes, I believe only Tesla and Hyundai/Kia are currently in a similar position, and both of them are widely considered the leaders in the EV transition. GM seems to be ahead of Ford, it could well be ahead of Stellantis (it’s hard to know what exactly is going on there these days), and it’s definitely ahead of the Japanese brands, which have foolishly refused to participate in this race. If GM’s capable of maintaining its current momentum and offering the proverbial “Model 2” in two or three years, it may well start eating into Toyota’s significant market share in the US.

But wait, this isn’t everything.

It’s been repeated as a mantra that all North American manufacturers abandoned cheap vehicles and can’t make them at a profit anymore … and this may be true, as far as US production goes. But the fact is GM has had a lead in affordable vehicles for a long time in Latin America, with the Chevrolet Onix (~$19,000) being the third most sold car in Colombia and Brazil in 2023, while the Chevrolet Aveo (~$15,000) got third place in Mexico that same year.

To win in foreign markets, GM must leverage both the Ultium platform and this experience in Latin American factories to turn these mass-market winners into EVs. China is ahead, sure, but there’s something that you may find surprising:

Once the Equinox EV (85kWh battery) starts deliveries in Mexico, it will be the cheapest EV in Latin America with a battery above 80kWh.

I’m not kidding. To get a battery like that nowadays in Latin America, you have to look for a BYD Tang (~$80,000), an XPeng G9 (~$75,000), or a GAC Aion V Plus (~$55,000); more options exist, but all of them are well above $45,000. This also applies to Europe by the way: I find quite impressive that the Equinox EV is currently being sold at roughly the same price as the 52kWh VW ID.4.

If GM can build a profitable, sub-$45,000, 85kWh SUV, as of 2024, that means that it should be able to offer a profitable sub-$20,000, 45kWh car in three or four years … so long as it tries, of course. The transition to EVs in Latin America is accelerating, but even the most optimistic of us doubt we will reach 50% BEV before 2029 or 2030. An Aveo EV or an Onix EV, leveraged upon Ultium and the upcoming LFP cells presented for the Bolt, could be a complete winner in 2028 provided it has reached price parity with gasoline versions by then. In the shorter term, the $35,000 Equinox and an even cheaper Bolt could win GM significant market share in developing markets. And if GM plays this right, it could build know-how in Mexico and the region to compete — again — in developing markets that have been lost to the Japanese and the Chinese in the last few years.

And this also fits current economic trends. As of 2024, North America is investing far more in developing EV supply chains than Europe (something I wouldn’t have predicted back in 2020) and also has the advantage of cheaper energy thanks to the overproduction of gas and the rapid deployment of renewables. Battery production is very energy-intensive, so this matters quite a bit.

Final thoughts

Of course, there are many ways this may fail.

It may well be that GM is treating Mexico as an extension of the US market and also selling the Equinox EV there at low profits or at a loss, and the ramp-up will be less smooth than anticipated because losses are piling up (looking at you Ford).

It may well be that GM botches the transition to LFP and wastes another three years getting the new Bolt up and running.

It may well be that political will towards EVs cools in the US and GM pauses its ramp-up, losing this small window of opportunity to become competitive with the Chinese brands.

It may well be that GM focuses on SUV-like vehicles for the US and abandons the Latin American markets (as well as other developing markets). After all, it only sells some half a million cars in the region each year.

But, for now, I believe GM is an interesting company to follow, and, with some effort and luck, it could present a decent challenge to the Chinese behemoths in the Latin American playground in the second half of this decade, perhaps joining Hyundai/Kia as one of the leaders in this transition.

We will have to wait and see.