General Motors (GM) is making significant investments, amounting to tens of billions of dollars, to develop a range of new electric vehicles. The goal is to catch up to industry leader Tesla. However, GM is currently facing challenges in achieving its ambitious electric vehicle production targets. The company’s chief financial officer, Paul Jacobson, admitted to difficulties in producing a new type of electric car battery pack that is necessary for the upcoming electric vehicles set to be introduced over the next few years.
In the first half of this year, GM only managed to manufacture 50,000 electric vehicles, with the majority of them utilizing older battery packs sourced from a supplier. The new modular Ultium battery packs, produced by GM in partnership with LG Energy Solution at an Ohio factory, were used in less than 2,800 vehicles sold in the United States. The company is constructing two additional Ultium factories in Tennessee and Michigan.
Previously, GM announced its plan to manufacture 400,000 electric vehicles in North America between 2022 and 2024, and over one million by 2025, with the majority incorporating Ultium technology. Jacobson forecasted the production of 100,000 battery-powered vehicles in the second half of 2023, with further details to be provided in an upcoming conference call with financial analysts.
Despite the sluggish rollout of electric vehicles, GM’s financial performance remains unaffected for now. The company reported a profit of $2.6 billion for the April to June period, marking a 52% increase compared to the previous year. Revenue also grew by 25% to reach $44.7 billion. Key contributors to this success were higher prices and strong sales of trucks and SUVs in North America. The average price of GM vehicles sold in the second quarter was $52,000, surpassing the first quarter by $1,600.
GM experienced a 26% increase in car and truck sales, amounting to 833,000 vehicles, in North America during the second quarter. However, in other regions, the company sold 147,000 vehicles, approximately 8,000 fewer than the previous year.
While the robust profits are welcomed, investors are growing increasingly concerned about GM’s electric vehicle strategy. This unease arises from the fact that electric vehicles represent the fastest-growing segment in the automotive industry. Many fear that GM, along with other major automakers like Ford, may lose customers rapidly as more drivers opt for battery-powered cars. Established manufacturers such as Volkswagen and Toyota have already experienced declining market share in regions like China, Europe, and California, where electric vehicles enjoy a significant and expanding portion of new car sales. Companies like Tesla and Chinese automakers like BYD have dominated this market.
Two years ago, GM’s CEO, Mary T. Barra, expressed the company’s aim to double annual revenue to approximately $280 billion by 2030, with electric vehicles and related software and services serving as significant revenue streams. GM has also set a target to phase out the production of internal-combustion models by 2035.
However, currently, GM is lagging behind where it should be according to Sam Fiorani, a vice president at AutoForecast Solutions, a consulting firm specializing in global vehicle forecasting. Fiorani expressed concern about GM’s ability to successfully launch higher-volume electric vehicle models if they are encountering difficulties with the initial wave of new EVs.
At present, GM only offers a limited number of niche vehicles utilizing Ultium battery packs, including the Cadillac Lyriq SUV, the GMC Hummer with a starting price of around $90,000, and large delivery vans from the newly established division called BrightDrop.
GM plans to introduce three new electric Chevrolet models, including the Blazer and Equinox SUVs, and an electric Silverado pickup, during the summer and fall. Initially, the Silverado was slated for a spring release, but it is now anticipated to launch in the fall.
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