August 16, 2022

Sixteen years ago, Tesla CEO Elon Musk announced his goal to build the first truly low-cost electric family car. Now General Motors has hit him.

inAugust 2006, Before Tesla built its first electric car, Elon Musk posted the first “master plan“The company has one goal: to transform the non-green car industry into a friendly industry by selling expensive electric cars that ensure the development of affordable cars.

“When someone buys a Tesla Roadster sports car, they are actually helping pay for the development of the low-cost family car,” Musk wrote.

Tesla has since introduced four models that are cheaper than the $98,000 Roadster it launched in 2008, but none have been reasonably priced or have met Musk’s often-repeated goal of becoming a true mass-market brand. Instead, the company has stayed focused on luxury-priced cars: Teslas start around $50,000 and have an average selling price of $68,000, according to Kelly Blue Book. That’s well above the $30,000-$45K price range that most industry watchers believe is the perfect spot for the “low-cost family car” that Musk envisioned—a cool spot hit by one of Tesla’s most unlikely competitors.

Tesla has now lost the affordable electric car race to General Motors, which spurred the creation of Tesla after it left the electric car business 20 years ago. The Detroit-based automaker will offer the 2023 Bolt hatchback for just $26,600, reducing the previous sticker price by $6,300. The slightly larger Bolt EUV is loaded with a high-end audio system, camera-based rearview mirror, sunroof and Super Cruise for hands-free highway driving costs just over $34,000. GM is showing off another cheap electric vehicle next year: the Equinox electric crossover with 300 miles per charge with a starting price of $30,000, on par with gasoline-powered competitors like the Honda CR-V and Toyota’s RAV4.

“General Motors was the first integrated manufacturer to bring an affordable, long-range electric vehicle to market with the Bolt EV when it launched in 2017, and that remains a priority,” said Mark Reuss, President of General Motors. Forbes, without commenting on Tesla. Ross says GM decided to reintroduce the Bolt at “the lowest price point in the market” in order to “help increase electric vehicle sales and adoption”.

And they could get cheaper soon. A proposed extension of federal tax credits for electric vehicles is making its way through Congress in what’s called The Inflation Reduction Act of 2022. The bill, if passed, could reduce the effective base price of the five-passenger Bolt to less than $20,000 with a new $7,500 tax credit, available at the time of purchase.

Drive an affordable EV from GM

The Detroit-based automaker has three mass-market models coming out that are cheaper than Tesla’s Model 3 sedan and Model Y crossover.

Chevrolet Bolt EUV (2023)

From $27,000

Chevrolet Equinox EV (2024)

Starting at $30,000

Chevrolet Blazer EV (2024)

Base price is $45,000

Making electric cars cheaper is vital as rising greenhouse emissions lead to heat waves, droughts and increasingly severe storms. That’s because oil-powered cars and trucks are the number one carbon emitter in the United States More than a third last year. To cut it dramatically, electric cars must become mainstream — and making them accessible to the average American is a necessary first step. There are also potential bragging rights for companies that do.

“Having the ‘most expensive EV’ title behind you now isn’t a bad marketing move,” says Jeffrey Schuster, head of global forecasting unit at LMC Automotive researcher. They do it for awareness and market share, and to get the cars out there. Same with Equinox worth $30,000. It’s about trying to bring electric vehicles into the mainstream and also, obviously, eroding Tesla’s dominance in this segment.”

“General Motors was the first integrated manufacturer to bring an affordable, long-range electric vehicle to market with the Bolt EV when it launched in 2017, and that remains a priority.”

– Mark Royce, President of General Motors

The Detroit automaker’s pricing moves look particularly aggressive as increases in costs for batteries, semiconductors, raw materials and other components needed to build vehicles have pushed up overall vehicle prices, especially for electric vehicles. The average cost of a new electric vehicle was more than $66,000 in June, according to KBB, mainly due to higher US sales for Tesla. It has raised prices significantly this year, citing inflation pressures, and has not said when or if it will drop.

“They are frankly at embarrassing levels,” Musk said during his second-quarter Tesla earnings call. “But we also have a lot of supply chain and production challenges and we have crazy inflation. I’m optimistic, it’s not a promise or anything, but I’m hopeful that at some point, we can bring the prices down a little bit.”

Neither he nor Tesla responded to requests for comment on GM’s pricing moves.

He. SheIt is noteworthy that Tesla He doesn’t seem to care about losing the race for affordable EVs — and for now it doesn’t matter financially. Texas-based Musk’s Austin took $2.3 billion in net income in the second quarter despite significant production losses due to the Covid-related shutdown in China, Tesla’s main source of profit. Thanks to its high prices, the company enjoys profit margins that the larger traditional automakers would envy.

“Tesla’s focus has evolved over time and evolved into more of a luxury brand,” says Jeffrey Osborne, equity analyst who covers Tesla for Cowen. “The decision that Makasban advocated before focusing on the human-like Optimus Prime robot rather than the mass-market vehicle indicates that this is the focus that Tesla is content with.”

In the first half of the year, Tesla posted a gross margin on its auto business of 30.6%. By comparison, GM’s adjusted EBIT margin for its total operations was 8.9%. Because the company continues to see high demand globally, especially for its $66,000 Y-Cross, it is using most of its existing production capacity in factories to meet that demand; There is a little pressure to add cheaper models.

“Selling too many cars for too high or too profitable is not a problem for the automaker,” says former Tesla battery engineer Gene Berdichevsky, CEO of Sila, a battery anode maker. “This creates something that people really want. It’s like the way people buy an iPhone versus any other phone. They want it even though it costs more.”

“Having the ‘most expensive EV’ title behind you now is not a bad marketing move.”

—Jeffrey Schuster, President, LMC Motors

Since the arrival of Tesla’s Model S sedan a decade ago, Musk has made the brand synonymous with high performance, speed, and cutting-edge technology, such as wireless updates that allow existing vehicles to gain new types of features and driver-assist autopilot (which doesn’t do what the name suggests). It has had organizational problems). These are the things that distinguish Tesla cars, enhance their attractiveness and help them get premium prices.

But luxury prices won’t lead to the kind of mass adoption of electric cars that Musk has long cited as Tesla’s goal. According to the CEO of Fisker Inc. Henrik Fisker, a veteran designer who designed luxury cars for BMW, Aston Martin and, briefly, Tesla, Musk may now be a victim of its own success.

“It’s very difficult for a luxury car company to make a cheap car,” he says. “It’s easier to start the other way around.”

cSure, Bolt from GM It would not be mistaken for a luxury car. Introduced in late 2016, it was built in Orion, Michigan, using a small vehicle platform created by the South Korean unit of General Motors. In terms of design, it’s cute at best, not sexy, and it smells functional. Acceleration is racy and integration on the highway is a breeze, if it lacks the raw centrifugal force of a Tesla. Although categorized as compact, the cabin is spacious, especially for rear seat passengers, and can hold ample amounts of stuff when the rear seats are folded down. It was named North American Car of the Year in 2017, selling about 23,300 units in the United States that year, making it the third best-selling vehicle after Tesla’s Model S and Model X SUV.

“Selling too many cars for too high or too profitable is not a problem for the automaker.”

Jane Berdashevsky, CEO of Sila

Retooled and updated in late 2020, including the addition of the slightly larger Bolt EUV, it got off to a strong start before faulty batteries supplied by LG triggered recalls in 2021. The electronics company agreed to pay GM about 2 billion dollars On this issue, after months of sales and production halted, a new packaging was introduced this year. As a result, GM’s price cut seems to account for the battery headache as much as it appears to be a clever marketing move. And while the Bolt’s size and versatility make it an attractive vehicle for city dwellers, it lacks the sheer size and power of the big crossovers and pickup trucks that Americans can’t stop buying (at least when gas was cheap).

“It could have done better in Europe than it did here because the North American market is always looking for an SUV,” said Michael Simcoe, GM executive design director who oversaw the design of the Bolt EUV.

But Bolt is only the opening shot in the battle to win sales away from Tesla and expand the battery-powered car market. The larger Equinox and Blazer models due out in 2023, while slightly more expensive than the Bolt, fall squarely into the hugely popular mass market of compact and mid-size crossovers. They’ll have a driving range of 300 miles or more per charge using the company’s low-cost batteries and lighter, cheaper electrical engineering. A Silverado electric pickup, starting at $40k, will soon arrive to compete with the much-anticipated $40,000 Ford F-150 Lightning and Cybertruck. In the end, General Motors got luxury electric Cadillacs and Hummers selling for more than $100,000 to hit the market.

All of these vehicles use GM’s new Ultium system, which combines a higher-powered, less-expensive battery, engine, and lighter-weight chassis created specifically for electric models. Ultimately, they’re part of CEO Mary Barra’s goal of selling 1 million electric vehicles annually by 2025.

“Recent advances in lithium-ion battery technology and development work are helping to make affordable, long-distance electric vehicles with great design and performance a reality,” says Royce. “When more customers are able to experience the benefits of electric vehicles – from home charging to instant acceleration, excellent ride and handling and zero emissions – they won’t look back.”

It is clear that GM is not alone in targeting a broader segment of the US market. Prices for many models, including the Ford F-150 Lightning, Mustang Mach-E, and electric small SUVs from Volkswagen, Hyundai, Kia, Toyota, Subaru, and startup Fisker Inc. From 30 thousand dollars to 40 thousand dollars.

Berdichevsky, who worked on the first Tesla battery packs before starting his own company, believes that major automakers are trying to hit lower prices too quickly given the soaring demand for batteries and tight supplies.

“If what you are trying to do is to create a sustainable, accelerating business, you need to drive profitability in every car you charge and every battery you can get,” he said. “It is a mistake to go to market before the supply chain is ready.”

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