General Motors Co. is ready to test both the mass market’s appetite for electric vehicles and its own strategy to provide them.
The company expects to make the electric model of its popular Chevrolet Equinox SUV available for sale in about a year with a $30,000 price tag. It may go 250 miles on a single charge and will be the first high-volume GM vehicle with its Ultium battery, the linchpin of the automaker’s $35 billion gamble to overtake Tesla Inc. in EV sales.
Chief Executive Officer Mary Barra pledged to make all of GM’s vehicles battery powered by 2035, part of her ballyhooed “Everybody In” plan to make vehicles a climate change solution by selling them en masse. By offering an electric version of the high-volume Equinox family SUV, the company will test how cheaper products perform in a market now dominated by $70,000 luxury cars, and if the Ultium battery makes those sales profitable.
“This concept of ‘Everybody In’ is very real,” said Travis Hester, a career engineer who is charged with growing GM’s EV business. “Equinox is a really practical vehicle but it has to do everything. That means not just being that second or third vehicle. That means it has to do the running around to and from your home, and it has to do the road trips.”
GM’s shares declined less than 1% at 9:43 a.m. in New York.
Building an electric vehicle for the masses sounds like a no-brainer, but few automakers are really trying to do it. Batteries are expensive and can wipe away profits, while customers have struggled accessing charging stations at home and on the road.
The industry’s solution has been to sell electric luxury models, with the average price of today’s EVs inching toward $70,000. Even Tesla, for all its meteoric growth, sells cars that start close to $50,000 and CEO Elon Musk said that little work is being done on a low-priced model. That puts them beyond reach for most Americans.
Cut Prices
GM has tried to address those challenges before. It sells the Chevy Bolt, and recently cut prices to below $30,000. However, the car’s compact size is less appealing to most American consumers. It has also had to recall more than 140,000 Bolts after some of the batteries caught fire, a gaffe that cost the company almost $2 billion and affected its reputation.
Around the same time GM launched the Bolt in late 2016, engineers started working on Ultium. It works like a Lego set of common battery cells, produced as part of a joint venture with Korean manufacturer LG Energy Solution Ltd., that can be grouped and configured to make a small Equinox or a giant Hummer or Cadillac Escalade EV. That gives GM scale and should drive costs down. By fall 2023, Chevy will be selling the Bolt and electric versions of the Equinox, Blazer and Silverado pickup.
Equinox Chief Engineer Doug Houlihan said the vehicle has two battery packs, one for the base model and another for a longer-range version of the car. Both are shared with the larger Chevy Blazer EV. The Blazer’s larger battery also goes in the Cadillac Lyriq that went on sale this summer. Those three models, and other future EVs, will also share electric motors, torque converters and creature comforts like a 17-inch touchscreen. Mexican assembly wages could also help the vehicle make money.
Despite the industrial logic of sharing parts, the base model Equinox might lose money or just break even, said Sam Abuelsamid, an analyst with Guidehouse Insights. Houlihan said Ultium vehicles can still be profitable, especially as volume rises and battery costs fall. Further, the battery will be sourced in the US, which should allow customers to tap into at least $3,750 in federal tax credits.
“We’re not in this to break even,” Houlihan said. “We’re in this to make money.”
Helping GM is the fact the price of an Equinox is well below the average sticker on today’s internal combustion vehicles. It’s also much cheaper than rival EVs. Assuming GM hits the targets it has set out, the car will go further on a single charge than the base-model version of Hyundai’s Ioniq 5 and the Kia EV6, and it sells for at least $10,000 less than both, Abuelsamid said.
Charger Access
The company is also working to address charging problems that have bedeviled the electric vehicle market. Today’s Equinox can go about 420 miles on a tank of gasoline, potentially 170 miles further than a single charge. And customers may have problems gaining access to chargers, even at home. GM research showed Chevy Bolt owners typically wait four weeks for the permit and installation of the product. One even waited 107 days, Hester said.
Part of a $750 million budget Hester oversees will go to adding 40,000 chargers to the nation’s network of 100,000 over the next two years. The spending is focused on parking garages, malls, restaurants, office buildings and other places where apartment dwellers might go to use a DC faster charger. He’s also working to install more charging stations across US highways.
If successful, GM could set the stage for the company’s next phase of growth. And it may persuade more people to give up their gasoline-powered cars, which researchers have long said is important to fighting the impacts of climate change.
“I guess we’ll find out very soon,” Hester said. “The demand for EVs is growing rapidly.”
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