General Motors (GM) holds aspirations to lead the auto industry‘s pivot towards an all-electric future. The Detroit automaker outlined targets to sell 1 million electric vehicles (EVs) globally by 2025, with North American capacity nearing that threshold the same year. However, recent headwinds for GM demonstrate how even minor supply chain issues can slow the transition off fossil fuels.
| 2025 Production Target | 1 million EVs annually |
|---|---|
| 2022 YTD Sales | Under 100,000 EVs |
| Battery Plants (by 2025) | 4 megafactories with LG Energy |
Table 1. GM‘s 2025 EV production goal relies on scaling battery output
To meet its ambitious production objectives, GM must orchestrate an extremely capital-intensive rollout of new battery factories, known as gigafactories or megafactories. The complicated task devolves further in light of recent bottlenecks that emerged. Constraints around battery production already led GM to pause GMC Hummer EV reservations after reaching 90,000 pre-orders.
Let‘s analyze the critical factors determining whether GM can achieve EV domination in coming years:
Battery Plant Scale-Up Proving Slower Than Anticipated
Central to ramping up EV output is expanding lithium-ion battery production capacity. GM‘s solution comes via a joint venture with Korean manufacturer LG Energy Solution, with plans for four US-based battery cell plants by 2025. The first facility in Ohio already operates, but manufacturing processes are demonstrating more complexity than expected.
Speaking during a recent Q3 2022 earnings call, GM CEO Mary Barra acknowledged supplies were increasing "slower than originally anticipated." She cited the challenges around training employees and conducting quality control for the highly-technical battery assembly. Barra now projects reaching the 400,000 EV production milestone across 2022, 2023 and early 2024 – rather than meeting it in 2023 alone.
| Year | Targeted EV Production | Battery Plants Online |
|---|---|---|
| 2022 | 255,000 to 275,000 | 1 |
| 2023 | NA | 2 |
| 2024 | 400,000 (by mid-2024) | 3 |
| 2025 | 1 million+ | 4 |
Table 2. GM battery plant construction determining EV production timelines
The capacity constraints directly funnel down to delayed vehicle delivery timeframes. GMC recently informed Hummer EV reservation holders that Edition 1 Pickups may not arrive until 2024. Original estimates suggested late 2023 for some reservation holders.
The situation illustrates how unprecedented complexity awaits auto giants like GM when attempting to scale emerging battery technologies. As the firm gains experience training employees and perfecting the manufacturing process, it should accelerate construction and output of plants 2 through 4. But near-term roadblocks impact GM‘s aggressive early production targets.
Chevy Bolt Bucks Expectations with Boosted Volumes
Interestingly, GM intends to buck assumptions around discontinuing existing EV models amidst its flashy new releases. The automaker plans to double production of its affordable Chevy Bolt EV next year, from around 44,000 units in 2022 to 70,000 in 2023.
Citing strong demand and sales outpacing the Ford Mustang Mach-E, GM CEO Mary Barra confirmed the company will expand Bolt volumes. The move runs counter to speculation that the upcoming $30,000 Chevy Equinox EV crossover would replace the Bolt.
Doubling down on the Bolt provides existing owners with support while offering an affordable option as new models carry higher price tags. GM expects to have over 200,000 Bolt drivers by end of 2023, indicating strong customer loyalty. Maintaining the Bolt through 2025 gives GM stability amidst a slew of all-new, unproven EV model launches in coming years.
| Model | Segment | 2022 Sales Target | 2023 Sales Target | Price | Range |
|---|---|---|---|---|---|
| Chevy Bolt | Subcompact Hatch | 44,000 | 70,000+ | $26,000 | 259 miles |
| Chevy Equinox | Compact Crossover | NA | 100,000+ (est) | $30,000 | 300 miles |
Table 3. GM will boost Chevy Bolt output in 2023 despite Equinox similarities
Impact of Inflation Reduction Act on EV Tax Credits
Alongside manufacturing obstacles, changes to policy environments present additional external variables for GM to navigate. The newly passed Inflation Reduction Act transforms federal EV tax credits for US car buyers.
Rather than incentives relating to battery size or sales volumes, new qualifications mandate:
- Final assembly in North America
- Rising portion of battery/component sourcing from the US or free trade partners
For GM, this spells complications in maximizing consumer incentives in the near-term. Most raw materials and battery parts currently get imported from China or other foreign suppliers. CEO Mary Barra expects GM EVs to only qualify for around $3,750 of the total $7,500 tax credit opportunity in 2023.
| Tax Credit Rules | 2023 Status | 2024/2025 Status |
|---|---|---|
| Final Assembly in North America | On track | On track |
| 50% of battery components from US/FT partners | Not met | On track |
| 40% of critical mineral inputs from US/FT partners | Not met | On track |
Table 4. New EV tax rules phase in through 2025 per GM‘s supply chain shifts
Gradual qualification aligns with GM‘s schedule for getting battery production plants online in the United States. As volumes scale domestically through the LG Energy partnership, mandated sourcing levels will comply accordingly. This roadmap even provides motivation for the supply chain investments GM is making.
In the interim, consumers may endure some additional EV sticker prices until credits ramp back up. But GM can leverage the Bolt EV and its 2023 cost structure below $30,000 as an affordable alternative.
Future GM EV Rollouts Through 2025 and Beyond
Make no mistake – GM‘s long-term objectives remain completely focused on an all-electric future. Short-term delays reflect inevitable learning curves around unprecedented manufacturing build-out more than anything.
As battery plants come online and supply chains localize, GM‘s electric models will populate showrooms through 2025. The automaker continues targeting 1 million EV sales globally through a sweeping range of new releases:
- 2023 Lyriq luxury SUV
- 2024 Silverado and Sierra pickups
- 2024 GMC Hummer editions
- 2023 Chevy Blazer SUV
- Next-gen Chevy Bolt after 2025
Combining flagship brands like GMC and Chevy with the high-tech Cadillac Lyriq, GM boasts big-name EVs to entice customer adoption. That‘s alongside continued Equinox and Bolt volumes targeting budget-focused demographics.
If the economy skids into recession, it could dampen demand and incentive levels. But GM holds an advantage as consumers gravitate towards familiar makes they trust. GM and LG Energy‘s scale as partners also helps buffer volatility.
Final Analysis: Delays Inconsequential to Long View
For GM, short-term delays ending 2022 and entering 2023 seem unlikely to dramatically slow its aggressive EV adoption vision through 2030. The temporary setbacks provide invaluable learnings around training workers and fine-tuning systems for new technology manufacturing.
As next-gen batteries transition from labs to scaled production, growing pains get worked out. The partnerships, capital, and capability give GM an eventual edge as the EV market matures. By exercising patience amidst initial capacity bottlenecks, the automaker puts itself in a commanding position this decade.
GM always intended to pace EV model introductions with battery plant construction. Near-term reservations for hot sellers like the Hummer EV just accentuate demand outweighing current supply. As constraints free up through 2024, GM will claim the pole position to lead EV sales industry-wide.
