General Motors intends to make a profit on its next generation of electric vehicles because the batteries will cost nearly one-third less than the batteries in today’s Chevrolet Bolt, CEO Mary Barra says.
“We are committed to a future electric vehicle portfolio that is profitable,” Barra said during a presentation to the Barclays 2017 Global Automotive Conference in New York.
Last month, GM product development chief Mark Reuss said the company intends to introduce 20 new electric vehicles by 2023.
The ambitious goal comes as U.S. auto sales are slightly below last year’s record level, and consumers continue to prefer larger pickups, SUVs and crossovers, most of which are powered by traditional gasoline engines.
Sales of gas-electric hybrids, plug-in hybrids and battery-only vehicles in the U.S. are up 12.5% in the first 10 months of 2017 from a year ago. But at 454,399 units, they represent only 3.2% of the market.
Sales of electric vehicles depend on federal and some state tax credits. The future of those incentives is uncertain. The Trump administration’s proposed tax bill currently before Congress would eliminate the $7,500 electric vehicle tax credit.
Battery cells are the big cost in most electrified vehicles, which carry sticker prices that are a few thousand dollars higher than a comparably-sized gas-fueled model.
Barra said the batteries for the Chevrolet Bolt cost about $145 per kilowatt-hour (kWh). By 2021 GM is confident that will drop to about $100 per kWh.
There are two reasons GM is betting heavily on electric vehicles. First, China, where GM and its partners sell more cars and trucks than GM sells in North America, is urging automakers to make and consumers to buy more electric cars.
China is requiring automakers to achieve a certain new-energy vehicle score tied to the quantity of zero- and low-emission vehicles it sells. The target is 10% of a manufacturer’s fleet in 2019, growing to 12% in 2020.
GM sold 3.87 million vehicles in China last year. So 10% of that would be 387,000. GM predicts global industry sales of electric vehicles will reach 1 million by 2026.
The other force pushing for electrification is autonomous vehicle technology. The greater computing power of EVs is compatible with the density of sensors, cameras and software that guide self-driving cars.
Barra said GM’s progress on autonomous technology accelerated after it acquired San Francisco-based Cruise Automation in early 2016. The partners are now testing self-driving fleets in San Francisco, Scottsdale, Ariz., metro Detroit and early next year in New York City.
They have developed three generations of autonomous vehicles in 15 months.
The expectation among automakers and urban planners at that AVs will be deployed primarily in ride-hailing fleets.
They will displace taxi drivers, as well as drivers for Uber, Lyft and other services. But automation will bring down the cost to consumers who make multiple trips in densely populated urban areas.
“Today ride-sharing only represents about 0.1% of total miles driven in the U.S.,” Barra said.
That seems like a tiny piece of the transportation pie, but Goldman Sachs estimates the global ride-sharing market is about $36 billion today. But it forecasts that will grow to $65 billion by 2030.
The unanswered question is whether these new services can generate the robust profit margins generated by large pickups and SUVs.
“The electric vehicle is simpler than an internal combustion engine vehicle,” Barra said. “There are a lot of creative things we can do to bring the cost down.”
The revenue will be driven as much by the services EVs support as well as the data they can gather. Automakers see that data, such as commuting patterns, dining and shopping habits, as something they can sell to other users.
Asked whether GM would still be selling gas-fueled vehicles in 2030, Barra said, “We’re going to be driven by the customer. We have the flexibility to respond to their choices.”