GM Walks Away From Big EV Investments

By Douglas A. McIntyre Published Jul 24, 6:40AM EDT

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GM Walks Away From Big EV Investments — © Justin Sullivan / Getty Images

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General Motors Co. (NYSE: GM | GM Price Prediction) has slowed its electric vehicle (EV) plans.
Investors will no longer tolerate large EV investments.

General Motors Co. (NYSE: GM) said two things about its electric vehicle (EV) plans when it announced earnings. The first was in the shareholder letter: “As excited as we are about our EVs and our early success, we are committed to disciplined volume growth, which is the key to earning positive variable profits from our portfolio in the fourth quarter, which remains our goal.” Many thought the automaker’s investment in EVs was too aggressive. GM has slowed the process to show investors it will not overspend.

According to The Wall Street Journal, the second sign was “GM Chief Executive Mary Barra told Wall Street analysts Tuesday that GM is deferring investments to ensure the company doesn’t get ahead of demand.” This is part of a significant reversal of GM’s plan to have the capacity to produce a million EVs in 2025. Management said the target was now “flexible” based on demand.

It is easy to see why GM has begun an EV retreat. According to the quarterly report, it sold only 22,000 EVs in the first half. That works out to about 7,000 a month. The company has to be losing money on each of those sales.

Shifting Sentiment About EVs

The American appetite for EVs.

GM, Ford, and several other large car companies have found that investors will not tolerate large EV investments, despite earlier plans to aggressively take a substantial piece of a rapidly growing pie controlled by Tesla Inc. (NASDAQ: TSLA). Tesla’s new earnings demonstrate that even it is struggling with price cuts, another reason for GM to retreat. In short, the entire industry has to wrestle with Tesla’s unexpectedly poor numbers.

The American appetite for pickups and SUVs will not go away. And that is the part of the market that makes money. GM acknowledged that.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.