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Key Points
- General Motors Co. (NYSE: GM) has pulled out of one of its largest EV initiatives.
- GM saves some money now, but will it come to regret its decision?
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Auto company after auto company struggles with slow electric vehicle (EV) sales in the United States and Europe. The only nation where EV sales are strong is China. Notably, Volkswagen says EV problems have damaged its bottom line. Yesterday, Stellantis CEO Carlos Tavares exited partly because of EV effort failures. General Motors Co. (NYSE: GM) has pulled out of one of its largest EV initiatives. It will sell its ownership in an EV battery factory to partner LG Energy. The facility is set to be completed in the coming months.
EV Plans Crumble
Building the $2.6 billion manufacturing operation was part of GM’s commitment to what it viewed as a bright EV future when it broke ground for the Michigan-based facility in 2022. The Wall Street Journal reports that, at that time, GM said it would produce a million EVs by 2025. That comment is similar to the one by Ford Motor Co. (NYSE: F). The number two U.S. car company planned to have the capacity to manufacture 600,000 EVs by the end of 2023. It pushed that date until this year and then abandoned it completely.
EV development and manufacturing have become a financial anchor for many of the world’s largest car companies. Ford will lose several billion dollars on its EV operations this year, which has dragged on its earnings. Analysts recently said Ford was losing $100,000 on every EV it sold.
GM’s retreat is due to reasons similar to those that have plagued most of the sector, except for Tesla and the most successful Chinese manufacturers. Drivers find EVs too expensive compared to gasoline-powered cars. They also worry about range, the availability of charging stations, and the time it takes to charge an EV battery. Rising gasoline prices were supposed to be an incentive for EV sales. However, gas prices are the lowest in over three years at $3 for a gallon of regular gas nationwide.
Selling its part of the EV battery plant puts GM in a difficult position. It saves money. However, when EV sales pick up, it will have abandoned a facility that might give it an advantage over competitors.
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