GM CEO Mary Barra says that she doesn’t see profitable electric cars in the $30,000 to $40,000 range until the end of the decade or “maybe even later.”
Here’s why she is wrong and why it doesn’t even matter.
At a Sanford Bernstein conference, Barra commented on the current EV market and admitted that Tesla has the lead in it, but she hinted that she believes GM can catch up (via Reuters):
Barra acknowledged that Tesla Inc has the lead in EV technology, profitability and scale, but said that lead is not permanent.
She added about EV profitability:
EV battery costs are still too high to build profitable mass-market vehicles, that sell for $30,000 to $40,000, Barra said. But she predicted EV and combustion vehicle costs will equalize “sometime in the latter part of this decade… maybe a little longer.”
That’s a strange comment considering GM is currently selling the Chevy Bolt EV starting at $26,500 and has promised a starting price of around $30,000 for the Equinox EV.
Though the Bolt EV is going out of production at the end of the year, it was never clear whether or not GM was making any money off of it.
But the Equinox EV is coming to the market this year, and while the base version starting at around $30,000 is not expected to come soon, it is expected to come way before the end of the decade.
First off, I think we are going to see several profitable EV options in the $30,000 to $40,000 range in the next few years.
I thought that GM itself would be building one of them, the Equinox EV, but now it almost sounds like Barra is saying that it won’t be profitable at the price.
Tesla already sells the Model 3 starting at $37,000 before incentives, and while we don’t know the exact gross margin on it, I’d bet it is slightly profitable.
But anyway, you don’t even need a profitable EV at less than $40,000 right now. You have to look at EVs within the broader auto market. Inflation has pushed prices up across the board, and now, the average new car sale price in the US is at an eye-watering $48,000.
We can’t discard this information. That’s what electric vehicles are competing again on average.
When you account for the overall cost of ownership, thanks to gas savings, electric vehicles have already won.
If you see an automaker complaining about the claim that “electric vehicles are not profitable,” what they are really saying is that they can’t make a compelling profitable EV that buyers want right now. If they can’t, it doesn’t mean others can’t.
FTC: We use income earning auto affiliate links. More.