Why GM is killing the Chevy Bolt EV amid record sales

DETROIT – After years of lackluster performance and a fire-fueled recall, the all-electric Chevrolet Bolt EV was finally gaining traction for General Motors.

As the cheapest electric vehicle in the U.S. after major price cuts, U.S. sales of the Chevy Bolt jumped more than 50 percent last year, and the automaker said it would make a record 70,000 units in 2023.

But instead of leaning more on the vehicle’s recent success and increased production, GM CEO Mary Barra said Tuesday that the automaker would end production at the end of ‘this year from the vehicle he once hailed as a “true game changer” for the industry and an “EV”. for everyone.”

“We have progressed so far that now is the time to plan to end production of the Chevrolet Bolt EV and EUV, which will occur at the end of the year,” Barra told investors during an earnings call.

Barra’s comments about the vehicle’s elimination were as quick as a butcher cutting off the head of a chicken, but they spoke volumes when combined with the company’s plans to produce cost-effective electric vehicles in the coming years.

GM is on track to make single-digit profits from its electric vehicle portfolio by 2025, when it aims to have a production capacity of 1 million electric vehicles in North America.

To achieve these goals, GM needs the production capacity, profits and market positioning of its upcoming next-generation electric vehicles. He doesn’t think he needs the Bolt.

For industry insiders, the writing was on the wall for the end of the Bolt’s days. But the timing of the decision caught many experts off guard. Expectations were that GM would produce the vehicle at least next year.

“It was more sudden than I expected,” said Michelle Krebs, an executive analyst at Detroit-based Cox Automotive. “I thought it would go away at some point when the new batteries came in and they moved to more body styles, but it seemed pretty abrupt.”

A company spokesman said the timing of the announcement coincided with GM’s need to update suppliers on the end of production and on the progress associated with the $4 billion the company is spending to retool the Bolt plant in Orion Township, Michigan, for the GMC Sierra and Chevrolet. Silverado electric vans.

It’s part of GM’s EV strategy to retrofit existing plants rather than build new ones, though it may do so in the future. Others such as Ford Motor and Hyundai Motor have announced new plants in addition to retrofitting current facilities.

GM has said the retrofit saves time and capital, and has also allowed the company the flexibility to partially convert plants and build different gas models in tandem. But in the case of the Orion plant, which only makes the Bolt, it didn’t make sense to adopt that point, because GM believes it needs the extra capacity. Also, the Bolt doesn’t contribute to the company’s bottom line like plants that produce gas vehicles to make money.

Barra said Tuesday that once the Orion plant reopens next year, the company will have a total production capacity of 600,000 EV trucks annually, including a Detroit plant that has been slow to ramp up production of GMC Hummer EVs.

“We’re going to need that capability because our trucks are more than up to our customers’ expectations, and we’re going to show that EV work and range are not mutually exclusive terms for Chevrolet and GMC trucks,” Barra said Tuesday. .

GM has promised investors that its next-generation electric vehicles, built on a new architecture known as Ultium, would be profitable. This is a milestone that Bolt models, including a larger ‘EUV’ version, were never believed to have achieved.

To spur interest and make the Bolt more affordable, GM dropped starting prices to $6,300 for the 2022 model year. The Bolt EV would start at $26,595, followed by the Bolt EUV at $28,195.

“Bolt is selling better than ever since the company dropped the price. On the other hand, that probably also means they’re losing more money than they ever have on this car,” said Sam Abuelsamid, analyst guidehouse main. Insights. “So they don’t want to continue any longer. They’re losing money there.”

GM expects to achieve low- to mid-single-digit adjusted profit margins on its electric vehicle portfolio by 2025, excluding any positive impact from clean energy tax credits like those included in the Inflation Reduction Act.

With those credits in mind, the company has said it expects its new portfolio of electric vehicles to be as profitable as its cars and trucks with traditional engines by 2025, years earlier than many thought possible.

While those credits likely would have boosted the Bolt’s profit margin as well, the car uses older battery technology purchased from LG, and GM is currently focused on ramping up more cost-effective domestic battery production through a plant it operates as a joint venture with the South Korean company.

That Ultium bump, plus the cost efficiencies achieved with the new EV pads, means margin improvements that the Bolt couldn’t have made, especially in the long run.

“As we scale electric vehicles, we will reduce fixed costs and continue to drive margin improvements,” Barra said Tuesday.

The Bolt will leave behind a mixed reputation. It was the first “affordable” long-range electric vehicle on the market, but it never lived up to its stated potential.

The Bolt brand was also damaged after the company in 2020 and 2021 recalled all vehicles produced due to fire problems stemming from defects with the supplier-manufacturer’s batteries. At least 13 Bolts spontaneously combusted as a result of the problem.

Still, GM touted the Bolt EV as a proof-of-concept for its electric future. The company said the vehicles attracted new customers, with 75 percent of Bolt owners making the switch from non-GM vehicles.

Now, the company will need a new entry-level EV, and it’s looking to the upcoming Equinox EV, starting around $30,000, to fill that gap.

“We think this is our big opportunity here to really start to have mass adoption, and we have that expectation with the price; the volume that we expect to do,” said Scott Bell, Chevrolet’s global vice president, during a media conference. last year. “This is a game changer for us and for the industry.”

Whether the Equinox EV, which will be produced at a plant in Mexico, can serve as more of a “game changer” than the Bolt really could be determined later this year when the car goes on sale.

Barra told CNBC’s Phil LeBeau last year that GM expects to ramp up production of the Equinox EV much faster than its current ones. He said the vehicle should be close to full production in the first quarter of next year.