Why GM is killing the Chevy Bolt EV amid record sales

DETROIT — After years of lackluster performance and a firefighting recall, the all-electric Chevrolet Bolt EV is finally gaining traction for General Motors.

Dubbed the cheapest electric car in America after deep price cuts, Chevy Bolt sales rose more than 50% last year and the automaker said it would deliver a record 70,000 units in 2023.

But rather than lean more into the car’s recent success and ramp up production, General Motors CEO Mary Barra said Tuesday that the automaker will end production later this year of the vehicle she once hailed as a “true game-changer” for the industry and “EV for everyone”.

“We’ve made progress so far, and now it’s time to plan for the end of production of the Chevrolet Bolt EV and EUV, which will happen at the end of the year,” Barra told investors during an earnings call.

Barra’s comments about stopping the car were as brisk as a butcher who decapitated a chicken but speak volumes when combined with the company’s plans to produce profitable electric cars in the coming years.

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

To reach these goals, GM needs the production capacity, profits and market positioning of its upcoming next-generation electric vehicles. Don’t think it needs a bolt.

For industry experts, the writing was on the wall at the end of Bolt’s days. But the timing of the decision surprised many experts. Expectations were that General Motors would produce the car at least next year.

“It was more of a surprise than I expected,” said Michelle Krebs, an executive analyst with Detroit-based Cox Automotive. “I thought it was going to go away at some point when new batteries came out and more body styles went by, but it kind of surprisingly hit me.”

A company spokesperson said the timing of the announcement coincided with GM’s need to notify suppliers of the end of production and about progress related to the $4 billion the company is spending to retool the Bolt plant in Orion Township, Michigan, for the GMC Sierra and Chevrolet. Silverado electric pickup.

Retooling existing plants is part of GM’s strategy for electric vehicles rather than building new ones, though it may do so in the future. Other companies such as Ford Motor and Hyundai Motor have announced new plants in addition to retooling existing facilities.

GM said retooling saves time and capital, and it also gave the company the flexibility to partially convert plants and build different gas-powered models side by side. But in the case of the Orion factory, which only makes the Bolt, it didn’t make sense to take that route, because GM thinks it needs the extra capacity. Plus, the Bolt doesn’t contribute to the company’s bottom line like factories that produce gas-powered cars make money.

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

“We will need this capacity because our trucks live up to our customers’ expectations, and we will demonstrate that scope and electric vehicles are not mutually exclusive terms for Chevrolet and GMC trucks,” Barra said Tuesday.

GM has promised investors that the next generation of its electric cars, built on a new architecture known as Ultium, will be profitable. This is a milestone that Bolt models, including the larger “EUV” version, were never thought to achieve.

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

Sam Aboulsamid, principal analyst at Guidehouse Ideas, said. “So, they don’t want to stay in business any longer. They’re losing money because of it.”

GM expects to earn low-to-mid single-digit adjusted profit margins on its EV portfolio in 2025, excluding any positive impact of clean energy tax credits such as those included in the Inflation Reduction Act.

With those credits in mind, the company said it expects its new electric vehicle portfolio to be as profitable as its conventionally powered cars and trucks by 2025 — years earlier than many thought possible.

While these credits will likely boost the Bolt’s profit margin as well, the vehicle uses older battery technology purchased from LG, and GM is currently focused on ramping up production of more cost-effective internal batteries with a plant operating as a joint venture with the South Korean company. .

The increased Ultium, combined with the cost efficiencies achieved with the new EV pickups, means margin improvements that Bolt simply couldn’t deliver, especially over the long term.

“As electric vehicles increase in volume, we will reduce fixed costs and continue to drive margin improvements,” Parra said Tuesday.

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

The Bolt brand name also took a hit after the company in 2020 and 2021 recalled all vehicles ever produced due to fire concerns caused by defective supplier and manufacturer batteries. At least 13 of the screws spontaneously caught fire as a result of this problem.

However, General Motors promoted the Bolt EV as a proof of concept for its electric-powered future. The company said the vehicles have attracted new customers, with 75% 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 at around $30,000, to fill that void.

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

Whether the Equinox EV, which will be produced at a factory in Mexico, is more of a “game changer” than it really can 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 existing EVs. It said the car will be close to full production by the first quarter of next year.