As chief executive Mary Barra announced the acceleration of General Motors’ rollout of 30 vehicle models in November, she said the carmaker was “committed to fighting for EV market share until we are number one in North America”.
She did not mention Tesla by name — and she did not have to.
A decade ago, GM was the company to beat in the US in electric vehicles. In 2012, the year Tesla debuted the Model S, GM sold more than 23,000 Chevrolet Volts, nearly double that of its nearest competitor, the Toyota Prius, and representing 18 per cent of the total US electric vehicle market.
But since Tesla began selling the Model 3 two years ago, it has smashed US sales records for electric vehicles — still just a sliver of the US vehicle market overall — and turned 112-year-old GM into an underdog. Tesla dominated the US EV market in 2019 with 58 per cent share, and some estimates have suggested its share rose to as much as 80 per cent in the first half of 2020.
Ms Barra has said that GM will increase the amount it invests in electric vehicle development to $27bn and that the company will sell 1m electric vehicles in 2025. At that rate, analysts say the Detroit carmaker is unlikely to soon overtake its California competitor, which joined GM in the blue-chip S&P 500 last month.
“Right now, on pure electric in the US, Tesla is dominant,” said David Whiston, a Morningstar analyst.
GM also must manage its traditional car and truck business, where it holds the largest share of the US market, to ensure it underwrites rather than undermines its electric vehicle push.
“It’s like you’re operating on yourself,” said Adam Jonas, a Morgan Stanley analyst, who is bullish on Tesla. “It’s possible. It’s just the added challenge.”
Industry experts agree that at some point, the market for electric vehicles will become the entire vehicle market — the question is when.
Market research firm IDTechEx estimated EVs will constitute 20 per cent of the worldwide market by 2030, and up to 80 per cent by 2040. But Luke Gear, the firm’s senior technology analyst, said that the estimates were sure to be revised upwards, with Democrat Joe Biden set to take over the White House and European emissions fines set to kick in this year.
GM’s target of 1m vehicles and flood of new models is “stepping up the game”, Mr Gear said. GM’s Ultium battery allows for new models to be developed faster, and the company’s planned battery factory in Lordstown, Ohio — a joint venture with LG Chem — should make it possible to crank out enough batteries to meet Ms Barra’s production goals.
More vehicle models mean more choices for consumers, hastening wider EV adoption. Tesla has had some high-profile quality problems, like a roof that flew off a Model Y in California in October, the same day a new owner picked it up from the dealership. GM’s play means customers who want to buy an electric vehicle “won’t have to go with the 15-year-old start-up that has quality issues”, Mr Gear said.
For now, Tesla is still better at making its batteries cheaper than competitors, Mr Gear said. Cheaper batteries mean cheaper vehicles, making them an option for a wider pool of potential customers.
In 2019, the best-selling electric vehicle in the US was Tesla’s Model 3, which started at $38,000. The company sold nearly 155,000. By contrast, the second bestseller was Tesla’s Model X, a sport utility vehicle starting at $80,000, which sold 19,000.
Emmanuel Rosner, a Deutsche Bank analyst, estimated in a note that GM will reduce the cost of battery cells to approximately $100 per kilowatt hour in three years, and then to about $75 per kilowatt hour by 2025. Yet it would still trail Tesla’s mid-decade target of $50 per kilowatt hour.
“Price is going to be what determines who is the market leader, and Tesla looks set to win on price for the foreseeable future,” Mr Gear said.
Tesla’s head start on electric vehicles is compounded by the huge difference between the two companies’ value. At $600bn, Tesla’s market capitalisation is now 10 times that of GM, giving it an advantage in raising capital, Mr Jonas said.
Moreover, as a pure-play electric vehicle company, Tesla is free of conflicts that could hamper GM, Mr Jonas said. All its capital expenditures go towards electric vehicles, and it may have an advantage in attracting engineering talent.
GM also could face future costs if the public and government begin to see the pollution emitted by internal combustion engines as a long-term liability, the kind that sparks regulation, legislation and litigation. That makes some investors think the automaker might still spin off its EV business, despite GM’s statements to the contrary.
“We are hearing investors starting to look at [internal combustion engine] cars like tobacco and asbestos,” Mr Jonas said.
Analysts say GM is unlikely to realise an ambition to beat Tesla this decade, if at all. The company has “a long way to go” if it wants to pass Tesla in the North American electric vehicle market, Mr Whiston said. Yet Tesla has dominated in recent years partly because it has lacked competition.
“Once you get into cheaper EV spots, you can’t rely on Tesla fanatics to get you into the number one share position,” Mr Whiston said. Even if GM never controls a larger portion of the North American market than their upstart rival, if “they keep putting out tons of great products . . . and they take a ton of share from Tesla, are their EV efforts a failure then? I would say no.”