In August 2006 Musk published his first master plan for the company, which was to transform the auto industry into a friendly one by selling expensive electric cars that would help develop affordable ones.
The low-cost family car is paid for by people who buy the sports car from the company.
In order to achieve Musk's goal of becoming a mass-market brand, none of the four cheaper models have been priced affordable. According to Kelley Blue Book, the average price of a car sold by the company is $68,000. The sweet spot for the low-cost family car is thought to be between $30,000 and $45,000.
After quitting the electric vehicle business 20 years ago, the creation ofTesla was spurred by the loss of the affordable EV race to GM. The previous sticker price of the Bolt will be slashed by $6,300. The Bolt EUV has a high-end audio system, camera-based rearview mirror, and Super Cruise for hands-free highway driving. Next year, GM will offer an electric SUV called the Equinox that will cost $30,000 and be 300 miles per charge, which is in line with rivals such as Honda and Toyota.
Mark Reuss, president of GM, told Forbes that the Bolt EV was the first full-line manufacturer to bring a long-range, affordable EV to market. Bolt was reintroduced at the lowest price point in the market to help drive EV sales.
They might get even cheaper. There is a proposal to extend federal EV tax credits in the inflation reduction act of 2022. A new tax credit of up to $7,500 is available at the time of purchase if the bill passes.
As climate change spurs heatwaves, drought and increasingly intense storms, making electric vehicles cheaper is vital. Cars and trucks are the top source of carbon emissions in the U.S. Making EV affordable to the average American is the first step in cutting them. It's possible that companies that do will get a lot of attention.
Jeffrey Schuster, president of LMC automotive's global forecasting unit, says that having a "most affordable EV" moniker is a good marketing move. I think they're not making any money on Bolt at that price. They're doing it to get more people to know about it. It's the same with a $30,000 car. It's about trying to bring EV into the mainstream and also trying to erode the dominance ofTesla in that area.
“GM was the first full-line manufacturer to bring a long-range, affordable EV to market with the Bolt EV when it launched back in 2017, and that remains a priority.”
The run-up in costs for batteries, semiconductors, raw materials and other components needed to build vehicles has pushed up overall automotive prices. The average price of a new electric vehicle was over $66,000 in June. It jacked up prices substantially this year and isn't saying when or if they'll come down
We have raised our prices a lot. Musk said during the second quarter earnings call that they were at embarrassing levels. We have had a lot of supply chain and production challenges. I'm hoping that at some point, we can reduce the prices a little bit.
He didn't respond to questions about GM's pricing moves.
For now, it doesn't matter that it has lost the race for affordable electric vehicles. Despite big production losses due to Covid-related shutdowns in China, Musk's company hauled in over two billion dollars in net income in the second quarter. The company enjoys a high profit margin because of its high prices.
Over time, the focus of the company has evolved into more of a luxury brand. Two earnings calls ago, the decision was made to focus on the humanoid robot and not the mass market vehicle.
The gross margin on its automotive business was 30.6% in the first half of the year. GM had an EBIT-adjusted margin of 9%. The company doesn't have to add cheaper models because it's using most of its current factory capacity to meet demand.
Gene Berdichevsky, CEO of Sila, said that selling too many cars at too high or too profitable a price is not a problem for an automaker. That is making something that people want. The way people buy a phone is similar to how people buy an Apple product. Even though it is more expensive, they want it.
“To have a ‘most affordable EV’ moniker behind you right now is not a bad marketing move.”
Musk has worked to make the brand synonymous with high- performance, speed and cutting-edge tech, like over-the-air wireless updates that let existing vehicles gain new types of features. These are the kinds of things that make a difference in the price of a car.
Musk has always said that mass adoption of electric vehicles is the goal of the company. The company may be a victim of its success according to the CEO of Fisker Inc.
He says it is difficult for a car company to make a cheap car. It is easier to start from the other side.
The Bolt won't be mistaken for a high end car. The small vehicle platform created by GM's South Korean unit was used to build it. It is cute, rather than sexy, and is practical. If you don't have aTesla, merging onto the highway is easy. When the rear seats are folded down, the cabin is large and can carry a lot of stuff. It was the third-best-selling EV in the US in the year that it was named North American Car of the Year.
“Selling too many cars at too high or too profitable a price is not a problem for an automaker.”
It was retooled and refreshed in late 2020 and got off to a good start before the faulty batteries caused recalls. A new pack was introduced this year after the electronics company agreed to pay GM $2 billion over the matter. As a result, the price cut looks as if it is an admission of guilt for the battery headaches. Bolt is an appealing vehicle for city dwellers, but it lacks the power and bulk of larger SUVs and pickup trucks that Americans love to buy.
Michael Simcoe, a GM design executive who oversaw the styling of the Bolt EUV, said that it would have worked better in Europe.
The battle to win sales away fromTesla and expand the battery-car market is only the beginning. The mass market for compact and mid-sized SUV's is where the larger Equinox and Blazer models come from. They will have a driving range of 300 miles or more per charge using the company's lower cost batteries and lighter, cheaper EV architecture. An electric Chevrolet pickup will be priced from the low $40,000s to compete with the F-150 and Cybertrucks. GM has luxury electric Cadillacs and Hummers that sell for over $100,000.
The vehicles all use GM's new Ultium system, which combines a higher-powered, lower-cost battery pack, motor and lighter body architecture. Mary Barra wants to sell 1 million electric vehicles a year by 2025.
Recent advances in battery technology help make high-mileage, affordable EV with great design and performance a reality. They won't go back when more customers are able to experience the benefits of EV.
GM is not the only one targeting the US market. The high-$30,000s to mid-$40,000s are the starting prices for many models.
Big automakers are trying to get to low prices too quickly because of the high demand for and tight supplies of batteries, according to Berdichevsky.
He said that if you want to create a sustainable, accelerated business, you need to reach for profitability on every car that you ship and for every battery that you can get your hands on. It is not a good idea to go down market before the supply chain is prepared.
The Chevrolet Bolt, theTesla Model Y, and the hanNIBAL HANSCHKE-POOL are all pictures of the same person.
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