GM has enjoyed a resurgence since the 2008-2009 global financial crisis and auto bailout, but sluggish sales last month suggests the largest automaker in the U.S. is in for some belt tightening ahead. According to MarketWatch, the company will lay off 2,000 workers at various assembly plants in Ohio and Michigan during the first quarter of 2017.
GM has also announced that early next year, it will eliminate a third shift at factories in Lordstown, Ohio and Lansing Grand River, Michigan. As more consumers have responded to the low price of gasoline by buying crossover cars and trucks instead of smaller cars, GM said such a move was necessary as it had to match production output with expected demand next year.
Such moves indicate that GM is nervous about how consumers respond to its all-electric Chevrolet Bolt, which the company recently launched into production at a plant north of Detroit. GM has promised the car will be ready for delivery by the end of this year.
The Bolt has scored plenty of attention as it is the first mass-produced electric vehicle that offers a range of over 200 miles with a price less than $40,000. At a cost of $37,495, which falls to $30,000 with a federal tax credit, the all-electric vehicle boasts a range of 238 miles. That range is about half of the average driving range of a gasoline-fueled car with a full tank of gas. A longer driving distance between recharges should provide more comfort to consumers and reduce “range anxiety,” as most drivers are comfortable driving if they about half a tank of gas in their cars.
But as Tom Krisher of PhysOrg has pointed out, GM will be cautious as it starts a limited rollout of the Bolt during 2017. The data research firm IHS Markit estimates that the company will sell at a maximum 300,000 Bolts next year. Early adopters and EV enthusiasts will have plenty of enthusiasm for the Bolt, but in an era where gasoline is $2.00 a gallon or less across much of the country, scoring mainstream consumer interest will be a challenge for what is still a very small market niche. GM is also planning a soft launch of the Bolt with the introduction of its cars to Lyft drivers in a few Illinois and Chicago markets.
Contrast those expectations with the far more bullish Tesla Motors. According to the blog Green Car Reports, the Palo Alto EV juggernaut expects to manufacture 100,000 Model 3 cars in 2017 once production begins mid-year. That number will surge to 300,000 in 2018, as Tesla is determined to plow through its Model 3 waiting list – which the company says has over 370,000 names on it. The Model 3 will be priced at a competitive $35,000 but early Elon Musk has hinted that options will bring the price of most sales closer to $42,000. News sites such as Reuters have cast skepticism that Tesla can line up suppliers fast enough in order to churn out such a high volume of EVs. Nevertheless, despite oil prices, the company’s co-founder and CEO Elon Musk is confident buyers will flock to this mid-priced EV once they see its benefits.
Overall, the outlook for electric cars is bright. Sales of these vehicles in the U.S. were up 26 percent in October, an impressive figure considering many drivers are holding out in anticipation of the Bolt and Model 3. But GM has been disappointed with how the market responded to its EV Spark and the plug-in hybrid Volt in the past. Meanwhile, sales of boat-sized Cadillac cars have increased by 20 percent for the fourth consecutive month. It is understandable that GM is being cautious; but its production capacity can also pull through in the event Bolt sales surge. After all, although oil prices have been low for over two years, the only thing we can really predict about long-term fuel prices is that they are inherently unpredictable.
Image credit: Chevrolet
Leon Kaye has written for TriplePundit since 2010, and became its Executive Editor in 2018. He's based in Fresno, CA, from where he happily explores California’s stellar Central Coast and the national parks in the Sierra Nevadas. He's worked an lived in South Korea, the United Arab Emirates and Uruguay, and has traveled to over 70 countries. He's an alum of the University of Maryland, Baltimore County and the University of Southern California.