On Wednesday, General Motors Co (GM.N) executives are going to face one of their trickiest tasks: Cajoling investors that an automaker from Detroit can compete with Elon Musk and Tesla Inc (TSLA.O) as vehicles are going electric.
Tesla is outpacing its competitors
Despite the stumbling situation of global markets due to coronavirus fears, Tesla’s valuation is surpassing that of GM and most other legacy automakers. On Tuesday, the market cap of Tesla sailed around $144 billion, over three times GM’s $45 billion. GM is by far the bigger manufacturer in terms of volume and makes more cash and profits. However, in the electric vehicle market, there is no doubt that Tesla is the leader.
Last year, Tesla registered the sale of around 367,500 electric vehicles globally, consisting of 223,000 in the United States. GM just managed to sell 16,400 Chevrolet Bolt EVs to U.S. buyers around 60,000 Baojun E-Series models in China along with joint venture partner SAIC Motor (600104.SS).
Chief Executive Officer of GM, Mary Barra, and President Mark Reuss have escalated up the development of electric vehicles over the past three years, aiming at a proprietary battery, a cheap flexible vehicle design and a blueprint for high-volume production, especially in China.
Working on an improved Battery
The company has disclosed its electric vehicle strategy in progressive steps – declaring the Hummer brand is going to be reborn as an electric pickup. It is allying with Korean battery manufacturer LG Chem (051910.KS) to create a $2.3 billion battery plant near a shuttered GM car plant in Lordstown, Ohio. Now, GM is trying to put the broader picture into focus for investors.
GM has said it focuses on the reduction of the cost of battery cells (which is the single greatest expense in electric vehicles) to less than $100 per kilowatt-hour. That, in turn, could cut the expense of battery packs for electric vehicles such as the Chevrolet Bolt EV by up to 45%, experts say.
GM is also working on an advanced battery, in alliance with LG Chem and Honda Motor Co (7267.T) from Japan. The battery is going to be smaller than current EV batteries, can be charged more quickly and will offer more energy.
Musk has explained to investors that Tesla has battery cost and range breakthroughs in the works that it will define at a “Battery Day” in April.
Barra has said GM is planning to spend more on electric vehicles rather than on gasoline-powered cars over the next five years. However, it has not put a figure on how much it is going to invest in its efforts to rival Tesla and its classic competitors such as Volkswagen AG (VOWG_p.DE) or Ford Motor Co (F.N) as the electric vehicle market develops.
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