The Ongoing Evolution of Two Venerable Dinosaurs

By Glenn Dyer | More Articles by Glenn Dyer

No fears from America’s two biggest car makers, GM and Ford, about rising costs for key green metals like lithium, nickel and cobalt, not to mention copper or aluminium.

This week the two giants are pushing ahead with their revamp from old fashioned car makers to full EV rivals of Tesla and other start-ups.

Both revealed more plans for their EV future this week with GM catching the eye with a surprise decision to slash the price of what it plans to be its entry level Bolt model in the US.

The likes of Ford and GM have long histories in handling costs – they survived the two oil shocks, the long period of weak demand after both, invasions of their market by a host of global majors like Toyota. They have dodged and weaved their way through periods of high inflation, low inflation, weak demand and intense competition.

They were saved by the Obama Administration post GFC, but so was the US banking system and dozens of other industries, just as the Trump and Biden administrations saved them and others in 2020 and 2021.

Higher prices for battery metals will not be a game changer for them but an opportunity to attack costs and encourage others to lower theirs. That’s what the likes of Toyota have been doing for decades in Japan – making suppliers bear a lot of the cost of research and development and cost cuts.

At a time when the cost of key battery metals is rising – none more so than lithium – a price cut of around 20% is not what you’d expect a company like GM to be doing.

Perhaps GM agrees with the recent research report from Goldman Sachs, that the prices of key green metals are heading for a fall over the next couple of years because of looming oversupply and using that cost saving now by cutting the price of its best-selling US EV to try and boost sales.

But that idea hasn’t stopped GM lifting EV prices elsewhere in the empire. This week’s price cut looks very much like an early market move to re-position a car that was once the market leader but had lost ground because of technical faults with its batteries that included some nasty fires.

GM says it is cutting the price of its 2023 Chevrolet Bolt EV, likely making it the least expensive electric vehicle on sale in the US.

GM cut the cost of the Bolt EV to a starting price of $US26,595, down $US5,900 from the 2022 model year price. GM also reduced the price of its larger Bolt EUV by $US6,300 to start at $US28,195. All pricing includes a fixed $US995 destination charge.

The price cut comes as GM lifts prices on a key EV model in its Cadillac range and in the Chinese market in a partnership there with a key state-owned car maker.

The price cuts in the US market come as car makers, especially BEV companies (Battery Electric Vehicles) lift selling prices, blaming rising costs of commodities like green metals and computer chip shortages.

Among those lifting prices are Tesla and GM’s own Cadillac brand, as well as struggling EV start-ups Rivian and Lucid.

A number of Chinese EV makers have lifted prices as well. These include BYD, Even, SAIC-GM Wuling, the joint venture between GM and state-owned automaker SAIC. Wuling makes lower cost vehicles but is the second-largest new energy vehicle player in China.

GM is worried about rising costs – it warned during its first quarter earnings briefing in April that it expects overall commodity costs in 2022 to come in at $US5 billion, double what the automaker previously forecast.

US analysts say the Bolt EV has been in production since 2016 and features older battery technology than the company’s new EVs but GM says the cuts will see prices align better with what consumer want to pay.

The five years of manufacturing experience clearly gives GM the confidence to cut prices and make a return.

GM electric vehicles don’t qualify for US federal tax incentives (which can total up to $US7,500 for other automakers) because the company has sold so many.

However, US media reports suggest that Bolt owners could be eligible for state EV incentives, which would bring the price down further.

Even without that help, the Bolt EV is expected to be the least expensive EV on sale in the US market in 2023 but several analysts wonder if this is the start of a price wear to entice more people into the sector because other EV makers have yet to announce their 2023 prices.

The one advantage GM, Ford and the big European carmakers have is experience in using price to stimulate sales and bring down costs – too many investors are treating EVs as high margin luxury goods (a criticism of Tesla in some markets).

GM’s price cutting could be the start of the next phase in the EV cycle – a technology at a price that more consumers can afford – and over time, a gradual rise in price and options to maintain profit margins.

The Bolt has had to overcome credibility problems from a series of fires involving batteries in older models. There was a huge recall and new vehicles have been sent to dealers ahead of the start of production shortly of the 2023 models.

GM says the Bolt EV has a range of up to 259 miles (420 kms) on a full charge. The larger Bolt EUV has a range of 247 miles (400 kms) on a full charge.


Meanwhile Ford revealed another round of spending on its US EV ambitions, committing $US3.7 billion to boost EV output to 2 million a year by 2026 and maintaining some of its existing ICE vehicle plants.

Ford said $US2.3 billion of the total investment will be spent on EVs, part of the $US50 billion in EV spending through 2026 it had previously outlined.

Ford also said the company will receive incentive packages of about $US350 million from Michigan and Ohio state governments.

Ford said the expansion would upgrade its EV plants in the US Midwest and add about 6,200 jobs. It also said it plans to invest $US1 billion over five years at its US plants to upgrade the workplace at the locations, which could include improved access to healthy food and EV chargers in parking lots.

“Our frontline manufacturing employees are the key to delivering what our customers want more of — amazing new electric vehicles like the F-150 Lightning as well as must-have internal combustion-powered vehicles like the forthcoming all-new Mustang coupe,” Ford Blue (Ford’s EV arm) President Kumar Galhotra said in a statement.

The $US3.7 billion will be distributed among three assembly plants in Michigan, one in Ohio, and one in Missouri, the company said. Michigan will receive $US2 billion along with 3,200 jobs; Ohio will get $US1.5 billion and 1,800 jobs, and Missouri will secure an investment of $US95 million alongside 1,100 new jobs.

Ford in March said it was boosting its spending on EVs to $US50 billion through 2026, up from $US30 billion previously.

It also said it would run its EV and internal combustion engine (ICE) businesses as separate units in a move aimed at catching market leader Tesla.

Separately, Ford said US sales of its EVs rose nearly 222% in May to 6,254 year-on-year.

That’s a low base to get to 2 million a year in just over four years time and gives us an idea of just how dramatic the change at Ford and all car makers will be in the next few years.

To give you an idea of the size of the change, in 2020 Ford made just over 2 million vehicles in the US and 1.905 million in 2021. In reality the target of 2 million EVs by 2026 represents a complete remaking of the company. There are big spending plans for its European plants to come as well, but the volume will be in its home market, the US.

The company has said it plans to build more than 2 million EVs a year globally by the end of 2026, about one-third of its global production.

Blaming a “global semiconductor chip shortage,” the company said its total US sales in May fell to 154,461 vehicles from 161,725 a year earlier. Cars and trucks sales fell 45% and 1.4%, respectively, while SUV sales dropped 4.4% from a year earlier.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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