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See page 42 of the source report. UBS and Munro predict a 33% reduction in battery costs due to broader industry pricing trends, with a further reduction of 10-

See page 42 of the source report. UBS and Munro predict a 33% reduction in battery costs due to broader industry pricing trends, with a further reduction of 10-25% on powertrain components due to economies of scale and technology improvements. The report argues that the Bolt is already profitable on a contribution basis (sale price - cost of goods sold), meaning that GM make money on every Bolt they sell. What makes the Bolt unprofitable is the high per-unit share of R&D costs and depreciation due to low volumes - the Bolt isn't selling in sufficient quantities to recoup the cost of developing it and putting it into production. The Bolt can become profitable even if manufacturing costs stay the same, simply by selling more units. Demand for the Bolt is substantially outstripping supply in Europe, because high fuel costs mean that pure EVs already have a lower TCO than ICE vehicles; It's likely that GM can achieve profitability simply by ramping up production, assuming that their battery suppliers can keep up with demand. https://neo.ubs.com/shared/d1mFW2YvNRvHXA/ https://neo.ubs.com/shared/d1mFW2YvNRvHXA/

krrrh 8y ago
If demand is so high it seems like they could achieve profitability just by raising the price.
- dmix 8y ago
  Not so simple in such a highly price-sensitive marketplace as the consumer auto industry.
- whatshisface 8y ago
  Any barrel of oil you produce will find a buyer, but if you sell it for one dollar more than the market price the number of people interested in doing business with you will drop from millions to zero instantly. That's what it means for something to be a commodity. Cars are not quite as bad, but at the same time each car isn't exactly an artisan masterstroke with no substitute.
benj111 8y ago
If it isn't profitable due to R & D costs, who's complaining it isn't profitable? I would expect a completely new product category to have higher development costs, I'm not sure its reasonable to shoulder the first fruits of that R & D with all the costs. Especially as this may well literally be the future of the company. So then the question becomes, is someone setting the Bolt up to fail? Trying to make it look bad against Tesla? Or what?
dd36 8y ago
Given that r&d is a sunk cost and that producing the vehicle is cash flow positive and will be even more so in 5 years, GM should be pedal to the metal. The loss per unit sold is a non-real accounting artifact. Frankly, it should be accounted for on the basis of the carrying cost of the r&d debt. If I open a bakery and buy a ton of expensive equipment, I will have huge accounting losses per cookie for years but I may very well still be cash flow positive. That’s all that matters.
- speedplane 8y ago
  > The loss per unit sold is a non-real accounting artifact. GM can clearly make money from this vehicle if the tighten up their production. I'm sure engineers there know exactly what needs to be done to get there. It probably takes investment, but there will only be a return on the investment if many more Bolts are sold. To sell more of these cars, they have to overcome public perception that they are some weird new technology. They have to make hybrid engines "feel" as solid as a Hemi. They have to make these cars known, understood, and "normal". Most people just want a car that fits in, they don't want to make a statement. This is why the blandest vehicles, e.g., Toyota Corollas are so popular. Unfortunately, engineering rarely changes the way someone feels about a product, marketing does. So to make the Bolt profitable, GM will need to make a significant investment in advertising and marketing to make it the new normal. They don't seem up to that.
  - cladari 8y ago
    I think you would see electric cars take off if those without garages or driveways had a way to charge them nightly. I know I would have one on my list. Perhaps use the government buyers incentive to instead give a write down to developers to install charging stations in their parking lots.
    - greglindahl 8y ago
      The market of "people who can already conveniently charge an electric car" is big enough for them be much more popular than they are now. Also, many places in the US already have government incentives or requirements for charging infrastructure.
davidgould 8y ago
> Demand for the Bolt is substantially outstripping supply in Europe, because high fuel costs mean that pure EVs already have a lower TCO than ICE vehicles; It's likely that GM can achieve profitability simply by ramping up production, assuming that their battery suppliers can keep up with demand. GM does not sell the Bolt in Europe at all. It was originally sold as the Opel Ampera, but GM sold their interest in Opel. So demand in Europe is higher than the non-existent supply. The Bolts battery and power train come from LG and apparently they contracted for 30,000 units or less annually. This may not be a problem for GM as US Bolt sales have not been great, 23,279 units in 2017, dropping to 18,019 in 2018. I think they have also sold several hundred units in Korea. Currently Autotrader.com shows several new Bolts near me (California Bay Area) being offered at discounts of more than $4,000 from MSRP. So it looks like demand is soft even with the full Federal tax credit and the California EV rebate. Unfortunately for the Bolt, GM will lose the full Federal tax credit on April 1 raising the price of the Bolt by $3,750. Personally, I'm disappointed by GM's failure to promote the Bolt and by it's low sales. I love my Chevy Spark EV and I like my Honda Fit, but it seems an overpriced weirder looking Honda Fit with a Chevy badge is not the way forward even if it is electric. I wanted to like the Bolt, it's not a bad car, I really prefer small but tall hatches, and am committed to electric vehicles and like to live frugally. After five great years with the Spark EV I'm not even afraid to buy a GM car. In other words, I'm probably the ideal Bolt customer. Which should make GM very concerned by the fact that I recently bought a Model 3 instead and am selling the Honda.
- Brakenshire 8y ago
  Opel Ampera is the Volt not the Bolt.
  - davidgould 8y ago
    Sorry, I meant to have typed Ampera-E which is the Bolt. Apparently the one consistent thing about GM's marketing of these cars is the desire to confuse with similar names.
    - Brakenshire 8y ago
logifail 8y ago
> high fuel costs mean that pure EVs already have a lower TCO than ICE vehicle Got a source for this claim? I bought a new ICE vehicle six months ago, in round figures it cost me $13,800 (that's the on the road price of the base model, including a couple of minor extras and all applicable taxes). The electric version of that exact same vehicle has a list price of $31,300. No, that isn't a typo. The salesman seemed faintly embarrassed when we enquired about the EV version. The depreciation curve for ICE vehicles is fairly well understood. So is maintenance and the reliability of key components (we've had a previous ICE from this manufacturer that ran for over 9 years without any out of the ordinary components failing). Before we purchased, a salesmen noted that EV technology is changing so rapidly that even if you do feel like handing over $30k for an EV, in 5 years time it may not be worth very much. Whether its batteries will take you very far is also less than clear. I wish all of these things weren't so, I'd happily own an EV, but not at current prices.
- steelframe 8y ago
  It's kind of looking like lithium battery prices have been and will continue to act like solar panel prices. Very slow and steady improvement in cost, but nothing massively drastic over a period of 5-ish years.
- marvin 8y ago
  I hope you're not basing your reasoning purely on what the sales representative of the dealership said about EVs. Car dealerships have an incentive to undersell EVs because they require less of the routine maintenance that combustion engine cars require (oil changes, brake pad changes). Dealerships make much of their money on servicing, so this is not in their interest. In Norway, a new electric car car is obviously better on a TCO basis, due to much cheaper fuel, no VAT or other taxes on purchase, free passage through toll roads, cheaper ferries and free parking. Most of those are political incentives, so I can't speak for countries that have no such incentives.
  - logifail 8y ago
    > Dealerships make much of their money on servicing, so this is not in their interest "Much of their money" - got a source for that? At least where we are, there is a competitive market in servicing of ICE vehicles, and I won't be getting the new vehicle serviced at this dealership, I'll be going to a third party shop much closer (and cheaper). The vehicle warranty isn't affected. > obviously better on a TCO basis, due to much cheaper fuel, no VAT or other taxes on purchase, free passage through toll roads, cheaper ferries and free parking Thought experiment: what % of EV ownership will your country have to reach before those incentives disappear? There is this annoying issue of governments needing to raise tax revenue one way or another ...
IshKebab 8y ago
> high fuel costs mean that pure EVs already have a lower TCO than ICE vehicles As much as really really want that to be true, it just isn't for most people. An electric car is ~£30k, but most people pay much less for petrol cars because there is a great second hand market. I'd say typical is ~£5k. Most people do something like 150k miles on a car. Assuming 40 mpg (8.8 miles per litre) which is fairly typical for motorway driving. The price of petrol has been around 120p/L for several years. That puts the total cost of the petrol car at: about £25k. Still less than the purchase price of an electric car. Maybe it will change when electric cars with a good range have been around for 20 years so there is a decent second hand market, but at the moment it just isn't true. Sorry.

krrrh 8y ago

If demand is so high it seems like they could achieve profitability just by raising the price.

dmix 8y ago
Not so simple in such a highly price-sensitive marketplace as the consumer auto industry.
whatshisface 8y ago
Any barrel of oil you produce will find a buyer, but if you sell it for one dollar more than the market price the number of people interested in doing business with you will drop from millions to zero instantly. That's what it means for something to be a commodity. Cars are not quite as bad, but at the same time each car isn't exactly an artisan masterstroke with no substitute.

benj111 8y ago

If it isn't profitable due to R & D costs, who's complaining it isn't profitable? I would expect a completely new product category to have higher development costs, I'm not sure its reasonable to shoulder the first fruits of that R & D with all the costs. Especially as this may well literally be the future of the company. So then the question becomes, is someone setting the Bolt up to fail? Trying to make it look bad against Tesla? Or what?

dd36 8y ago

Given that r&d is a sunk cost and that producing the vehicle is cash flow positive and will be even more so in 5 years, GM should be pedal to the metal. The loss per unit sold is a non-real accounting artifact. Frankly, it should be accounted for on the basis of the carrying cost of the r&d debt. If I open a bakery and buy a ton of expensive equipment, I will have huge accounting losses per cookie for years but I may very well still be cash flow positive. That’s all that matters.

speedplane 8y ago
> The loss per unit sold is a non-real accounting artifact. GM can clearly make money from this vehicle if the tighten up their production. I'm sure engineers there know exactly what needs to be done to get there. It probably takes investment, but there will only be a return on the investment if many more Bolts are sold. To sell more of these cars, they have to overcome public perception that they are some weird new technology. They have to make hybrid engines "feel" as solid as a Hemi. They have to make these cars known, understood, and "normal". Most people just want a car that fits in, they don't want to make a statement. This is why the blandest vehicles, e.g., Toyota Corollas are so popular. Unfortunately, engineering rarely changes the way someone feels about a product, marketing does. So to make the Bolt profitable, GM will need to make a significant investment in advertising and marketing to make it the new normal. They don't seem up to that.
- cladari 8y ago
  I think you would see electric cars take off if those without garages or driveways had a way to charge them nightly. I know I would have one on my list. Perhaps use the government buyers incentive to instead give a write down to developers to install charging stations in their parking lots.
  - greglindahl 8y ago
    The market of "people who can already conveniently charge an electric car" is big enough for them be much more popular than they are now. Also, many places in the US already have government incentives or requirements for charging infrastructure.

davidgould 8y ago

> Demand for the Bolt is substantially outstripping supply in Europe, because high fuel costs mean that pure EVs already have a lower TCO than ICE vehicles; It's likely that GM can achieve profitability simply by ramping up production, assuming that their battery suppliers can keep up with demand. GM does not sell the Bolt in Europe at all. It was originally sold as the Opel Ampera, but GM sold their interest in Opel. So demand in Europe is higher than the non-existent supply. The Bolts battery and power train come from LG and apparently they contracted for 30,000 units or less annually. This may not be a problem for GM as US Bolt sales have not been great, 23,279 units in 2017, dropping to 18,019 in 2018. I think they have also sold several hundred units in Korea. Currently Autotrader.com shows several new Bolts near me (California Bay Area) being offered at discounts of more than $4,000 from MSRP. So it looks like demand is soft even with the full Federal tax credit and the California EV rebate. Unfortunately for the Bolt, GM will lose the full Federal tax credit on April 1 raising the price of the Bolt by $3,750. Personally, I'm disappointed by GM's failure to promote the Bolt and by it's low sales. I love my Chevy Spark EV and I like my Honda Fit, but it seems an overpriced weirder looking Honda Fit with a Chevy badge is not the way forward even if it is electric. I wanted to like the Bolt, it's not a bad car, I really prefer small but tall hatches, and am committed to electric vehicles and like to live frugally. After five great years with the Spark EV I'm not even afraid to buy a GM car. In other words, I'm probably the ideal Bolt customer. Which should make GM very concerned by the fact that I recently bought a Model 3 instead and am selling the Honda.

Brakenshire 8y ago
Opel Ampera is the Volt not the Bolt.
- davidgould 8y ago
  Sorry, I meant to have typed Ampera-E which is the Bolt. Apparently the one consistent thing about GM's marketing of these cars is the desire to confuse with similar names.
  - Brakenshire 8y ago

logifail 8y ago

> high fuel costs mean that pure EVs already have a lower TCO than ICE vehicle Got a source for this claim? I bought a new ICE vehicle six months ago, in round figures it cost me $13,800 (that's the on the road price of the base model, including a couple of minor extras and all applicable taxes). The electric version of that exact same vehicle has a list price of $31,300. No, that isn't a typo. The salesman seemed faintly embarrassed when we enquired about the EV version. The depreciation curve for ICE vehicles is fairly well understood. So is maintenance and the reliability of key components (we've had a previous ICE from this manufacturer that ran for over 9 years without any out of the ordinary components failing). Before we purchased, a salesmen noted that EV technology is changing so rapidly that even if you do feel like handing over $30k for an EV, in 5 years time it may not be worth very much. Whether its batteries will take you very far is also less than clear. I wish all of these things weren't so, I'd happily own an EV, but not at current prices.

steelframe 8y ago
It's kind of looking like lithium battery prices have been and will continue to act like solar panel prices. Very slow and steady improvement in cost, but nothing massively drastic over a period of 5-ish years.
marvin 8y ago
I hope you're not basing your reasoning purely on what the sales representative of the dealership said about EVs. Car dealerships have an incentive to undersell EVs because they require less of the routine maintenance that combustion engine cars require (oil changes, brake pad changes). Dealerships make much of their money on servicing, so this is not in their interest. In Norway, a new electric car car is obviously better on a TCO basis, due to much cheaper fuel, no VAT or other taxes on purchase, free passage through toll roads, cheaper ferries and free parking. Most of those are political incentives, so I can't speak for countries that have no such incentives.
- logifail 8y ago
  > Dealerships make much of their money on servicing, so this is not in their interest "Much of their money" - got a source for that? At least where we are, there is a competitive market in servicing of ICE vehicles, and I won't be getting the new vehicle serviced at this dealership, I'll be going to a third party shop much closer (and cheaper). The vehicle warranty isn't affected. > obviously better on a TCO basis, due to much cheaper fuel, no VAT or other taxes on purchase, free passage through toll roads, cheaper ferries and free parking Thought experiment: what % of EV ownership will your country have to reach before those incentives disappear? There is this annoying issue of governments needing to raise tax revenue one way or another ...

IshKebab 8y ago

> high fuel costs mean that pure EVs already have a lower TCO than ICE vehicles As much as really really want that to be true, it just isn't for most people. An electric car is ~£30k, but most people pay much less for petrol cars because there is a great second hand market. I'd say typical is ~£5k. Most people do something like 150k miles on a car. Assuming 40 mpg (8.8 miles per litre) which is fairly typical for motorway driving. The price of petrol has been around 120p/L for several years. That puts the total cost of the petrol car at: about £25k. Still less than the purchase price of an electric car. Maybe it will change when electric cars with a good range have been around for 20 years so there is a decent second hand market, but at the moment it just isn't true. Sorry.