I smiled when Mary Barra vowed to surpass Tesla by 2025, although I thought if anyone were to challenge the EV leader, it would be GM. With all the resources, all the money, and all the factories, GM had a shot at being an important player in the EV arena, even without selling more EVs than Tesla. GM proved me wrong despite all this, with a disappointing EV production in 2022 and no sign of improvement in 2023.
Many believed electric vehicles were just a gimmick, despite Tesla's strides in a market dominated by ICE vehicle makers. Then they thought that legacy carmakers would blow Tesla out of the water when they finally began building electric vehicles. If GM's struggles are anything to go by, they couldn't be further from the truth. Traditional automakers have tried for years to match Tesla's production, sales, and technology without coming anywhere near.
GM is just one example. The Detroit carmaker started producing its iconic GMC Hummer EV 15 months ago. All the manufacturing prowess couldn't help it build more than a dozen trucks per day, far below the target. And it wasn't because the truck could not find customers, even at $110,000. The Hummer has a waitlist of more than 80,000 people, and many are more than happy to pay the price, especially as GM has closed the order book. GM simply can't produce more, and those already at dealerships have been affected by a stop-sale order since last October because of water ingress into the battery pack.
Understandably, GM has prioritized the other high-profile EV in its portfolio, the Cadillac Lyriq, which started sales almost a year ago. Even so, it has only produced 1,000 Lyriqs since production began in March 2022. It aims to build 36,000 units this year, although this target seems overly optimistic considering how it has gone so far. Although GM would want to accelerate EV output, the tight supply of battery cells will hinder progress. Building electric vehicles is not much different from putting together combustion vehicles, except it needs a different supply chain. Until now, legacy carmakers haven't shown they understand how it works, and now they pay the price.
Many people have expressed their interest in buying an electric vehicle from GM. The Hummer EV has 80,000 reservations, and the Cadillac Lyriq adds 200,000 others. Soon, the company will launch new EVs, including the mass-market Chevy Equinox EV and the Chevy Silverado EV pickup. Although they look compelling, they would not make a difference if GM could not build them. With the limited battery supply, the carmaker would prioritize the models with the highest margins, like the Lyriq and the Hummer EV.
GM expects to accelerate output significantly in the second half of the year, although we are still skeptical. Potential buyers would probably defect to other carmakers by then, although GM is not the only one struggling to speed up EV production. Ford is facing similar problems, with the F-150 Lightning production only resuming on March 13 following a stop-build order caused by a battery fire.
GM posted impressive financial results for 2022, with profits exceeding expectations. However, the carmaker wants to trim its workforce and has established a "voluntary separation program." GM has not announced how many people it expects to accept the offer, but it wants to cut $2 billion per year in costs as a result. The times have lost patience with legacy carmakers, and Mary Barra already knows that. It's not about surpassing Tesla anymore, it's about survival.