GM is set to release first quarter earnings this week, with expectations of a somewhat rosy report thanks to an 18-percent increase in sales from a year prior. Nevertheless, GM must also convince investors that it will not engage in a price war with rival electric vehicle producer, Tesla, which has recently introduced numerous aggressive price cuts.
Per a recent report from Reuters, Tesla CEO Elon Musk has implemented a strategy of squeezing the EV producer’s profit margins in a bid to expand sales volume.
Tesla Model 3
As GM Authority covered previously, GM CEO Mary Barra is hoping to cut operating costs by $2 billion over the course of the next two years. To that end, GM rolled out a voluntary separation program (DSP) where in certain GM employees were offered pay, health coverage, and other benefits for a limited time in exchange for voluntarily leaving the company. Reports indicate that roughly 5,000 white-collar workers opted to participate in the new VSP, with GM CFO Paul Jacobson indicating that the program results were in line with expectations and will result in a $1 billion charge for the quarter, with some program costs possibly spilling into the second quarter. The majority of employees participating in the VSP will leave GM by the end of June. According to Jacobson, the results of the VSP will enable GM to avoid layoffs going forward.
Cadillac Lyriq
Meanwhile, GM has been relatively slow in its all-electric vehicle roll-out, including that for the Cadillac Lyriq crossover. Per previous GM Authority coverage, the slow Cadillac Lyriq roll-out is actually intentional as the automaker fixes teething issues prior to making the bulk of deliveries, including vehicle management software, display screen issues, and a cracking liftgate panel. Only 122 Cadillac Lyriq units were delivered through the entire 2022 calendar year.
Per Reuters, which cites a note from J.P. Morgan analyst Ryan Brinkman, the slow rollout may actually help GM avoid the impact of Tesla’s recent price cuts. However, weak EV prices could still impact the lineup of other automakers and the broader new-vehicle market in general.
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Comments
The vehicles that they produce now ,some are being made for China only. Get rid of this foolish plan and take care of the American Cadillac driver. Then then won’t have to worry about lowering it’s prices.
Yes, GM has already started the EV war in China.
The Buick Electra E5 starting price is started at 208000yuan (30kUSD-40kCAD) upto top trim 40kUSD(54kCAD).
Even though its FWD drive only.
It shall please more people joining the EV rank.
At least, they should import those in Canada!
We won’t have problem, just like the Tesla MY RWD SR, at 59900CAD (Coming from China).
We gets the full Fed 5000$ rebate, plus provincial incentive.
GM will sell extremely well I am sure of it.
Not sure how anyone can start a Price War with Tesla.
Tesla has the lowest production cost. Legacy never took Tesla seriously from the start and are currently paying the price!!!
Momolos, you are correct, they can’t without increasing their debt which will be expensive with higher rates and considering that collectively Western OEMs combined debt exceeded $1.1T prior to all of the recent battery plant production announcements. Toyota and VW alone have more debt than Russia. Its a well known fact that ALL legacy auto loses money on every BEV it sells in the West. This will change as scale and platform sharing improves. As far as a US price war with Tesla, I see no need as GM already loses money on the dying Bolt and can’t scale any Ultium based BEV. They will easily sell every Lyric/Equinox they can make. There is a long list of GM fans anxious to purchase GM BEVs, so I wouldn’t reduce the price at all. Tesla is competing against all vehicle types (hybrids, PHEVs, BEVs and ICE) and rapidly increasing market share, while GM provides a non-Tesla BEV alternative for the Tesla/Elon haters. The Model Y now outsells the Camry, Corolla, Accord, CRV, RAV4 and only trails the F-150, Silverado and RAM in Q1 in the US and is on track to be the top selling vehicle globally in 2023. Therefore, the Tesla ‘price war’ is not directed at BEVs, but legacy ICE strongholds – they are not concerned with the Lyric, Mach-e, ID.4, or Ioniq 5/6 as those buyers were already committed to buy a BEV that wasn’t a Tesla.
EVs are a scam. Tesla only makes money because of carbon credits! There’s no demand that’s why they are cutting prices. Tesla will be bankrupt this time next year.
I guess since Barnum & Bailey’s closed down you have plenty of time to make ignorant comments here.
Enjoy retirement Bozo.
Tesla delivered 422,875 EV’s in Q1 of both Model 3 and Y. Tesla does not provide a difference breakdown between the two models so unless you work for Tesla you don’t have the actual numbers of Model Y’s that were sold. Also it is interesting to note that Model Y’s are a full $11,000 cheaper than at the start of the year. Another interesting statistic taken from the ars-TECHNICA website is that along with the 56,000 unsold 2022 Tesla EV’s there was another 18,000 unsold Tesla from Q1, 2023.
Personally speaking, and is my opinion only, while acknowledging that Tesla currently manufactures the best EV sedan, I’m surprised that Tesla sold as many vehicles as they did. The styling is getting old and needs an update or new model releases. -Cybertruck, or how about the $25k model?
Final observation is that I wonder if anyone realizes that Tesla has more fatalities (17) due to the Tesla Autopilot than the Chevrolet Bolt has had with their battery fires (16)?
They only make money from regulatory credits and they are only dropping prices because there’s no demand. GM will outlast Tesla.
The price war has begun and the lowest cost producer will lead the pack. Entry level pricing will become more and more significant as the EV market matures. Luxury EVs will fight for the status buyers. Tesla currently has the pole position in EVs. Can they hold it?
Yup, the price war has begun in the US and Tesla started it.
They have lowered prices several times since the first of the year, the latest time was a few days ago. There is a Tesla repair and test drive/order shop (not quite a dealership, it’s a CA thing) near me, and there are at least 10 Demo cars which are in almost constant use. The place is so busy they are bulldozing lots on both sides, assumedly for more parking.
I checked out a new Model Y, and they let me test drive it ALONE, just said bring it back in 30 minutes. My daughter, and my grand daughter both bought new ones this week, and I am giving it a lot of thought.
I know they are discounting Model 3’s to lower inventory when the new updated ones come out soon, but I suspect they are also selling as many as possible, getting ready for the likely upcoming recession.