GM puts Tesla on the target with the reduction of its electric vehicles

General Motors is, at least, beating Tesla on one front. The $57 billion Detroit automaker headed by Mary Barra slashed the price of its flagship electric vehicle on Wednesday, to the point where it could compete with compact gasoline cars. As Tesla slowly raises the price of its models, GM could use its sub-$30,000 Chevy Bolt to do what no automaker has: steal Tesla’s spotlight. The only catch is that Barra doesn’t have forever.

Tesla boss Elon Musk has long been skeptical of the Bolt, stating in 2017 that the structure of government subsidies meant GM would never produce more than about 25,000 vehicles a year. And, in fact, GM’s sales in the United States were capped in that environment in 2021. Subsidies that expired in 2020 got in the way in part. But the automaker was also forced into a full manufacturing shutdown last year over battery problems, which delayed the Bolt.

With an 18% price cut, the entry-level Bolt is roughly in line with Kelley Blue Book’s median price for compact cars this past April. GM’s unit profits may not budge, if customer buying incentives reverse, for example, and the price cut is just illustrative for would-be car buyers. However, by lowering the price, Barra starts a war in that area.

This energetic movement shows how much you need to move forward. Sales figures for the Bolt pale in comparison to those of Tesla, which has an annual production capacity of 500,000 Model 3 and Model Y cars at its California plant alone. Rival Ford Motor has launched an electric version of the F-150, America’s best-selling car. And Ford boss Jim Farley has made it clear that he, too, is willing to compete on price.

But the electric vehicle business is not getting cheaper. Material costs are rising, including batteries, which are vulnerable to skyrocketing lithium prices. The chip shortage also complicates matters. These problems have led competitors, including Tesla, to raise their prices.

In the short term, these pressures will continue to force automakers to make decisions about spending cash. Last year, GM’s operating cash flow was positive, but investments ate up that pot and then some. This explains why Barra is taking direct aim at Tesla. He needs to prove that the electric vehicle plans work, but before they run out of charge.

The authors are columnists for Reuters Breakingviews. The opinions are yours. The translation, by Carlos Gómez Abajo, is the responsibility of Five days