Why GM Is Okay Losing Money On The Electric Chevy Bolt

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When it comes to electric vehicles, consumers have to be willing to spend a pretty penny in order to reduce their emissions. But it’s not just car owners that are shelling out for more environmentally friendly rides, carmakers are too: on top of the cost to create, test, and manufacture the vehicles, companies, like General Motors, are regularly taking a hit when it comes to putting keys in customers’ hands. But why?

Bloomberg —  citing sources familiar with the matter — reports that for each new zero-emission Chevrolet Bolt (not to be confused with the similarly named, but not all-electric Volt) sold GM will lose about $9,000.

While that isn’t a small chunk of change, it appears to be a necessary sacrifice for carmakers who want to continue selling vehicles in certain states with strict clean-air rules. Currently, 10 states — including California, New York, and New Jersey — have laws on the books that require carmakers to make up a certain percentage of their sales though electric vehicles.

In order to do this, many manufacturers are going into the red, and that’s apparently something they’re willing to do.

For GM, Bloomberg, citing a source familiar with the matter, reports, that means taking a $8,000 to $9,000 loss on each roughly $37,000 Bolt sold.

Of course, GM isn’t the only carmaker to take a hit: analysts estimate most carmakers are losing an average of $10,000 per electric vehicle sold. In 2014, Fiat Chrysler CEO Sergio Marchionne revealed that the company lost about $14,000 for every battery-powered Fiat 500e sold.

Last year, Reuters reported that Tesla had lost an average of $4,000 on each car it sold. The losses were an estimate based on the company’s operating costs and reduced production targets.

Still, Bloomberg reports that the losses are a necessary evil: companies have to sell EVs to stay compliant with the law and selling more means they can make other EV vehicles like trucks or SUVs that might be more appealing to buyers.

A big part of why carmakers are willing to take the losses are the zero-emission vehicle credits begin doled out.

According to Bloomberg’s math, in California GM would need to sell 30,794 Bolts or Volts to avoid hefty fines or being prohibited from selling vehicles in the state. For each car sold, GM will be awarded four credits. Any excess credits can then be sold to other carmakers, making GM money.

Bloomberg notes that it’s not all doom and gloom for manufacturers. One day, EV models could become the hallmark of carmakers — when charging-stations are widely available and battery prices are lower.

Until then for any would be EV owners, discounted cars and incentives — such as the $7,500 tax credit — could make buying a Bolt, 500e, or other EV model appealing in some cases, Bloomberg notes,

GM’s Ready to Lose $9,000 a Pop and Chase the Electric Car Boom [Bloomberg]


Source: Consumer Reviews