General Motors’ recent pledge to produce almost nothing but electric vehicles by 2035 is part of a global auto trend — a shift given fresh impetus by a supportive U.S. administration under President Joe Biden, say analysts reacting to the most ambitious clean-energy goal announced by any major auto maker.
GM says it hopes to shift to producing only electric cars, small trucks and sports utility vehicles over that 14-year period and become a carbon neutral company five years later.
“Our vision for the future is a world with zero crashes, zero emissions, and zero congestion,” General Motors CEO Mary Barra told the Consumer Electronics Show CES 2021 on January 12 in Las Vegas.
The ultimate goal? Reducing reliance on fossil fuel and cutting the carbon dioxide emissions that are warming the planet. Last month, GM also announced it has signed the Business Ambition Pledge for 1.5 degrees Celsius, a global pact that aims to limit the warming.
GM was an early entrant to the green vehicle market in December 2010 with its Chevy Volt gasoline-electric hybrid. In 2019, however, the company sided with the Trump administration to fight strict fuel standards enacted by California and followed by 12 other states.
Under the new U.S. administration, the trajectory is shifting, says a business professor who was a former chief economist and group vice president at Ford Motor Company.
“What’s happening here is a realignment of General Motors, and certainly it’s getting its policy or its vision aligned with where the Biden administration is going,” said Martin Zimmerman, an emeritus business professor at the University of Michigan. On Biden’s first day in office, the United States rejoined the Paris climate accord which aims to curb greenhouse gas emissions.
But Zimmerman says planning for GM’s pledge was under way, independent of politics.
“I think the industry as a whole, and not just General Motors, saw that the pressure for greater fuel economy, the pressure for dealing with climate change is here and it’s permanent,” he said, noting, “Administrations will come and go,” but the trend toward green technology is long-term.
The startup Tesla, founded in 2003, has proven that electric vehicles can appeal to consumers, but another analyst notes the U.S. market is still small.
“Our EV (electric vehicle) market is only about 2% right now,” said Tyson Jominy, vice president for data and analytics for the market research company JD Power. “Europe this past quarter hit 10%,” he said. China’s EV market is more than 5%.
In Norway, the world leader, electric vehicles have a market share of more than 50%.
Jominy said GM’s announced EV target was “not quite John F. Kennedy’s moonshot announcement,” when the late U.S. president declared in 1961 that it would put a man on the moon by the end of the decade, but added, “It’s a pretty big deal for an automaker of GM’s size to announce such an ambitious goal.”
Part of the challenge in reaching it, says analyst Bruce Belzowski of the Automotive Futures Group, is that Americans love big SUVs and trucks.
“Last year, 70% of all sales in the U.S. were SUVs or pickup trucks,” he said, “so if you’re talking about selling electric vehicles, you’re going to have to be in those segments.”
When designed as electric vehicles, trucks and SUVs have slimmer profit margins, providing a challenge for automakers. GM says it will release a large Hummer EV pickup later this year and that most of its luxury Cadillac cars and SUVs will be electric by 2030.
One big challenge: batteries for electric vehicles are expensive, keeping the cost high.
“But there is an expectation that the battery cost is coming down pretty rapidly,” said analyst Jominy, “and then beyond that, as we keep seeing with Tesla announcements, range keeps getting further and further.” Still, scarce recharging stations outside of major urban centers make long trips difficult and a recent JD Power survey shows that worries EV owners.
“You can charge it (your EV vehicle) at home and you never have to go to a gas station,” says Belzowski. “That’s the good news. The bad news is that it takes a long time to charge these vehicles,” he said, eight hours or longer for a drained battery, slower with some systems, faster with others.
More recharging stations are crucial, says former industry executive Zimmerman. “Likely you’ll need government help to get over this chicken and egg problem ... Consumers won’t buy the vehicles unless there are fuel stations out there,” he said, “but people aren’t going to want to invest in fuel stations unless there are vehicles that will get charged there.”
Government incentives, increased consumer demand, improved technology, expanded infrastructure and price drops: analyst Belzowski said there are many parts to the puzzle before electric vehicles dominate the market. Increasingly, however, the industry and the current U.S. administration are on board with the effort.
Last month, President Biden signed an executive order to convert the U.S. government fleet to electric vehicles with zero emissions.
