Five years after unceremoniously selling off its money-losing European operations, General Motors is looking for a way back in, the automaker’s Chairman and CEO said Monday — but this time, officials think battery-electric vehicles will make the critical difference between profit and loss.
Mary Barra hinted at this possibility previously, telling TheDetroitBureau.com in 2020 that a shift to EVs could open up a way to create a more profitable business case for GM in Europe. She offered more insight this week during an appearance at the Milken Institute Global Conference in Los Angeles.
GM has no “seller’s remorse” after it transferred ownership of its Opel/Vauxhall operations to what was then the PSA Group in 2017, said Barra. “But we are looking at the growth opportunity that we have now, because we can reenter Europe as an all-EV player. I’m looking forward to that.”
CEO Barra rewrites the rules
Under Barra, GM has made a number of transformative moves. The automaker traditionally put a high premium on global scale, even if it meant maintaining money-losing operations. That included Europe where it operated in the red for 16 consecutive years before selling off the German-based Opel/Vauxhall unit for $2.2 billion. PSA — which later merged with Fiat Chrysler Automobiles to form Stellantis — was able to put Opel back into the black within a year.
“This was a difficult decision for General Motors,” Barra said after the sale. “But we are unified in our belief that it is the right one.”
Barra in recent years ordered GM out of a number of other troubled markets, including South Africa, Australia, India and Russia. But none come close to the scale available in Europe, the world’s third-largest region on a sales basis.
While shifting focus to more profitable markets, Barra has also ordered a major transformation of GM’s product development strategy. It is in the midst of launching 30 all-electric vehicles by 2025 — including the new GMC Hummer and Cadillac Lyriq. It plans to go 100% electric by 2035.
EV sales surge overseas
While the U.S. has been slow on the uptake, with BEVs accounting for barely 3% of total new vehicle sales last year, demand has surged in other parts of the world. And GM is racing to take advantage of that transformation. It has launched an assortment of all-electric models in China — the world’s largest BEV market. That includes the Hong Guang Mini EV which currently is the best-selling battery vehicle in China, outselling the Tesla Model 3.
But demand in Europe is growing fast, as well. The shortage of gasoline in Great Britain last summer saw sales of all-electric vehicles nearly double there and, in Norway, BEVs have made up as much as 70% of demand in recent months. All told, industry data show battery-electric models now account for about 20% of Western European sales.
That could provide not only a significant market for future GM models but also help improve the automaker’s global economies of scale. Driving up volume is a critical target for automakers entering the EV market as that should be able to drive down costs for key components, including batteries.
Today, they are the most expensive part of a BEV but GM expects to cut the cost by about a third, to $100 per kilowatt-hour, with the launch of its new Ultium technology. Longer term, it is targeting $70 per kWh. The automaker has already confirmed plans to set up at least four Ultium battery plants in the U.S., including one set to open in Lordstown, Ohio.
Cadillac could provide the first shot
How GM would return to Europe isn’t something Barra is ready to disclose in detail. But it does have a couple avenues.
The automaker actually has maintained a small presence on the Continent, with limited distribution of both the Chevrolet Corvette and products from the Cadillac brand.
The Lyriq is the first all-electric model from that luxury marque and will be followed by a number of others, including an exotic sports car, the Celestiq, as well as a battery-powered alternative to today’s flagship model, the Escalade. Cadillac is en route to becoming the automaker’s first brand to go entirely electric by 2030.
The automaker last week confirmed it will have an “electrified” version of the Corvette in production next year — widely expected to be a hybrid — with an all-electric model to follow.
A “dogfight” ahead
Cadillac could offer an opportunity to start targeting the European market, “as the tip of the spear,” said Joe Phillippi, lead analyst with AutoTrends Consulting. But it will go up against more established luxury brands, including Mercedes-Benz and BMW, that are themselves shifting from internal combustion to battery power.
Looking down the road, GM would need to go more into the mainstream EV market, but there, said Phillippi, “it will be a dogfight” against familiar marques like Volkswagen, Ford and even GM’s old Opel/Vauxhall. And GM, he added, “better be prepared to lose a boatload of money” until it can reestablish itself, a process likely to take a number of years.
There’s another path opening up that GM hopes to take advantage of. Globally, there’s a rapidly growing demand for commercial BEVs, especially in the last-mile delivery market that GM is targeting with its new BrightDrop subsidiary.
Europe could provide a market for the autonomous vehicle technology being developed by Cruise Automation, the San Francisco-based tech company in which GM is the lead investor.
In November, GM announced plans to establish a mobility services venture in Europe, tapping Mahmoud Samara — up until then the head of Cadillac sales — to take charge in a new position as president and managing director of GM Europe.
While analysts like Phillippi believe it will take years for GM to reestablish itself in Europe, the automaker appears to be looking to step up the pace of its return.
“Over the coming months, our team will develop our plans to bring our best products and services to customers in Europe,” Samara said in a statement following his appointment. The plan is to bring “new and innovative software, autonomous technology and freight and logistics services,” as well as all-electric vehicles.