Connect with us

Hi, what are you looking for?

CleanTechnica

Cars

Big Auto’s Existential Problem: Cannibalize Cash Cows Or Evolve Too Slowly

Legacy automakers have a dilemma on their hands. Transitioning to electric cars is hard. A few German automakers have calmly voiced their concerns. Others have resorted to all-out whining. So what about Big Auto in America? To get some perspective, Seeking Alpha’s Scott Morton takes a look at GM’s vexing EV challenges as the company tries to face off with Elon Musk on Tesla’s turf.

Originally published on EVANNEX.

Legacy automakers have a dilemma on their hands. Transitioning to electric cars is hard. A few German automakers have calmly voiced their concerns. Others have resorted to all-out whining. So what about Big Auto in America? To get some perspective, Seeking Alpha’s Scott Morton takes a look at GM’s vexing EV challenges as the company tries to face off with Elon Musk on Tesla’s turf.

 Tesla’s all-electric, long-range Model 3 (Photo Credit: Kyle Field / CleanTechnica)

GM should be applauded for launching the all-electric, long-range Chevy Bolt. And Morton notes, “GM currently operates at a scale of vehicle production that Tesla can only envy.” But there’s trepidation, “the company is reluctant to [really] put its resources to use. In order to compete with Tesla, GM must expend additional capital in order to transition from manufacturing ICE vehicles to manufacturing electric vehicles.” Is GM facing a “damned if you do, damned if you don’t” moment?

No, EVs are destined to spark growth downstream. The bigger issue for a legacy automaker like Gm is clear: “by nature of being a mature player in a mature market, they [may] have experienced all of the significant growth that they are ever going to.” In fact, “legacy automakers must undertake [significant] R&D simply to maintain current revenue streams. Between 2013 and 2017, GM spent a combined $36bn in R&D yet revenue declined from $155bn to $145bn. Over the same period, Tesla spent a combined $3.7bn in R&D, but revenues grew from $2bn to $11.7bn.”

 Tesla and GM are at completely different stages in their business life cycles, as evidence well by this chart on Seeking Alpha.)

While some of GM’s R&D efforts went to EVs, some (likely) went to improving internal combustion engine tech. And looking ahead, “shifting the focus to EVs, GM will render their current factories, production lines, patents, designs — anything that specifically relates to ICE products and production — either partly or fully redundant.” Some of those assets could become liabilities. “This is the equivalent of owning a printing press in the advent of the Internet or a Blockbuster franchise during the birth of Netflix.”

And whether they like it or not, “EV sales will simply cannibalize and replace ICE vehicle sales.” This is a hard pill to swallow. At this stage in their business lifecycle, “GM must, therefore, undertake all of these additional challenges and expenditures knowing full well that [short term] revenues will not grow by any significant amount,” writes Morton. In turn, GM’s CEO Mary Barra rightfully argues that the US federal tax credit for EVs should not only be continued but extended.

Long term, the change over to electric cars is mission-critical. Yet Morton notes that “GM has little incentive to rapidly transition to EV manufacturing and would rather stave it off as long as possible … regardless of it being widely accepted as the socially responsible thing to do. You may label me as a conspiracy theorist for suggesting this, but the unfortunate reality is that for [car] businesses, profits often trump ethics.” Proof? Look at Germany’s massive Dieselgate scandal.

In contrast, Elon Musk is turning away from fossil fuels. So, Morton concludes, “Tesla has no such internal conflicts … and is, therefore, free to pursue a future which represents nothing but growth for the company. The combination of a lack of internal conflict for Tesla and the extreme baggage that is the legacy for established auto manufacturers may very well lead to Tesla significantly outpacing the competition.”

Ben Sullins gives his take on the so-called “Tesla Killers” coming from legacy automakers (YouTube: Teslanomics by Ben Sullins)


Appreciate CleanTechnica’s originality? Consider becoming a CleanTechnica Member, Supporter, Technician, or Ambassador — or a patron on Patreon.
 
 
Have a tip for CleanTechnica, want to advertise, or want to suggest a guest for our CleanTech Talk podcast? Contact us here.
Written By

Matt is all about Tesla. He’s a TSLA investor, and he loves driving the family's Model 3, Model S, and Model X company cars. As co-founder of EVANNEX, a family business specializing in aftermarket Tesla accessories, he’s served as a contributor/editor of Electric Vehicle University (EVU) and the Owning Model S and Getting Ready for Model 3 books. He writes daily about Tesla and you can follow his work on the EVANNEX blog.

Comments

#1 most loved electric vehicle, solar energy, and battery news & analysis site in the world.

 

Support our work today!

Advertisement

Power CleanTechnica: $3/Month

Tesla News Solar News EV News Data Reports

Advertisement

EV Sales Charts, Graphs, & Stats

Advertisement

Our Electric Car Driver Report

30 Electric Car Benefits

Tesla Model 3 Video

Renewable Energy 101 In Depth

solar power facts

Tesla News

EV Reviews

Home Efficiency

You May Also Like

Cars

After reporting on top electric vehicle sales in 10 European countries, a reader indicated it would be even more interesting to see the combined...

Cars

April sales figures are in for electric vehicle models in 10 European countries — Norway, the Netherlands, Spain, France, Germany, Switzerland, Finland, Ireland, Sweden,...

Autonomous Vehicles

The following is part fact (Michelin CrossClimate+ data) and part fiction (feature request hint to Tesla), and just my way of getting boring information...

Autonomous Vehicles

YouTuber “Wham Baam Teslacam” has shared one Tesla owner’s incredible footage of something that’s usually seen in the movies — an insane police pursuit...

Copyright © 2021 CleanTechnica. The content produced by this site is for entertainment purposes only. Opinions and comments published on this site may not be sanctioned by and do not necessarily represent the views of CleanTechnica, its owners, sponsors, affiliates, or subsidiaries.